Chinese e-commerce giant Alibaba has applied to patent a blockchain system that allows a third-party administrator to execute “special transactions” such as halting a smart contract or freezing an account linked to illegal activity.
According to documents made public on Thursday by the U.S. Patent & Trademark Office (USPTO), the Hangzhou-based firm submitted the application through Alibaba Group Holding Limited, a holding company located in Grand Cayman, in March.
Writing in the filing, the patent authors state that while blockchain technology has many attractive features — openness, unchangeability, and decentralization, for instance — it fails to account for certain practical considerations associated with implementing it in a regulated, real-world environment.
In particular, the Alibaba researchers expressed concern that standard smart contracts do not provide legal authorities with a general ability to freeze user accounts associated with illegal transactions or otherwise facilitate administrative intervention in a blockchain network.
From the patent application:
“In real life, however, there is a type of administrative intervention activities in the category of special transactions. For example, when a user performs illegal activities, a court order may be executed to freeze the user’s account. However, this operation activity conflicts with smart contracts in existing blockchains and cannot be carried out,” the patent authors wrote. “Therefore, there is a need for a blockchain-based transaction processing method that enables special transactions like administrative intervention in a blockchain.”
Under Alibaba’s proposed blockchain system, dedicated administrator accounts would have the ability to send so-called “special transactions” to nodes, which then invoke a smart contract to perform operating instructions on a particular account.
In one potential embodiment, the blockchain creator could issue an account to a government agency that allowed the agency to invoke a smart contract that performs a predefined set of interventions corresponding to their legal or regulatory mandate.
The authors wrote:
“Here, the issuing account recorded in the various embodiments may be an account owned by a government agency or a trustful institution. Since corresponding smart contracts are created for different designated accounts, it indicates that operation instructions issued by the designated accounts are recognized. As a result, effective administrative supervision can be performed on all accounts in a blockchain network, and this type of supervision is limited, which will not restrict normal transactions in the blockchain network.”
The authors concede that this system introduces an element of risk into the blockchain network since administrator accounts could be prime targets for hackers. Consequently, they suggest decentralizing supervisory power among a plurality of designated accounts.
“In this way, the supervision power of the accounts in the blockchain can be decentralization, such that the supervision power against the blockchain is not centralized in one designated account and the effectiveness and credibility of supervision can be ensured,” they wrote. “At the same time, it prevents the loss of all supervision power over the blockchain when one designated account is compromised.
Even apart from Alibaba’s proposed system, smart contract developers can generally write contracts that give them some degree of control over those contracts after they have been deployed. In Ethereum, for instance, developers can create “upgradeable contracts” that separate logic and data into separate contracts, one of which calls the other, often with the use of delegatecall and a so-called proxy contract. When creating its stablecoin, cryptocurrency exchange Gemini implemented a proxy contract to enable it to freeze tokens held by suspected criminals and otherwise comply with financial regulations. However, developers warn that creating upgradeable contracts significantly increases the complexity of the code, raising the likelihood of bugs.
Alibaba’s proposed system would not only reduce the complexity associated with giving administrators extraordinary privileges but would also give them the ability to perform these actions over the entire network, not just on a particular token or smart contract.
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