Dear Phala Community,

I'm submitting this proposal for urgent review regarding 8,849 PHA tokens locked in a system-generated address due to cross-chain address translation. With Khala deprecation approaching, this requires timely consideration. Similar cases have been resolved through governance on other chains like Bifrost.

System-Generated Address Error: Urgent Recovery Request for 8,849 PHA

The Technical Situation

When I attempted to make a transfer using the Phala dashboard, a critical system behavior issue occurred. Instead of protecting users by rejecting an invalid cross-chain transfer (KSM address G4bsXhKHQ4v1o5TRdqRfB2Crvau8qSWAoNcfgKKgDYhs7St ) , the system automatically generated a Khala address linked to this KSM address and locked 8,849 PHA tokens in this inaccessible location.

Original Address (41x1etEFF1Lc7vLnErX1sqSYyco3iTfXLruFiewnqmNH6n5X)
↓
Attempted transfer to KSM address (G4bsXhKHQ4v1o5TRdqRfB2Crvau8qSWAoNcfgKKgDYhs7St)
↓
System auto-generated Khala address (44757Jrc3YZGPSQSnYU6EQU6xWb8fy55T8tHtpKkeACMjxAU)
↓
8,849 PHA now locked in inaccessible address

The following evidence demonstrates this is a system-level issue:

• Original transaction: https://khala.subscan.io/extrinsic/3630637-15
• KSM address involved: G4bsXhKHQ4v1o5TRdqRfB2Crvau8qSWAoNcfgKKgDYhs7St
• System-generated Khala address: 44757Jrc3YZGPSQSnYU6EQU6xWb8fy55T8tHtpKkeACMjxAU
• Amount locked: 8,849 PHA tokens
• Return address: 41x1etEFF1Lc7vLnErX1sqSYyco3iTfXLruFiewnqmNH6n5X

System Error vs User Error

This situation demonstrates a system-level flaw rather than user error for several reasons:

1. The system should have rejected the invalid cross-chain transfer immediately
2. Instead, it created a new Khala address 44757Jrc3YZGPSQSnYU6EQU6xWb8fy55T8tHtpKkeACMjxAU linked to KSM address G4bsXhKHQ4v1o5TRdqRfB2Crvau8qSWAoNcfgKKgDYhs7St without warning
3. The system then accepted and processed a transaction that should have been impossible
4. The tokens are now locked in an address that no one - not users, not developers, not even the system itself - can access

Step-by-Step System Behavior

The full technical sequence shows how the system created this unrecoverable situation:

1. Initial Attempt:

   • Tried to transfer 8,849 PHA using Phala dashboard
   • Transaction hash: 3630637-15 (https://khala.subscan.io/extrinsic/3630637-15)

2. System's Automatic Address Generation:

   • Encountered KSM address: G4bsXhKHQ4v1o5TRdqRfB2Crvau8qSWAoNcfgKKgDYhs7St
   • Instead of rejecting the cross-chain transfer
   • System automatically generated a Khala address
   • Proof of system-generated link: https://khala.subscan.io/tools/format_transform?input=G4bsXhKHQ4v1o5TRdqRfB2Crvau8qSWAoNcfgKKgDYhs7St&type=Khala

3. Result of System's Actions:

   • New Khala address created: 44757Jrc3YZGPSQSnYU6EQU6xWb8fy55T8tHtpKkeACMjxAU
   • 8,849 PHA transferred to this system-generated address

4. Required Recovery Path:

   • Force transfer from: 44757Jrc3YZGPSQSnYU6EQU6xWb8fy55T8tHtpKkeACMjxAU
   • Return to sender: 41x1etEFF1Lc7vLnErX1sqSYyco3iTfXLruFiewnqmNH6n5X
   • Timeline: Before Khala chain deprecation
   • Method: Governance-approved force transfer

Established Precedent

Other prominent blockchain networks have already established how to handle these situations:

• Bifrost has officially recognized similar cases as system-level edge cases
• They have approved force transfers in comparable situations
• Their approach acknowledges that system-generated inaccessible addresses require governance intervention
• This precedent shows that recovery is the standard solution for such system behaviors

Critical Timeline and Urgency

The situation requires timely action because:

• The Khala chain is scheduled for deprecation
• Once deprecation occurs, these tokens will be permanently lost
• No recovery will be possible after the chain is deprecated
• 8,849 PHA tokens will be permanently removed from circulation

Why Recovery is Warranted

1. This is a documented system behavior issue
2. The address is provably inaccessible
3. Similar situations have precedent for recovery
4. Chain deprecation creates urgency
5. Recovery prevents permanent token loss
6. The entire situation is fully verifiable on-chain
7. No other users are affected by this recovery
8. The solution maintains the intended token supply

This recovery action serves both individual justice and system integrity, preventing permanent loss from a system-generated error while following established blockchain governance precedents.