Developers could have prevented crypto’s 2022 hacks if they took basic security measures

Users losing funds due to malicious activity is hardly unknown on Ethereum. In fact, it is the very reason researchers recently developed a proposal to introduce a type of token that is reversible in the event of a hack or other unsavory behaviors. 

Specifically, the suggestion would see the creation of an ERC-20R and ERC-721R, which would be modified versions of the standards that govern both regular Ethereum tokens and nonfungible tokens (NFTs).

The premise goes like this: this new standard would allow users to make a “freeze request” on recent transactions that would lock those funds until a “decentralized judiciary system” determined the validity of the transaction. Both parties would be allowed to present their evidence, and the judges would be chosen at random from a decentralized pool to minimize collusion.

At the end of the process, a verdict would be reached and either the funds would be returned or they would stay where they are. This decision would then be final and subject to no further contention. This would open up a practical avenue for victims of hacks and other malicious activity to get their assets back in a direct and community-driven manner.

Unfortunately, this may well be an unnecessary and ultimately harmful proposition. One of the cornerstones of the decentralized philosophy is that transactions only go in one direction. They can’t be undone under virtually any circumstances. This new protocol change would undermine that fundamental precept and in order to fix what isn’t broken.

So how does this work when an attacker steals ERC-20R and cashes out to ETH via a DEX in the same transaction? Or ERC-20R will be incompatible with the current DeFi ecosystem? https://t.co/n5pN82ZBBe

— Roman Semenov ️ (@semenov_roman_) September 25, 2022

There’s also the fact that even implementing such tokens would be a logistical nightmare. Unless every single platform shifted over to the new standard, then there would be huge gaps in the system, meaning that thieves could simply quickly swap their reversible assets for non-reversible ones and avoid the repercussions entirely. This would render the entire asset completely pointless, and more than likely users would simply not engage with it.

Furthermore, the whole idea of a judicial review implies centralization. Isn’t independence from a third party the exact thing cryptocurrency was created for? The existing proposal isn’t clear on how these judges are chosen, other than it will…