April 1, 2023

The irreversibility of blockchain transactions is often touted as a proof of cryptocurrency security.because of a Transaction cannot be reversed, scammers cannot initiate chargebacks after transferring funds to purchase products. It provides the highest level of protection for sellers – especially those who may have been burned in the past using third-party services such as PayPal, where chargebacks are not only common, but also difficult to challenge when scammed .

There is an opinion that the irreversibility of blockchain is one of the reasons why it is such a secure technology. However, this unique feature of blockchain also has drawbacks.After all, blockchain users are just humans, and make mistakes often. The problem is that blockchain wallet addresses are essentially long strings of random numbers and letters, and manual entry is prone to error. If the address is incorrect and the transaction is confirmed, the funds will either end up in the wrong wallet or be lost forever in Ethereum and never be seen again.

The second problem comes from the complexity of DeFi, where users often conduct a series of cross-chain transactions. For example, they might borrow from a protocol on one chain, then bridge those tokens to another chain, and deposit them into a liquidity pool. This is a three-step trade that traders execute to take advantage of arbitrage opportunities, but such trades are fraught with risk if any step in the process fails.

Why can’t a blockchain transaction be reversed?

Transaction finality is the key design feature This is a necessary blockchain due to its decentralized nature. Unlike bank transfers, which are performed by trusted third parties, blockchain transactions are processed by validators when consensus is reached among the various nodes that make up the network. Since blockchain records are stored on multiple nodes, the distributed ledger is immutable, meaning it cannot be changed by any single node or user. If someone tries to change the transaction, the rest of the network will know and reject the change.

For security reasons, the blockchain is designed in this way because it eliminates adouble flower“, users may try to cheat and make multiple transactions with the same funds.

Therefore, transactions cannot be reversed due to the decentralized way of the blockchain. The only way to return funds is if the person who received them decides to return the funds. This can be problematic because if funds are sent to a complete stranger, that person will most likely want to keep them, since they won’t face any trouble doing so.

Problems with irreversible transactions

While many people consider the irreversibility of blockchains to be a good thing, it can also cause big problems when things go wrong. There is a strong argument that if cryptocurrencies are to replace fiat currencies as the mainstream payment method, people will need a way to reverse transactions when funds are sent to the wrong address.

While most errors can be eliminated by simply copying and pasting addresses or scanning QR codes, these methods are not entirely perfect. For example, addresses may be changed unexpectedly after they are scanned. Alternatively, the sender may have entered the wrong amount of coins to send. This happens more often than people realize because people often set prices in dollars or other fiat currencies and then send the equivalent amount in cryptocurrency. In order to send $50 in BTC, the user must transfer 0.0027 BTC at the current exchange rate. But it’s easy to accidentally send 0.027 BTC ($500).

It’s not just mistakes that are worrying, though. Another big issue is wallet hacking. In traditional banking, users can rest assured that if their bank account is hacked and someone transfers money from their account, the bank will eventually refund their lost amount. This does not happen with blockchain transactions because there is no centralized authority that can provide refunds. Security is the sole responsibility of the individual user, so if your wallet is compromised in some way, you can almost certainly say goodbye to any funds in it forever.

Why you need a safety net

Clearly, many people would benefit from having the ability to reverse blockchain transactions. The difficulty, however, lies in achieving this in a way that does not compromise the security of the blockchain. If someone could pay for a good or service and then reverse that transaction after the product was delivered, the cryptocurrency would lose all credibility and no one would use it again.

This is a difficult problem to solve, but some very smart people have come up with a solution.A good example is t3rn protocolwhich develops a platform for executing smart contracts with built-in fail-safe mechanisms to ensure that complex transactions are handled correctly, or complete reversal If any problems arise.

T3rn is a good example of how its failsafe mechanism works blog post. Imagine a user is planning a five-step transaction that involves bridging tokens from Ethereum to Polkadot and then to Moonbeam, making various additional exchanges and deposits along the way. These types of transactions are often performed by DeFi traders, but can cause problems if users don’t have enough coins in their balances to cover the gas fee for each transaction. If they run out of gas on step 3 or 4, the tokens will remain at that step, causing a huge headache for traders. They will almost certainly miss any arbitrage opportunity they wish to take advantage of.

With t3rn this is not a problem. Its unique fail-safe mechanism involves placing the assets involved in each step of the transaction in escrow. This way, they are only released after each step of the transaction has successfully executed. If either step fails, t3rn will simply cancel the transaction and all previous steps will be reverted. As you can see in the example above, Bob will simply put all his original ETH tokens back into his wallet without losing any gas fees.

The great thing about t3rn is that it allows users to write complex transactions through a simple user interface, where each step is arranged in chronological order.The protocol also supports multiple wallets, including metamask, Ambire wallet and others.

Paving the way for wider adoption

The blockchain reversibility achieved by t3rn is likely to prove to be transformative for the crypto industry. It offers users the possibility to better protect their digital assets by introducing a security mechanism for every transaction they make. If someone accidentally sent $500 worth of tokens instead of $50, they now have a way to reverse that transaction and correct the error without relying on the honesty of the person receiving the funds.

This capability is a fundamental guarantee that will benefit both regular users and DeFi traders equally, and may build greater trust in cryptocurrencies as a whole. While blockchain transaction finality cannot and should not be sacrificed, there is still a need for a way to avoid being punished for honest mistakes. By providing this capability, t3rn could, in part, help the next generation of more cautious crypto users who need some kind of safety net.

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