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A group of researchers from the Stanford Institute, Kylie Wang, Qingchen Wang, and Dan Boneh, have proposed creating new token standards called ERC20R and ERC721R. They are extended versions of the ERC-20 and ERC-721 standards and have the ability to roll back transactions.
Researchers believe that the ability to reverse transactions is an important condition in the fight against cybercriminals. With a way to reverse the theft of cryptocurrencies, the global virtual ecosystem could become more secure for customers.
How the transaction return mechanism works for the new ERC20R and ERC721R token standards
According to the available information, the researchers propose to return transactions if it is approved by a decentralized quorum of judges. That is, the client will be able to use the refund option in the event that unauthorized persons connect to this. It is unlikely that it will be possible to use this option every day. A decentralized quorum of judges will decide whether to activate the transaction rollback option or not.
This will help prevent scammers as they will not be able to claim to send assets and then cancel them. ERC20R and ERC721R combine smart contracts the token itself and its management.
The managing smart contract is controlled by a decentralized judicial system. In it, a quorum of judges votes to freeze and reverse malicious transactions. A client whose funds have been stolen can submit a freeze request to the managing smart contract by providing proof. He must also pay a “lawsuit” fee so that judges have an economic incentive to do such work.
If a majority of the quorum votes in favor of the client, funds may be frozen, triggering litigation. During it, both parties – the client-victim and the hacker – can present their evidence to decentralized judges. According to the results of the vote, the funds are either returned to the victim, or the request is rejected
How effective will the mechanism proposed by the new token standards be?
The idea has already been criticized. Returning transactions is against the principles of the blockchain. In addition, ERC20R and ERC721R smart contracts are difficult to integrate into the existing decentralized finance system. There are other ways to prevent theft of funds.
And it is impossible to extend this standard to all tokens, so the option to return transactions will be narrowly focused. Hackers will simply steal other assets, and the problem of stealing cryptocurrencies will remain unresolved.
Author: Vadim Gruzdev, analyst Freedman Сlub Crypto News
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