Circle Introduces Reusable Blockchain Transaction System

Circle developers have introduced an innovative concept known as Recoverable Wrapper Tokens (RWT), which will enable reversible blockchain transactions. This solution aims to enhance the security of digital assets.

Circle, a worldwide FinTech firm and issuer of the USD Coin (USDT) stablecoin, in partnership with applied cryptography specialists from Stanford University, has released a white paper detailing a new technical solution — Recoverable Wrapper Tokens (RWT). The document indicates that this novel product is designed to mitigate risks and bolster user trust in blockchain technology.

The unique RWT mechanism encapsulates ERC-20 tokens, adding an additional layer of security without altering the underlying token. Consequently, this solution permits the owner to retrieve lost or stolen assets within a specified timeframe following their transfer.

The Recoverable Wrapper Tokens (RWT) mechanism comprises the following stages:

1. Wrapping. The mechanism generates an extra layer around ERC-20 tokens, maintaining the original token code.
2. Recovery. Once the assets wrapped with RWT are transferred, the recipient will be unable to utilize them during the timeframe defined in the code. Within this period, the sender can initiate a refund.
3. Refund. If the owner realizes that the assets have been stolen during the designated timeframe, they can start a return process. The assets can be automatically returned to the owner.

The RWT framework allows developers to tailor the functionality of the solution by modifying:

• the duration within which transactions can be reversed, such as 24 hours or three days;
• an arbitration system for resolving disputes;
• the terms and conditions governing token transfers.

This methodology renders RWT a more adaptable tool that can be suited to various requirements and use cases. The solution’s open-source code is accessible on GitHub.

To guarantee the liquidity of wrapped tokens, Circle developers have implemented the R-Pool model, whose primary functions facilitate:

• the exchange of wrapped tokens for the underlying assets of the ERC-20 standard;
• the determination of the exchange rate through the Automated Market R-Pool, which operates similarly to AMM and evaluates the risk of token return based on the transaction history of the address requesting the exchange;
• the independent assessment of the return risk of wrapped tokens via the Order Book R-Pool, which details all records of the liquidity provider.

The main goal of the R-Pool model is to ensure that ERC-20 tokens wrapped with RWT are compatible with existing DeFi protocols.

Circle is actively investigating the Web3 domain, offering developers pre-built solutions and toolkits for the development of Web3 applications. Previously, a team of researchers from Stanford University proposed a concept that theoretically allows for the freezing and returning of transactions within the Ethereum network.

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