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🔌 More Than 80% of Ethereum Miners Pull the Plug After Merge

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Defiant Exclusive

🔌 More Than 80% of Ethereum Miners Pull the Plug After Merge

Ethereum Classic Hash Rate plunges 48% Since Shift to Proof of Stake

By Samuel Haig

HASH RATE Eight out of 10 Ethereum miners appear to have gone offline after The Merge, according to data from 2miners, a website tracking the hash rate of Proof of Work networks.

👉READ THE FULL STORY IN THE DEFIANT.IO👈

DeFi Players

👀 Sifu Resurfaces with New Money Market Protocol

Controversial Entrepreneur Forks Lending Venture From Aave

By Owen Fernau

INFAMOUS Few DeFi players are as irrepressible as Sifu. Undeterred by his exposure in January as the co-founder of QuadrigaCX, the infamous crypto exchange that lost $190M in customer deposits in 2019, Sifu launched a token last February.

👉READ THE FULL STORY IN THE DEFIANT.IO👈

Sponsored Post

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📺 Quick Take: Pound Gets Rugged + Huge Week For Crypto Markets

📺 The Defiant Weekly: Biden’s Crypto Guidelines: Bullish or Bearish?

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🎙 Reviewing Ethereum 2.0 a week after The Merge

DeFi Beginners

🧐 What Is ENS?

A Step-by-Step Guide to Ethereum’s Domain Name System

By Rahul Nambiampurath

ADDRESSES Ethereum Name Service is a blockchain equivalent to Domain Name System (DNS) that assigns addresses on the internet. ENS translates cumbersome Ethereum addresses comprising random numbers and letters into memorable names.

👉READ THE FULL STORY IN THE DEFIANT.IO👈

Elsewhere

🔗 Disney hiring transaction lawyer for ‘aggressive’ NFT and DeFi plans: The Block

The Walt Disney Company is looking to hire a transaction lawyer to explore emerging technology opportunities, including NFTs, working at an “accelerated and aggressive timeline,” according to a job posting on LinkedIn.

🔗 Interpol Issues Red Notice for Do Kwon: Report: CoinDesk

nterpol has issued a red notice for Terraform Labs co-founder Do Kwon, according to a report from Bloomberg.

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🧑‍💻 ✍️ Stories in The Defiant are written by Owen Fernau, Aleksandar Gilbert, Samuel Haig, and yyctrader, and edited by Edward Robinson, yyctrader and Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.

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🎓 Academic Proposal to Make Ethereum Transactions Reversible Divides DeFi Community

Critics Call Idea ‘Plain Stupidity’ But Supporters Embrace It As Defense Against Hacks

By Samuel Haig

NEWS Researchers at Stanford University have designed variations of Ethereum’s popular ERC-20 and ERC-721 token standards to enable reversible transactions. But the Ethereum community is largely panning the work.

HACKS Reversibility — the ability to redo transactions on blockchains — has long been a challenging project for crypto scientists.The Stanford team believe it may hold the key to making cryptocurrencies more protected from hackers. Chainalysis, the blockchain forensics firm, estimates that hackers stole $14B in crypto hacks during 2021.

OPPOSED Yet to make this proposition work, technologists would have to tinker with one of the most sacred properties in cryptocurrency systems: immutability.  Many in the crypto community vehemently opposed allowing transactions to be reversed in any circumstances.

“That paper doesn’t represent DeFi ethos at all,’ tweeted top stablecoin DEX, Curve Finance. 

Stanford researcher Kaili Wang called the ERC-20R and ERC-721R token standards and their immutability “blessing and a curse” in a Sept. 25 blog post. 

The problem of reversibility was present from the beginning. Satoshi Nakamoto was not the first developer to conceive of a form of money backed by cryptography.

Cypherpunks

The cypherpunk community explored the concept of decentralized electronic money in the early 1990s. But their research was unable to overcome “the double-spend problem,” which allowed the same digital coins to be spent by multiple parties.

Nakamoto overcame this in 2008 with the intention of the decentralized blockchain, which prevented multiple parties from transferring the same coins and spurred the creation of cryptocurrency and decentralized finance. 

But the immutability of blockchains comprises both a cryptocurrency’s value and its vulnerability — on the one hand immutability imbues crypto with credibility as a medium of exchange but its lack of reversibility permits hackers to rip off protocols and individuals with little recourse.

Reversible Ether

Vitalik Buterin, Ethereum’s co-founder and chief scientist, previously advocated for enabling reversible transactions.

“Someone should come along and issue an ERC-20 called ‘Reversible Ether’ that is 1:1 backed by Ether but has a DAO that can revert transfers within n days,” he tweeted In April 2018. Buterin revisited the concept with a Twitter poll in October 2019, but 63.3% of nearly 14,600 respondents voted that transactions should never be reversible.

The Stanford paper describes the token standards as allowing short time windows after transactions are executed in which thefts can be contested and possibly restored. Users requesting transaction reversals would also be required to provide a stake as collateral that could be slashed to disincentivize dishonest behavior, similar to how optimistic rollups work.

Stolen Funds

Should the victim of a malicious activity request a freeze on stolen funds, “a decentralized quorum of judges” would be tasked with voting on whether to accept or deny the freeze request. 

Both transactional counterparties would then be given the opportunity to present evidence supporting their case to the panel of judges, who will then determine whether the transaction is reversed.

The paper said that freezing NFTs is simple, with the token in question being barred from transfers until the conclusion of the trial. However, in the context of ERC-20s, the use of crypto mixing services may obfuscate the transaction history for stolen assets, so funds would only be frozen if there is “a direct flow of transactions from the theft.”

Token Standards

If the token standards are widely adopted, they could have interesting implications for decentralized exchange users.

Wang noted that token swaps conducted using reversible tokens could be executed instantly, but if a freeze is requested by one counterparty, it would be possible to reverse the transaction afterwards.

In the context of reversible tokens being exchanged for tokens based on existing standards, she suggests that exchanges may opt to delay finalizing the trade until after the period in which the transactions could be rolled back has elapsed. “This would mean that reversible [to] non-reversible swaps would have [a] delay until the funds are irreversible,” Wang said.

Logical Conclusion

Many in the DeFi community didn’t like what they read. 

“Reversible transactions are already well served in traditional finance,” said MonetSupply, a MakerDAO governance delegate. “When you take it to logical conclusion, it essentially breaks all the benefits of DeFi (fast settlement, atomic transactions, etc).”

“Plain stupidity,” added Mark Fidelman, an advisor to decentralized ETF provider Tetraguard, chimed in. “Might as well go back to using fiat.”

“That paper doesn’t represent DeFi ethos at all,’ tweeted top stablecoin DEX, Curve Finance. 

Legacy Transactions

But not everyone thinks allowing users to reverse transactions is a bad idea, with many emphasizing how the utility could bolster the adoption of crypto in the context of daily and legacy transactions.

“We believe that the general concept of reversibility in blockchain is necessary for mainstream adoption and regulatory compliance, Arturo Rodriguez of NotCentralised, of web3 venture studio that is building a compliance service that will include transaction reversibility features, told The Defiant.

“There are two main reasons (at least) that reversible transactions are important: management of human errors and careless behavior, and regulatory requirements of rolling back [or] correcting non-compliant outcomes,” Rodriguez continued. “Although the article proposes a few very interesting and smart techniques to reverse transactions, I believe that the concept of reversibility will become more and more standard as blockchain matures into mainstream.” 

Obligations

Reversible transactions allow you to use decentralized money to pay for centralized goods,” said cory.eth, an Ethereum Name Server delegate. “It lets you get your ETH back when the t-shirt doesn’t fit instead of a cash gift card… I want my ETH back if the other party doesn’t fulfill their implicit/explicit contract obligations.”

“If implemented correctly, could actually be good for crypto,” said PeeZapp, the project lead for X-Race, an NFT racing game. “Probably an unpopular opinion among communities but this would aid in regulation among governments.”

“How many of you who’ve had a wallet drained would ever risk your mortgage being on-chain after that?” asked tjboudreaux, the CTO of Azra Games. “More governance and security models need to be explored if we’re ever going to see certain asset classes on-chain.”

Scaling Solution

Other spectators believe transaction reversibility is worth exploring on Layer 2 or Layer 3.

I had been working on a draft concept of a scaling solution that is like L2s but restricted to certain dApps. Mini communities, smart wallets, run by governance and aimed at consumers,” said Adam Cochran, a Yearn Finance contributor. “Reversible transactions can make sense in that environment, but not on an L1.”

“I’m all for people coming up with new ideas and putting them out into the ether but I’m not here for TradFi 2.0,” said Anthony Sassano, the host of The Daily Gwei Podcast. “Doing it at the ERC20/721 level would basically be doing it at the ‘base layer’ which I don’t think is right. End-user protections can be put in place at higher levels such as the front-ends.”

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