Which One Has Greater Weight ” Crypto Theft Or Privacy”?

The crypto theft has seen a strong rise and reached about $14 Billion in 2021 alone.
Some Stanford researchers have devised a reversible transaction method which has gathered a mixed reaction from the Ethereum community.

In 2018 Vitalik tweeted that Some day some one can come and introduce a reversible Ether which is 1:1 backed by Ethereum. It will also have a Dao which can revert transactions in a few days. Now that concept has taken the shape of a prototype which can help to reverse the effect of crypto theft but can also have some bad impacts.

Is It Necessary To Have Reversible Transactions Opt-in ?

The concept of Reversible transaction is not new. It was first opted in 2018 as Reversible ICO where users can get their money back in proportion to their investment period. Now,Before understanding the Pro and cons of the Reversible Transactions in Ethereum lets understand the working.

The process of the reversible transaction consists of 3 steps:

1: Request freeze

2: Freeze assets

3: Trial

There are two basic types of theft which can occur on the Ethereum block chain ERC-721 NFT or ERC-20 tokens. Initially let’s look at reversible transactions of NFT.

Suppose a person V steals an NFT from person A and he sells it to an open market to person C. Victims can post an on-chain freeze request which includes the offending transaction ID, a link to evidence that an unauthorized transfer took place, and some stake.The _frozen structure in the ERC 721r API will freeze the asset of the given token Id.The function initially verifies that the disputed transfer took place within the dispute window by using the block number at position index+1 in the sequence. It will also ensure that asset is not already frozen.Meanwhile once found guilty by the governance contract it will reverse the asset to the original owner.

The freeze is much more complicated as it gets moved to the other owners or been deposited in the exchange or burnt or converted into some other Erc-20 token.

There are various examples which have been presented in the paper but the one particular which caught the attention is when the address from v to a, there is a second transaction a → a1. If funds are insufficient at the time of the freeze, then some of the freeze obligations should pass on to a1,like the previous one. However, suppose that at some time before the a → a1 transaction, there is a transaction a1 → a2 that transfers funds from a1 to a2.

because the a1 → a2 transaction was posted before the disputed funds arrived at a1. The funds sent to a2 are not directly involved in the dispute and the funds of the a2 are not in dispute.

The Cons Of Reversible Transaction

The first problem which arises with the Erc-20r and Erc721r is that they will be competing with the existing standards. They will compete with the other standards for network effect, liquidity and various other things. Meanwhile, Defi cannot work with the reversible token as it will effect the liquidity pool which will disturb the ratio. For example a trade on Dex is not affected by the external behavior and it only depends on the logic of the smart contract. The next issue with it is that if the algorithm exempts previous transaction address before the attack then it can become serious loop hole for the attackers.

Conclusion

Crypto theft has been on a rise for the past few years. There are several methods which are currently present in the market and reversible transactions is one such method. There are several demerits of the reversible transactions including harm to privacy for the users. But this also the first step to create a better way to avoid crypto theft. It would be interesting to look the future where this method takes