In a recent X thread, Matter Labs co-founder and CEO Alex Gluchowski ignited a debate within the Ethereum community by proposing the creation of an “Ethereum Supreme Court” to address the ongoing challenges surrounding smart contract implementation risks in the decentralized finance (DeFi) ecosystem.
Gluchowski’s idea seeks to establish a hierarchical system of on-chain courts, resembling real-world judiciary structures, to provide a resolution mechanism for disputes related to smart contracts.
In the September 2 thread, Alex Gluchowski tackles critical issues and limitations in the DeFi sector, especially within Layer 2 (L2) implementations. He systematically highlights the deficiencies of current solutions, particularly their inability to handle emergencies and vulnerabilities effectively.
Gluchowski emphasizes the need for more time-locked upgrades, which are suited for planned changes but fall short of addressing urgent and unforeseen situations.
He also points out the limitations of converting to alternative Layer 1 (L1) solutions, as this approach exacerbates existing problems and fails to offer viable solutions.
Importantly, Gluchowski notes that assets bridged from Ethereum cannot be forked, complicating the resolution of fork-related challenges.
The thread also delves into the role of security councils in mitigating issues but underscores that they need to offer comprehensive solutions.
While governance multisigs with emergency upgrade rights can address some problems, they introduce regulatory and security risks, highlighting the immaturity of DeFi systems.
Furthermore, Gluchowski explores the concept of combined governance mechanisms, illustrating how security councils may temporarily freeze contracts, necessitating token governance approval for an emergency upgrade.
However, this approach exposes vulnerabilities, as a malicious majority of undercollateralized stakers could execute an illicit takeover upgrade, resulting in asset theft.
Building an Ethereum Supreme Court: A Solution to L1 and DeFi Protocol Challenges
L1 protocols can be forked, allowing users to choose their preferred fork branch. However, this forkability doesn’t apply to L2s and DeFi protocols due to the inability to fork native assets bridged from L1, like ETH.
Gluchowski asks, “What if we forked the L1 itself to resolve protocol-specific issues?”
While technically viable, this proposal faces two notable challenges. First, it may benefit larger protocols as smaller ones struggle to take action.
Second, there’s a risk of overburdening L1 social consensus, a concern that Ethereum co-founder Vitalik Buterin underscored in a related blog post.
“Now, hear me out. What if we built a hierarchical system of onchain courts similar to the real-world judiciary?”
Gluchowski’s Twitter thread introduces the idea of building a hierarchical system of on-chain courts, the “Ethereum Supreme Court,” akin to the real-world judiciary, to address these issues.
Each protocol within the Ethereum ecosystem would define its governance and emergency upgrade mechanisms.
Additionally, protocols would designate a unique contract to serve as an instance of appeal, necessitating a standardized ERC interface.
The proposal envisions an appeal period during emergency upgrades, wherein anyone can challenge the decision in a higher court by providing a predefined bail deposit.
These courts would vary in members, prices, and reputation, ensuring decentralized dispute resolution. Ultimately, the Ethereum Supreme Court, enabled by a technically soft fork of L1, would serve as the final authority.
To encourage adoption and usage, the proposal suggests forming a social consensus around the concept and deploying a “canonical” court instance with prohibitively high costs, making it accessible only for truly exceptional cases.
Gluchowski’s idea has sparked discussions within the Ethereum community, with some expressing interest in exploring and developing such a system. Regarding this proposal, Gluchowski said Zksync — an Ethereum layer 2 scaling solution created by Matter Labs, has indicated a willingness to fund research in this direction.
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