Blockchain technology is terrific. We all know it well, especially those who have delved deeper into it. Transactions on the blockchain are incredibly secure, almost unbreakable, which we can not claim about traditional payment methods. But it’s not without its problems that need to be solved.
One of the biggest issues is the irreversibility of transactions. If you’ve ever made a crypto transaction, you know how crucial it is to enter the correct info. If you don’t, the funds could go elsewhere and likely be lost forever.
As this could be problematic for larger transactions, we wanted to cover why that’s the case in this article. More importantly, we’ll delve deeper into why transactions on the blockchain should become reversible and how that can work. It might sound impossible, but there are always ways. Let’s see what those are.
Problems Stemming From Irreversible Transactions
Clearly, the blockchain was created to ensure the security of the whole network while remaining decentralized.
However, this always meant there would be no way for transactions to be altered or reversed. That’s because once a transaction is made, it is written into the blockchain. If we were to change that information, we would change the entire transaction and break the system.
If you could change a transaction on the blockchain that’s supposed to be final, then it wouldn’t make much sense to have the whole system in the first place.
However, that doesn’t mean we shouldn’t find a way to make reversible transactions a reality while ensuring the system stays true to the nature of blockchain to keep it decentralized.
We need to change it because the current system leads to two significant problems — technical errors and hacks.
Technical errors are the system’s biggest problem in terms of irreversible transactions. People make mistakes all the time, but when you misspell an address in the world of cryptocurrency, there’s no going back. Once the transaction is made, it’s over.
You have to rely on the owner of that address to return the funds to you. However, many addresses are not operational, which is fairly common with many cryptocurrencies, most notably Bitcoin. So, once the funds go to such an address, it’s over.
Currently, many cryptocurrencies have a vast portion of burned coins — the coins left in inaccessible addresses. This shows how problematic errors can be.
Another big problem of irreversible transactions is successful hacking attempts. If someone gets a hold of your funds, it’s almost impossible to get them back.
With banks and other payment systems operating in a centralized manner, the central authority can quickly reverse the transaction and return stolen funds. But that’s not possible with blockchain transactions as there’s no centralized authority to return the funds.
Naturally, that doesn’t mean centralization is the key here, but it does mean that another fail-safe system or some other mechanism is necessary to avoid such problems.
Reversibility Is the Key
The need for reversibility has long been recognized to make cryptocurrency usage and any other transaction on the blockchain easy.
There have been attempts to change the system. For instance, the aptly named Reversecoin was a small attempt to create a coin that would feature irreversible transactions. It didn’t go through, but the basic idea wasn’t all that bad.
It envisioned a timeout period and a set of keys so a user would have the chance to stop a transaction from going through and effectively reverse it. With the set of keys, even stolen amounts could be returned by reversing the transaction with the proper keys.
Naturally, we also have solutions embedded into the current system, like multi-signature smart contracts that require several users to complete transactions. They represent a good system to prevent hacking attempts from succeeding, but they are not always enough.
We get something more with a solution called t3rn. It’s a smart contract hosting platform that uses a fail-safe mechanism that guarantees a successful execution every time. It effectively escrows executed changes, so they are easily reverted if they fail.
One of the key partners of t3rn is Polkadot, and it already has other projects that attempt to achieve a similar thing like t3rn, like Moonbeam or Radicle. They know that reversibility is important, especially when dealing with cross-chain transactions. With the help of smart contracts and embedded fail-safe mechanisms, there’s a chance to achieve that.
And if we can get to reversible transactions without compromising the decentralized nature of the blockchain, then why not do it? Irreversible transactions can be very problematic, as you’ve already seen, so a solution that doesn’t affect decentralization is definitely needed.