Explanation: Proof Of Forgiveness and Forgiveness Payments

Proof of Forgiveness (PoF) is detailed in the whitepaper on page 28, but I want to go into detail here because this unusual in the cryptocurrency space, and I suspect there will be confusion on this topic because of how other chains (such as ETH and The DAO) handled hacks.

I want to reiterate, PoF isn’t a hard fork and doesn’t revert any payments. In fact, it isn’t detailed directly on the protocol layer at all. Rather it is the logical consequence of two other Causevest mechanisms.

First, that Proof of Cause (PoC) payments exist, and the criterion for receiving these payments is partially dependent on human judgement.

Second, that in the event an on-chain vault is breached, the funds can instead of going to the thief, be irreversibly redirected to the network, which means they get added to the pot that pays out PoC rewards.

In the case that someone (who can prove their identity beyond reasonable doubt) has money in an on-chain vault, gets hacked, and has the funds sent to the network can get reimbursed under the PoC rewards mechanism at no total cost to the network (aside from the cost of having to verify the identity and give out the coins). We have decided to give this type of payment the name PoF to distinguish it from other PoC payments, but technically speaking, it is just a PoC payment.

Now, in practice, this mechanism has large limits. If the attacker is able to make off with the funds and not have them donated to the network, then paying the owner back would be rewarding the attacker and would carry the opportunity cost of the other uses for those funds, they would garner much less support. In addition, I suspect only the largest hacks (like exchange hacks) will be worth going through the trouble of PoF payments.

Even with these limits, I think this mechanism is useful. Exchanges will (hopefully) hold their coins in a cold wallet vault and will be able to donate the coins to the network in the case of a breach. An exchange wallet is going to be large enough and well documented enough to overcome the problems of identity and size.

Exchange losses are unfortunately a common occurrence in the crypto space and this mechanism offers another layer of protection and last line of defense against lost of customer funds. As a community, I hope we can pressure exchanges into using the vault mechanism (and make the mechanism easy enough to use) so they actually use it, and give themselves this extra protection.