In a significant advancement for blockchain, Circle Research, in collaboration with Stanford’s Applied Cryptography Group, has unveiled two groundbreaking open-source projects.
According to the official announcement, these initiatives address the persistent challenges of on-chain theft and the limitations of current blockchain-based financial systems.
The Future of Safer On-Chain Transactions?
Jeremy Allaire, CEO of Circle, announced the launch of these projects, highlighting their potential to “revolutionize” the security and versatility of blockchain transactions. From 2021 to 2023, nearly $10 billion was lost to illicit theft and attacks on blockchain platforms.
2023 has been a particularly difficult year for decentralized finance (DeFi) platforms. In November 2022 alone, the industry lost around $300 million from exploits and cyber-attacks, raising concern from entities within and outside the nascent sector.
In the official announcement, Circle makes the case for implementing a way to apply “transaction reversibility” for on-chain payment methods. The stablecoin issue believes that leveraging this feature can mitigate security risks across the industry.
In that sense, Circle and Stanford have introduced solutions that could redefine the landscape of money transmission. The first project is a detailed Recoverable Token standard.
This standard proposes a mechanism for revoking transfers through various configurations, adaptable for commerce and decentralized finance (DeFi) scenarios. This initiative is detailed on Circle’s blog and explained in a whitepaper and GitHub repository.
A Solution For Blockchain Security Risks
In parallel, Circle and Stanford presented a model for “R-Pools” at the recent ACM-CCS conference. R-Pools serve as an insurance and liquidity solution for Recoverable Tokens, allowing token holders to redeem through an insurance pool.
Comparing stablecoin payments to traditional card network transactions, it’s important to note that card networks offer reversibility and fraud protection, which were previously missing in blockchain transactions.
Circle believes the open and programmable nature of digital currencies on blockchain networks will foster solutions to these issues. These solutions will be adaptable to a wide range of on-chain financial and commercial applications, extending beyond retail payments.
With the launch of these open-source projects, Circle anticipates a surge in the development of safer, more “reliable” on-chain financial products and services on a global scale. However, the crypto community offered mixed reactions to these products.
Many in the industry believe that the incapacity to reverse transactions is a key feature of the asset class rather than something that requires fixing. An user stated the following reacting to Allaire’s post:
Umm… doesn’t this defeat the entire purpose of immutability? Credit Card merchants are currently being skinned alive through fraudulent disputes, and centralized intermediaries (Stripe) imposing their will on businesses. Irreversible token transfers is a feature not a bug.
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