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New Ethereum token value for reverse transactions

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You cannot cancel or reverse your cryptocurrency transaction once confirmed on the Ethereum blockchain. Why? Because Ethereum was designed to be immutable in the first place.

What is immutability?

Immutability means you cannot change the data in a dataset. In the context of blockchain, it precludes a central authority, such as a government or a company, from manipulating, replacing or censoring data. It is a method of ensuring decentralized operations.

This enables data integrity, a requirement for building efficient data storage platforms. Since data cannot be changed, new data is simply added to existing data, making the whole process faster than in a mutable database. Moreover, transaction histories are open, verifiable and auditable because the data is permanently stored on the blockchain.

The downside is that it is impossible to undo a transaction; For example, when you send your crypto because you typed in the wrong wallet address or because you got caught in a scam. In other words, your financial loss is also permanent.

Is reverse transaction possible?

There is no universal method yet. However, using different methods has been proposed.

One approach is to reverse initial coin offerings (ICOs), such as with RICO, which was developed by Fabian Vogelsteller. RICO coins give investors the option to store coins for a certain period of time. If, during this period, buyers change their mind, they can return the reserved tokens to the smart contract Reversible ICO is a strong protection against scams that occur during project launch. However, this does not work for reversing individual transactions.

New token value

Another approach is to extend existing token values ​​so that they can handle reverse transactions.

Token standards are a set of rules, and they act like a blueprint that developers can use to create new tokens, Cryptocurrencies, or NFTs. In this way, tokens created by different projects become compatible with each other and with Ethereum wallets like Metamask.

The most commonly used Ethereum token standards are ERC-20 and ERC-721. Developers use the former to create fungible tokens, e.g. CryptocurrencyWhen they use the latter to create non-fungible tokens, ie, NFT.

An example of a token-standard extension for immutable transactions is the ERC721 refundable standard that was introduced to enable refundable NFTs. It’s Eli Steinbock, Amir Hagafni and The CryptoFighters Team. Like RICO, this new standard requires NFT buyers to request refunds within a predetermined timeframe. Considering how rampant scam schemes are within the NFT industry, ERC721R is also a significant advance.

Stanford offers

Recently, Stanford University researchers proposed a method to make reversible Ethereum transactions a reality. In research, they explore both how ERC-20 and ERC-721 Immutability can be extended by introducing reversible versions of tokens, e.g., ERC-20R and ERC-721R.

Also in this method, transactions can be reversed only within a limited period of time. During the dispute period, the particular transaction is “frozen” before becoming irreversible again.

Researchers have also implemented some prototypes of the proposed method. It works in 5 steps:

  • The victim filed a motion to dismiss by providing evidence
  • A decentralized set of judges accepts or rejects requests
  • Cumulative death penalty
  • Both sides presented evidence to the jury
  • Judges decide whether to reverse the transaction or reject the reverse request

Are reversible tokens beneficial to the Ethereum ecosystem?

From a decentralization perspective, probably not. For example, the Stanford proposal has received much criticism, mainly because of the inclusion of judges in the process. Because it is difficult to construct a decentralized justice system, the approach may conflict with blockchain’s promise of permissionless operation.

But for accelerating mainstream adoption, the answer is yes, as reverse tokens can help reduce exploitation and theft. They can prevent anger and teams can use them to increase accountability for their projects.



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