If someone steals your credit card and spends your money, your bank reverses those transactions.
- When someone steals your crypto, it’s gone forever.
How can we design crypto protocols with failsafes that protect against fraud and theft?
A key advantage of centralized banking is the ability to easily reverse transactions.
- How can we build this feature into decentralized finance (DeFi)?
What do you do if someone hacks your crypto wallet and steals your NFTs?
- We need a decentralized consensus mechanism to track and reverse theft of digital assets.
We need to move beyond coin voting governance.
- One Coin = One Vote rules exposes blockchain protocols to the risk of 51% attacks.
- Example: The Beanstalk protocol was robbed of $182M after an attacker used a ~$1B flash loan to acquire ~67% voting stake in this protocol.
- The attacker used this supermajority to vote to transfer all assets to their own wallet.
- This whole hack took less than 13 seconds, using AAVE Lend for the flash loan.
- The attacker used this supermajority to vote to transfer all assets to their own wallet.
- Example: The Beanstalk protocol was robbed of $182M after an attacker used a ~$1B flash loan to acquire ~67% voting stake in this protocol.
Idea: Make both Voice and Exit easier in blockchain protocols.
- Make Voice Easier: Connect voting to the value of individuals’ participation in the network.
- Use proof of personhood, participation, or other proof of useful work to allocate votes.
- Make Exit Easier: When it’s easier to fork a protocol, it’s less valuable to hack it.
- The DAO Hack was reversed through the split of Ethereum and Ethereum Classic.
This idea is a work-in-progress. If you’d like to riff on it, hit me up @neilthanedar on Twitter.