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Cryptocurrencies are fascinating but the irreversibility is not a feature but a bug. I don't get the appeal for irreversibility. A legitimate trade always occu

• lawn 5y ago
  > A legitimate trade always occurs between willing partners Charge back fraud (also called friendly fraud) is a big problem in commerce, where the buyer will buy something, receive it and then cancel the payment. The merchant will often have to swallow the cost.
  • mrtksn 5y ago
    But that is an illegitimate trade and cuts BOTH WAYS. When the buyer is fraudulent the merchant swallows the cost AND when the merchant is fraudulent the buyer swallows the cost. That's actually why credit cards come with protection against fraudulent merchants and you need a good enough credit score to actually get a credit card. On top of that, payment processors run fraud detection systems that block suspicious actions. Irreversibility turns the trade into a competition over who is the better fraud. The only thing that the crypto guarantees is that the winner keeps the prize.
    • xur17 5y ago
      > Irreversibility turns the trade into a competition over who is the better fraud. The only thing that the crypto guarantees is that the winner keeps the prize. I think it's more complicated than that. It moves the fraud risk to one specific spot (the consumer) which VASTLY simplifies the checkout process + the costs associated with online purchasing. Right now online payments are a giant mess - every single merchant has to implement anti-"fraud" tools to try and ascertain the identity of the consumer and determine if it matches the owner of the card. As a consumer, I would happily take this trade for lower prices.
• imtringued 5y ago
  One thing I don't understand is this. The vast majority of people will use credit cards (or equivalent) to purchase things. If I wanted to pay with Bitcoin I would get a crypto credit card. Payment processing just isn't the same thing as a currency. It's like expecting the dollar bill to do payment processing. Is lightning network supposed to be that fancy decentralized payment processing platform that is going to kill credit cards or will people stick with visa and mastercard?
  • dboreham 5y ago
    Yes and yes.
• colechristensen 5y ago
  The end question is "why bother" with cryptocurrencies if you have a central authority that handles transaction disputes. It makes sense if you have a small group of trusted entities that want to have a ledger between themselves (like inter-bank ledgers for various purposes) but if you have somebody in the middle handling disputes... don't you just have paypal? Then cryptocurrency is just an extra complicated step that doesn't really matter.
  • robcohen 5y ago
    If only there was some kind of extensible system that would allow for people to enter into contracts with the protections they desire. One might even call these contracts "smart", and could include the ability for a trusted third party (or collection of third parties) to provide a trusted role in approving the transaction. If only such technology existed.
• Taek 5y ago
  The appeal for irreversibility is the complete removal of counterparty risk. It's a sharp edge and you need to be structured/careful, but for certain types of transactions, the cost of being careful is 100x cheaper than the cost of finding and using a trustworthy counterparty. A strong example of where the irreversibility of crypto is very useful is in the online sale of expensive electronic goods. Especially for things like speakers, TVs, and projectors, fraud rates are extremely high and boutique shops struggle to effectively support online customers, because such a large percentage of their sales get chargebacks after they've shipped the goods. If you accept crypto, you have a 100% guarantee that when the money has hit your wallet, the money is good and will stay in your wallet. You don't need to deal with an anti-fraud firm, you don't need to check whether this person is trying to have the goods shipped to a sketchy country, and you don't need to fear that your $6,000 item is going to sail away from you without payment. Yes, this means that the consumer has to fully trust the merchant, but in the case of online sales, the merchant is the known quantity with a reputation. Every consumer is a random, unknown person to the merchant and so it's much harder (and therefore more expensive) for the merchant to establish trustworthyness.
  • yunohn 5y ago
    > in the case of online sales, the merchant is the known quantity with a reputation This is absolutely not true. There’s plenty of risk buying expensive goods online, lots of problematic merchants. I don’t understand why merchants are inherently more trustworthy than customers?
    • Taek 5y ago
      It's not that merchants are inherently more trustworthy, it's that the buyer has ample opportunity to research the merchant and establish credibility. If there's a merchant that only accepts crypto and the buyer can't get comfortable that the merchant is trustworthy, the buyer can walk away instead of making a purchase. The merchant has much less to go on. There aren't review websites detailing the reputation and history of every random buyer that enters a credit card onto your website.
      • 5y ago
• astoor 5y ago
  > irreversibility is not a feature but a bug Completely true. Irreversibility and lack of consumer protections might just about fly for small transactions with pocket change which people on both sides of the transaction don't mind losing, but isn't going to be acceptable to most people for larger transactions. If I'm buying a house, for example, I don't want the risk of it being stolen because of an unfixable bug in a smart contract, or sold to the wrong person by an irreversible mistake entering the address. Scaling up further, if you look at the back office for any investment bank, a big chunk of people power is spend on trade reconciliation and essentially fixing human errors - this is a good thing for both parties making such transactions.
• lucozade 5y ago
  > why would you be so afraid that the transaction would be cancelled? The transaction will likely be for goods, services and/or money. If one or more parties don't provide said goods, services or money then the other parties may well want the transaction cancelled. That's different from them all being willing to transact in the first place. That's not a justification for irreveribility. The opposite in fact. But if you were planning on screwing your customer, say, the irreversibility is a bonus.
• cryptica 5y ago
  Irreversibility is one of its best features. Imagine a scenario in 50 years when 80% of token holders are dead... This could result in a non-trivial % of tokens being lost forever; this greatly reduces the remaining circulating supply of tokens and thus makes everyone else who still remembers their keys wealthier (less supply, same demand translates to higher price). On the other hand, stocks are more susceptible to demographic collapse; for example, if a lot of shareholders die and all their relatives inherit their stocks, you can expect a selloff to occur which could crash the stock price. With stocks, shares are never lost forever; they just get passed down to an increasing number of increasingly lazy and incompetent heirs. That's not to say that cryptocurrencies cannot be passed down (they can) but the fact that they are tied to a secret passphrase (instead of the legal system) makes it more likely that they can get lost. The negative economic effects of wealth inheritance are not as strong in crypto space. The idea that negligent people may lose their tokens is highly meritocratic as it transfers wealth from negligent people to careful people.
  • nradov 5y ago
    That's just such a naive take with no connection to reality. Occasional deaths and inheritance by retail shareholders has zero impact on share prices.
    • cryptica 5y ago
      Wait until the majority of boomers start retiring and/or dying, watch how that affects stock prices and/or the value of the USD relative to Bitcoin (if the Fed continues to prop up stocks artificially with more money printing), then we can talk.
• legutierr 5y ago
  > Sometimes mistakes happen(a faulty system, a design bug or straight out human error and people who are trying to take advantage of those), most of the time these are correctable. These errors are correctable if the counter-parties trust each other, or at least have a relationship that they don't want to undermine by being petty. Immutable blockchain systems are valuable in part because they allow entities to transact with each other even if they don't trust each other at all, don't know each other at all, or are even antagonistic with each other. Yes, if something goes wrong, a transaction won't be reversed, but without the blockchain these potentially antagonistic entities wouldn't have the capacity to do business with each other in the first place. Blockchains allow these entities capture the value of transacting with each other—value that wouldn't otherwise be realized—at the expense of irreversibility. You can potentially imagine that if antagonistic entities tried to do business in a more malleable environment, a request to reverse an error by one entity might not be honored by the other entity, or one entity might maliciously attempt to reverse a transaction that was not performed in error, but was simply disadvantageous in hindsight. The possibility that a transaction may need to be reversed—or that a reversal request may need to be litigated—increases transaction costs, especially when counter parties are antagonistic. The certainty of irreversibility creates a context by which certain entities are willing to do business with each other, when they might not otherwise do business at all.
  • mrtksn 5y ago
    How do they transact if they don't trust each other? You have the guarantee that the money your received is not going back but what kind of guarantee does the receiver of product/service has? Yes - so far, it worked well for extortion with ransomware but is that something that we want to have? Can you think of a legit business case where the merchant providing the promised service is guaranteed and all you need is a method to receive the payment? All that when the merchant and the buyer don't trust each other at all and on't have a conflict resolution mechanism. What do they trade exactly?
    • deleted 5y ago
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• nybble41 5y ago
  Irreversibility in the core protocol is a feature, and a necessary one at that. If you start with irreversible payments and you need payments to be reversible with some kind of review/appeal process you can add reversibility through escrow. The classic arrangement is a 2-of-3 multi-key system where the payment is made to an escrow address where it can be either finalized or refunded only when at least two key holders concur; the third key, held by a neutral third party, is used to settle disputes when the payer and payee cannot come to an agreement on their own. There are, however, situation were reversible payments are a liability, and there is no way to build an irreversible payment system on top of a reversible one. For example, you can't build a reliable escrow system on top of reversible payments since the payer can trivially circumvent the escrow by unilaterally revoking their payment to the escrow account.