Ripple Chief Technology Officer (CTO), David Schwartz, has done just that always been fast in defense of the crypto company and its technology. This time he defends Ripple developers implementing a newly proposed ‘Clawback’ feature the XRP ledger (XRPL).
Why the chargeback feature is needed
In a tweet shared on his existing freeze function.
The “clawback” amendment is now up for a vote. This allows issuers of new assets created specifically with this feature to reclaim a certain amount of a holder’s asset.
Some thoughts:… https://t.co/OmrerirRQz
— David “JoelKatz” Schwartz (@JoelKatz) October 2, 2023
As the name suggests, the Clawback feature allows a token issuer to reclaim tokens when there is fraudulent activity or for recovery purposes, such as when a user loses access to their account.
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He noted that the chargeback feature was primarily intended to meet legal obligations, such as in the case of a stablecoin issuance meeting their redemption obligations or when a court order requires the need to use such a feature.
From this premise, he explained that this function ensures that this event is reflected in the ledger, unlike the freeze function, which does not clarify why an asset is frozen. As such, this latest feature provides better accountability and makes audits less complex.
Moreover, he said that the freeze function is more of a “nuclear” option, unlike the clawback function, which causes less damage and can be seen as a viable and probably better alternative.
Schwartz reiterated that this chargeback did not apply to XRP and suggested it was an option for XRP stablecoin issuersnoting that other “blockchains with stablecoins have some version of this chargeback feature” and how this has helped solve an accountability problem.
Token price retains $0.52 support | Source: XRPUSD on Tradingview.com
XRP Ledger Feature Receives Cold Reception
Despite Schwartz’s justification for the feature, many still expressed displeasure with it, as it undermined the ethos of decentralization and user privacy. One X user (@bigcjat) explained that a clawback feature seemed more drastic, unlike the freeze feature, as the former stripped users of their tokens, unlike the latter, where the user still retained control over their tokens.
He continued quiz whether this token was simply proposed because of the ‘recent partnership’, as the feature had never been proposed before. He then suggested that the crypto company and its blockchain may have been compromised, as he stated: “Money spots, even decentralized ledgers.
In response, Schwartz stated that, to his knowledge, the driving force behind this feature was to ensure accountability, as this would reflect an issuer’s legal obligation. He is not aware of anyone claiming that this alone will be the case partner of Ripple if the XRPL supports chargeback.
Other users joined the conversation, with some expressing support for the feature and stating that stablecoin issuers should implement such a feature. On the other hand, others argued that the chargeback feature was unnecessary for a given user to report that this risk is “comparable to changing SIM cards.”
Another concern expressed is that token issuers could use this feature maliciously, especially if they are experiencing financial difficulties. That particular user provided an example of how FTX was able to reclaim its rights FTT tokens or a stablecoin issuer like Tether reclaiming their USDT tokens in case of financial distress.
X-user @bigcjat re-entered the conversation, noting that Schwartz’s statements about “legal obligations” essence of blockchain technology because there was no need for a ledger if the “actual value” and “lines” were outside the ledger.
However, Schwartz noted “several benefits” of posting these transactions to the ledger. One of these is that a public blockchain ensures that “the total legal obligations of the issuer can be fully public in a verifiable manner.”
The chargeback feature still needs to be voted on by validators on the XRP Ledger before it is implemented. Once implemented, stablecoin issuers must decide to enable it before they can create their tokens on the network.
Featured image from Bitcoinist, chart from Tradingview.com