Everything You Need to Know About One of the Important Ripple Updates

TL;DR

• The XLS-39 Clawback, part of the XRP Ledger Version 1.12.0, allows asset issuers to “claw back” assets for account recovery or in case of suspected fraudulent activity.
• The feature has stirred debate in the XRP community, with concerns about it granting issuers excessive control and potential for misuse.

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Clawback: More Safety or a Double-Edged Sword?

The XLS-39 Clawback is a feature that seeks to add a new layer of token control for the XRP Ledger. Clawback is part of the XRP Ledger Version 1.12.0., and will be an optional feature for asset issuers.

Ripple’s development team proposed this feature in early September. On their official X (Twitter) account, the team announced the XRP Ledger update, which introduced multiple features, mainly an Automated Market Maker and the Clawback. These are still pending validation from the community. 

But what can you do with Clawback? First, it allows you as an issuer to “claw back” your assets from the token holder should any jeopardizing scenario arise. This is in case of fraudulent activity or for account recovery when a user loses access to their account.

Therefore, there are two main things you can do with this feature.

1. Asset Recovery: if a token holder loses access to their account, the clawback feature places control back to the issuer as they’re able to re-assign tokens to an alternate wallet. This prevents potential token losses for both parties.
2. Fraudulent activity: if an asset is equipped with the Clawback function, the issuer can take action by reclaiming the funds from the token holders if they suspect fraudulent activity coming from the other end.

This feature, as we have stated, can be enabled on transactions. Therefore, it should be considered one of the many tools within the XRP Ledger’s inventory. It’s turned off by default, so users don’t have to worry if their assets will be clawed back arbitrarily. However, it can only be activated for other issued tokens besides XRP. 

It’s been happening on the Stellar network.
It will tell you if it’s a claw back or if it can be considered a @ claw back in The future . This ain’t new.
This is basically telling the public .
We can giveth and we can taketh away.

— X marks the spot, LET’sEat‼️ (@WittyXcash) October 2, 2023

However, the Clawback caused the most stir among the XRP community. Some people said this feature gave token issuers too much control over token holders, others saying it’s a double-edged sword that will be exploited.