Ethereum Foundation Developer Proposes Smart Contract Insurance Fund

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Ethereum Foundation developer Alex Van de Sande has unveiled a proposal for an insurance pool that he believes will mitigate the risk of network splits stemming from a desire to recover funds frozen due to code faults in smart contracts.

Van de Sande, who is team lead for the Mist browser, wrote in a blog post that creating a recovery contract with a dedicated insurance fund would reduce the incentive that a person or group — e.g. the owners of the more than $320 million in ETH that was rendered unspendable after Parity’s multi-signature wallet contract library self-destructed — would have to pursue a contentious hard fork to regain some or all of the value lost due to the bug.

Here’s how the system would work.

Developers would insure their smart contracts by locking up Ether for a predetermined period of years in a recovery contract. In exchange, they would receive an equal number of…