An Ethereum update has been proposed that would introduce insurance pools.
The proposal, started by Ethereum Foundation developer Alex Van de Sande, aims to prevent events like the Parity wallet bug that saw $320 million of users’ Ethereum dissappear. At the time, the only suggested solution was to hardfork the Ethereum blockchain from a point before the catastrophic error. If this had happened the community would have been split in two. As Van de Sande notes in his post, forking is never a good answer.
As time progressed, with no available methods of freeing the trapped Ether, a new idea was suggested. EIP (Ethereum Improvement Proposal) 867 proposed a voting mechanism that would allow users to regain lost funds – but this became a hugely contentious issue in the community. That’s because the proposal would allow the editing of the blockchain, going against one of the technologies strongest features: immutability.
Many also feared that the ‘tyranny of the majority’ would use the voting system to forcibly control users balances, with one critic giving the example of rading Donal Trump’s wallet.
Van de Sande’s new idea would not involve editing blocks after the event. Instead, it would seek to stop funds being lost in the first place. The system would work by creating insurance pools, a type of smart-contract where developers could lock away funds safely for a set period. In exchange they would receive recover-ether tokens, an ethereum token just for testing. If funds are lost during the development of a project, as happened at Parity, then they will be the recover-ether tokens, and the real tokens will be released back when the smart contract is completed. If no issues occur, then the recover-ether tokens will be destroyed.
It’s an unavoidable fact that mistakes will be made in development, especially services such as wallets. By preventing Ethereum tokens from being lost when this occurs, de Sande is hoping to avoid further loss of funds, as well as users wishing to fork to restore their balances.
