Posting this on behalf of the Locked Ether Collective reachable at u/Cova_EFRP

TL;DR

We propose the Ethereum Fund Recovery Protocol (EFRP): a decentralized, hard-fork-independent mechanism intended to provide a recovery path for ETH compromised by smart contract malfunctions (e.g. the Parity multisig wallet lock). The protocol proposes a gradual recovery funded by ETH sourced from EIP-1559 burned base fees.

Background and Motivation

We are a small group of early Ethereum adopters who helped grow the protocol at its inception. We are united by a shared personal tragedy: the Parity multisig wallet bug that occurred on November 6th, 2017, which permanently locked a significant amount of ETH.

After nearly two years of collaboration, discussion, research, and writing, we published a proposal last month aimed at addressing what we believe to be one of Ethereum’s longest-standing unresolved issues.

• 📄 Full proposal: Here
• 💬 Public discussion on Ethereum Magicians: Here

Fund Loss on Ethereum: An Incomplete Model

On traditional blockchains, loss of funds is generally understood to fall into two primary categories:

1. User error (e.g. lost private keys, incorrect transactions)
2. Criminal activity (e.g. hacks, phishing, spoofing)

However, on a smart contract platform such as Ethereum, a third category must be acknowledged:

1. Smart contract malfunction

In these cases, unforeseen bugs or unintended contract interactions result in users losing control over their funds. Importantly, these funds are neither stolen nor lost — rather, they are compromised and rendered inaccessible to their legitimate owners.

Limitations of Existing Remedies

Basic crypto due diligence can significantly reduce the risk of user error.
Similarly, theft and fraud fall under existing criminal and civil law frameworks (even if enforcement remains challenging).

In contrast, there is currently no meaningful recourse for users who lose funds due to smart contract malfunctions:

• there is no authority to appeal to,
• legal action against developers is impractical and undesirable,
• and the protocol itself provides no native resolution mechanism.

Given that smart contracts are authored by humans and are therefore fallible, the absence of any recourse represents a systemic risk unique to smart contract platforms.

The Hard Fork Constraint

In cases such as the Parity multisig wallet lock, recovery can only be achieved via a hard fork.

This presents significant challenges:

• hard forks are socially and technically sensitive,
• they conflict with Ethereum’s core principle of immutability,
• and they do not scale as a general solution.

While there are valid reasons to oppose hard fork-based interventions, the lack of alternatives leaves affected users with no viable path forward.

The Ethereum Fund Recovery Protocol (EFRP)

To address this gap, we propose the Ethereum Fund Recovery Protocol (EFRP) — a general, decentralized recovery mechanism that operates without requiring a hard fork.

Key properties:

• applicable to all cases of smart contract malfunction, regardless of size,
• permissionless and open to all eligible users,
• designed to coexist with Ethereum’s existing economic and governance structures.

Core Mechanism (High-Level)

• Eligible users voluntarily self-burn their compromised ETH
• In return, they receive a recovery token (sETH)
• Over time, sETH is gradually burned and replaced with ETH
• This ETH is sourced from currently burned base fees introduced by EIP-1559

Oversight and parameter management would be handled by a small, decentralized, single-purpose DAO.

Why This Matters

We believe the EFRP offers a principled approach to one of Ethereum’s most persistent unresolved issues.

If successful, the protocol could:

• Help restore acces of legitimate owners to compromised funds
• Reduce the risk profile of interacting with smart contracts,
• Lower barriers to adoption for both users and developers,
• And contribute to long-term ecosystem resilience and growth.

Feedback and Discussion

We welcome thoughtful feedback and critique —
either here on Reddit or in the ongoing Ethereum Magicians discussion.