The Circle’s technical arm unveiled two projects aimed at combating theft and fraud on blockchains, and expanding payments in stablecoins.
Circle launches open source protocols to address on-chain theft and risks of illicit finance
Circle Research, along with Stanford’s Applied Cryptography Group, introduced two new open source projects that seek to address issues that plague the use of blockchains.
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— Jeremy Allaire (@jerallaire) December 4, 2023
The Circle Research team worked in collaboration with Stanford University’s Applied Cryptography Group on the initiatives.
Experts noted that between 2021 and 2023, hacks and fraud involving DLT-based financial systems resulted in about $10 billion in losses. The main causes of user losses they cited were ‘the irreversible nature of digital assets and the immaturity of smart-contract security management’.
They also said that the lack of reversibility of transactions hinders broad adoption by businesses of on-chain payment instruments such as stablecoins. The ability to reverse transfers is a key feature of modern payment systems that enables recovering funds lost due to unauthorized transfers, they noted.
Building on prior Stanford research and the ongoing collaboration between the university group and Circle, the developers published two new open-source projects.
The first is the Recoverable Token standard, which enables reversing blockchain transfers using configurations suitable for ‘for both commerce and DeFi scenarios’.
The second solution in this direction is the ‘R-pool’ model, providing insurance and liquidity to restore tokens to their owners.
‘Payments in stablecoins are often equated with operations in traditional card networks that offer reversible transactions and fraud protection. We have long believed that the open and programmable nature of money in digital currencies on blockchains will lead to solutions to these problems’, Circle specialists said.
They say that the tools can be adapted ‘for a broad range of financial and commercial uses, not only for retail payments’.
Earlier in September, Circle introduced the first development from its technical arm — the open-source Perimeter protocol for creating tokenized lending markets.