Matter Labs co-founder, Alex Gluchowski has proposed an idea to implement onchain judiciary into the decentralized finance (DeFi) ecosystem.
Alex Gluchowski is also the developer entity behind Ethereum layer 2 rollup zkSync. In his latest post, Alex addresses the issue of deploying risk-mitigating smart contracts for DeFi protocols and Layer 2 networks.
The DeFi developer identifies that existing solutions such as time-locked upgrades or converting applications into an alternative system is not an ideal solution while protocol is infected. Onchain security councils or governance are useful but it has certain limitations.
“L1s don’t face the same problem because they are forkable. [ ]… This doesn’t work for L2s and Defi protocols, unfortunately, because we can’t fork underlying native assets bridged from L1 (such as ETH),” Alex said while describing the core of the problem.
As an ideal solution, Alex proposes an onchain judiciary between the DeFi ecosystem which will be similar to the real world judiciary system. It consists of higher courts and the Ethereum Supreme Court being at the top.
It is suggested that every protocol must have a smart contract for court appealing alongside governance controlled emergency upgrades. Whenever a protocol executes an emergency upgrade, anyone can appeal to the court to propose upgrade cancellation.
“This court can then cancel the emergency upgrade (and do nothing else). Different courts will have different members, prices and reputation, in a completely decentralized manner,” said Alex.
Furthermore, Alex explains that each court will have to specify to its higher court if the decision can be appealed until the final appeal reaches the Ethereum Supreme Court. The decision here is determined by the soft-fork of the network.
To prevent misuse of this novel idea, the developer said to form a social consensus around it while adding ‘canonical’ tags on courts to identify its authority.
“The most important function of such a system will be to protect protocols against political inference from the outside.” Alex said, adding “It will serve as a great deterrence mechanism, and will elevate the role of Ethereum as a powerful network state.”
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