Matt Powers April 18, 2014 at 2:02 am

It appears to me that one of the biggest drawbacks to the current model of cryptocurrencies is the lack of reversibility in transactions. Historically, third parties such as banks have enabled transactions to be reversed, such as refunds or guaranteeing purchases. I think that if cryptocurrencies want to avoid third parties as much as possible, they should adopt a method for reversing transactions for the purpose of dispute resolution. Thoughts?

Chris Pruden April 18, 2014 at 2:14 am

If a transaction can be reversed, there is some authority that decides to reverse it or not. That authority can be subjected to coercion (legal, physical) to force them to change transactions.

What you probably want, though, is multi-signature transactions and escrow. You could setup a transaction, for instance, that had to be signed by two of three before it would pay out. Those would be: buyer, seller, and escrow. If the buyer and seller agree, the deal is fine, and the transaction clears. If they don’t, escrow decides whether it clears or not.

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Nathan Tritchka April 21, 2014 at 12:21 am

I do think reversibility follows a line of logic that, in may respects, defeats the purpose of cryptocurrency in the first place.

To fall back on the analogy of gold:

Without contracting a third party, each transaction is only as secure as the trustworthiness of the persons involved. If you make some shady deal in a dark alley, expect some chance of duplicity.

If you pay some cryptobank to arbitrate the deal, you are far more secure, but you will pay for in the form of a fee.

I think what will happen, in the form of self-regulation that cryptocurrencies seem wan in begging the question, is that 2 kinds of entities will pop-up.

1) We will have our first cryptobanks.

2) We will have profile databases. Private, third-party entities will keep and track reports of individuals and, for a small fee, sell you what info they have on your potential buyer/seller.

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