November 27, 2022


The immutability of blockchain transactions is often cited as proof of crypto’s security. Because a Transactions cannot be undone, there is no way for scammers to initiate a chargeback after transferring funds to purchase a product This provides the ultimate level of protection for sellers – especially those who have been burned in the past using third-party services like PayPal, where chargebacks are not only common but also very difficult to challenge in the event of a scam.

There is an argument that blockchain’s immutability is one of the reasons it is a secure technology. However, this unique feature of blockchain has its downside. After all, blockchain users are only human, and Mistakes are often made. The problem is that blockchain wallet addresses are basically a long string of random numbers and letters, and it’s very easy to make mistakes when entering them manually. If an address is incorrect and the transaction is confirmed, those funds will either end up in the wrong wallet or be lost forever in the ether, never to be seen again.

A second problem arises from the complexity of DeFi, where users often conduct a series of cross-chain transactions. For example, they can borrow from a protocol on one chain, then bridge these tokens to another chain before depositing them into a liquidity pool. It is a three-step transaction that allows traders to take advantage of arbitrage opportunities, but such transactions are risky if any step in the process fails.

Why can’t blockchain transactions be reversed?

Transaction finality is key Design features Necessary due to the decentralized nature of blockchain. Unlike a bank transfer executed by a trusted third party, blockchain transactions are processed by validators when consensus is reached between the various nodes that make up the network. Because blockchain records are stored across multiple nodes, the distributed ledger is immutable, meaning it cannot be changed by any single node or user. If someone tries to change a transaction, the rest of the network will know about it and reject that change.

Blockchains are designed this way for security reasons, as it eliminates a problem known as “”Double the cost“, where a user can try to cheat and use the same funds to make multiple transactions.

So due to the way blockchains are decentralized, there is no way to reverse a transaction. The only way funds can be returned is if the person who received them decides to send them back. This can be problematic, because if funds are sent to a complete stranger, that person may be tempted to keep them, as they won’t face any problems for doing so.

Problems caused by irreversible transactions

While many people see blockchain immutability as a good thing, it can also cause big problems if done wrong. There is a strong argument that if cryptocurrency is to replace fiat as a mainstream payment method, people will need a way to reverse transactions if funds are sent to the wrong address.

While most incorrect addresses are eliminated by copying and pasting or scanning a QR code, these methods are not completely flawless. It is possible to accidentally change the address after scanning, for example. Alternatively the sender may input the wrong amount of coins to send. This happens more often than people realize because people often pay for things in US dollars or other fiat currency, then send the equivalent amount in crypto. To send $50 in BTC, a user needs to transfer 0.0027 BTC at the current rate. But incidentally it’s very easy to send 0.027 BTC ($500) instead.

It’s not just errors that are a concern, though. Another big problem is wallet hacking. In traditional banking, users are 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, as there is no centralized entity capable of issuing refunds. Security is the sole responsibility of individual users, so if your wallet is somehow compromised, you can almost certainly say goodbye to whatever funds were in it, forever.

Why is a safety net needed?

It is clear that many people would benefit from having the ability to reverse blockchain transactions. However, the difficulty is enabling this in a way that doesn’t compromise blockchain security. If someone could send a payment for a product or service and reverse that transaction after the product was delivered, crypto would lose all credibility and no one would use it anymore.

This is a tricky problem to solve but there are some very smart minds that have already come up with a solution. A good example is t3rn protocolwhich has developed a platform that executes smart contracts with a built-in fail-safe mechanism to ensure that complex transactions are either processed correctly, or The complete opposite If there is any problem.

T3rn provides a good example of how its fail-safe mechanism works Blog post. Imagine a user planning a five-step transaction that involves bridging tokens from Ethereum to Polkadot and then to Moonbeam, with various additional swaps and deposits along the way. Such transactions are usually performed by DeFi merchants, but can cause problems if the user does not have enough coins in their balance to pay the gas fee for each transaction. If the gas runs out in the third or fourth phase, the tokens will remain in that phase, causing major headaches for traders. They will almost certainly miss out on any arbitrage opportunities they were hoping to exploit.

This is not a problem with t3rn. Its unique fail-safe approach involves keeping the assets involved in escrow at each step of the transaction. Thus, they will be released only after each step of the transaction is completed successfully If one of the steps fails, t3rn simply aborts the transaction and all previous steps are rolled back. As you can see in the example above, Bob will get all his original ETH tokens back to his wallet, without losing any gas fees.

The great thing about t3rn is that it allows users to compose complex transactions through a simple user interface, where each step is arranged in a chronological order. The protocol also supports multiple wallets, incl Metamask, Ambi’s Wallet and others.

Paving the way for greater adoption

Blockchain reversibility enabled by T3rn could be transformative for the crypto industry. This opens up the possibility for users to better protect their digital assets by introducing a security mechanism for every single transaction they ever make. If someone accidentally sends $500 worth of tokens instead of just $50, they now have a way to reverse that transaction and correct the error without relying on the integrity of the person who received the funds.

Such a capability is an essential safeguard that will benefit ordinary users and DeFi traders alike, and likely create greater confidence in crypto as a whole. Although blockchain transactions cannot be final and should not be sacrificed, people still need a way to avoid punishment for honest mistakes. By providing that capability, t3rn could go some way toward onboarding the next generation of more cautious crypto users who need some sort of safety net.



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