Reversible Ethereum transactions: the new delusional idea of ​​​​these academics

A false good idea ? – Ethereum (ETH) is the cradle of dynamic innovation via the rise of decentralized finance (DeFi). However, the reliability of smart contracts is not absolute and has generated name hacks. This is why a team of researchers is tackling a surprising concept: that of reversible operations South Ethereum.

Reversible transactions on Ethereum

The ecosystem of decentralized finance (DeFi) stopped innovating after its birth at the end of 2019. Indeed, it proposes to decentralize the usual financial services so that they are accessible to all.

However, DeFi faces a major problem: hacks. In fact, they don’t care about the course of the year 2021, hackers have stolen more than $14 billion within the ecosystem crypto. For his part, the Challenge accounts, on its own, 3 billions dollars of losses due to smart contract flaws or bugs.

This painful assessment prompted a team of researchers from Stanford to propose a solution that is surprising to say the least, by imagining reversible operations South Ethereum:

“We have designed token standards that are siblings of ERC-20 and ERC-721 that allow transactions to be reversed (when there is enough evidence to do so). We wrote an article about them and implemented some prototypes. These token standards are titled ERC-20R and ERC-721R respectively. »

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Function of ERC-20R and ERC-721R

You buy will have it. These new jet standards improve two of the most used standards on Ethereum:

  • ERC-20, the token standard;
  • ERC-721, the NFT standard.

Thus, these tokens allow recourse in the event of a hack. Indeed, if a hacker refuses to break the token within the framework of a protocol, it will be possible to set up a recovery process in 5 steps:

  1. The victim demanded a freezing of the stolen funds. The latter will publish a freeze request on the governance contract. The applicant must provide evidence justifying the freezing;
  2. Judges accept or refuse the freeze. A decentralized consortium of judges will vote for or against the proposal during a two-day release period. If you accept the request, you can proceed with your freezing via the ERC-20R or ERC-721R contract;
  3. Running Freeze. The transfer of frozen funds will no longer be possible;
  4. you treat. The victim also said that the hacker could present the predictions supporting the version of events to a decentralized panel of judges. The latter will rule on the case and decide whether or not to call the function that will reverse the transaction;
  5. Transaction investment. If you find them in favor of the victim, the transaction is canceled and the funds are returned.
Diagram of operation of reversible transactions on Ethereum

In practice, the token type could have allowed name protocols to recover funds following an attack. However, this raises a series of philosophical and ideological questions.

Impacts on the decentralization of Ethereum

Although this proposal is based on a good feeling, it presents many weaknesses. Indeed, immutability is at the heart of the blockchain ecosystem. Therefore, the placement of the ERC-20R and ERC-721R tokens generates a refer to question deep this immutability.

In addition, the investment decision of a transaction is placed in the hands of a centralized actor. Therefore, although the consortium is decentralized, the decision rests with a handful of actors who could serve their own interests.

Moreover, this idea is based on yet another decentralized governance. However, over time, many weaknesses have been identified in this type of governance. Indeed, these turn out to be highly centralized in most cases.

According to the latest report from chain analysis on I held it, less than 1% of addresses hold 90% of the voting power.

Frontrunning: the Peckshield solution

Obviously, Stanford researchers are not the first to imagine solutions to the problems of hacks. In fact, the company Shieldspecialized in blockchain security, I proposed a completely different the solution. Unlike reversible transactions, Peckshield’s solution aims to intervene upstream of the attack.

In concrete terms, the solution called “Immobilizer” see detect hack transactions when they are adapted and take action before the transaction is committed. This service will use a method called avant-garde to catch hackers off guard.

“KillSwitch will detect hack transactions before including them in the block and learn urgent measures to block the attack or start the assets. It is actually a DeFi protection based on the avant-garde. »

Peckshield Statement

Reversible Ethereum transactions: the new delusional idea of ​​​​these academics
KillSwitch block diagram

To do this, KillSwitch will set up programs responsible for monitoring the mempool. If a transaction fulfills the conditions defined in the detected amount, the program “avant-garde” the transaction to prevent the attack.

“The trigger condition captures the fact of a large part due to a hack and the need to know the protocol address, the voucher, and a percentage of the part. For multiple assets, we specify the loss for each. »

Peckshield Statement

In fact, this solution aims to solve the problem upstream without a decentralized consortium of judges.

Note however that each protocol will have to configure KillSwitch. In addition, although the urgent transaction was sent by KillSwitch, it must be upstream signed by protocol team so that it can at the same time pause the protocol in the event of an attack.

The last major attack I impacted the market maker Winter Mute. oh all in all $160 million was stolen because of a fail in the useful Impiety.

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