The banks here have said that if you get scammed and money has been transferred (no cryptocurrency involved), there's nothing they can do. It was a bit surprising to hear since you only hear cryptocurrency transactions being irreversible.
The bank refused to return the funds. The concept that just because it is a bank and it must be irreversible, is totally wrong. Another very good example of this is the whole corrupt Zelle service.
Just google "zelle fraud" and go down the rabbit hole...
Generally they're unwilling to do that because it involves losing money for them.
Transfers work in a multi-step process to ensure money isn't created.
You tell Bank A to transfer money to person X at Bank B.
Bank A tells an intermediary bank C to move funds from Bank A's account to Bank B's account. (This step is unnecessary if either A or B are large enough to be an intermediary)
Bank C lets Bank B know that it's gained funds
Bank B moves funds internally from Bank C to customer X.
If you want your money back and Bank C says it's already been withdrawn then somebody in A,B,C is going to take a loss. Personally I think we should have an easy way to pay in a 7d settlement or something. Who really cares if somebody sends a 7d settlement when buying a house as long as its done 7d before closing.
To the unending dismay of crypto fans, the same is true about cryptocurrency - but its design fundamentally gives the law less leverage and actual points an intervention could be made. That, plus the whole thing is very new. But that's just a transient state; this kind of immutability is not compatible with society or real life, so the only cryptocurrency-based systems that'll survive long term will be the ones that give up on the whole cryptoanarchy thing.
And then less people have bank accounts.
The scammer isn't necessarily the person with the final bank account. Its often somebody who was told they're managing payroll for some made-up company and they're going to get a 2k transfer and to keep 500 of it and withdrawal 1.5k of it as cash to do payroll.
While you may think that now only people who aren't scammers won't get bank accounts what actually is happening is that anybody that can be fooled doesn't get one.
https://www.bitsaboutmoney.com/archive/optimal-amount-of-fra...
Banks are more careful, and that's why they don't deal with certain kinds of transactions. And that's where crypto comes in to "disrupt banks" and "democratize finance".
Long term, crypto will be no different than regular currency and finance because people don't like getting ripped off and defrauded. We'll have a period of time with people pulling old scams but with crypto, and eventually it'll be regulated just like normal finance.
The dilemma is that you can either escape those regulations by going to unhosted wallets (self-custody) and transacting on the blockchain, or you keep everything (by regulation) entirely within the regulated intermediaries, but then there's no need to waste 1% of world electricity on some slow "decentralized" database.
For this to not be possible it would have to be widely in use and government-backed.
In my previous post, I was considering the cases that currently involve a bank, not those involving crypto. When someone goes to crypto to bypass the existing systems (safety or otherwise), I think that fairly switches them to a fully buyer beware process.
You're the one that was defrauded. The bank processed the transfer exactly as you told them to. So therefore, if person X isn't providing the service you expected then you should have to go to the courts to get it back?
The general problem is that it takes a lot of leg work. Often Customer X was being defrauded through some payroll scam (they take out ~500 and forward the remaining 1500). So now you have to recover $500 from them and then trace the 1500 again. Possibly through multiple countries and their courts (who may see this as beneficial for their country; jury nullification goes both ways).
You could still decide what kind of use suits you the best. Regular people wouldn't (and shouldn't) need to know all the technicalities. A trusted party, maybe a bank, could provide their own integrated solution with whatever features they want to offer.
The smart contract writers sometimes fool themselves when working on the problem full time.. That's a bigger problem if the code is the contract instead of code attempts to honor the contract and a system with judgement can undo things that obviously fall bellow our ethical expectations like account ID swaps, supply chain attacks, kidnapping/intimidation and so on.
Irreversible transactions are not desired by anyone in payment networks. Consumers don't want to get scammed out of money. Merchants want customers to feel like transactions are low risk so they are more willing to make them. That's a big reason why merchants put up with the outright hostile to them system of chargebacks. Sure, you will lose some money to chargebacks you might think were not valid, but you have made much more than that back from liberalized spending habits.
Nobody benefits from irreversible transactions except fraudsters and other bad actors. And they benefit soooo much from transactions being irreversible. Why would you build and advocate for a system that explicitly empowers bad actors over anyone else?
An escrow is not a solution. The escrow itself could be a bad actor.
In such cases it is win-win for both the merchant and customer, the customer doesn't have to foot the reversibility overhead and the merchant is able to offer goods at the same profit margins but lower price which should yield more sales.
Basically everybody who's ever sold something in person wants to know they get to keep the money when the other person walks away with their stuff. It's the fraudsters in those everyday transactions who want reversibility.
But given the choice of paying with cash or credit card, I will almost always choose the credit card. I like the idea that if I walk away from that transaction and then later realize that the merchant sold me something defective or outright fraudulent, I will have some recourse in getting that money back.
I get that a merchant will prefer an irreversible transaction, all else being equal. But I don't think all else is equal; I absolutely buy the GP's argument that purchasers will be more liberal with their spending if they don't have to worry so much about the merchant being a scammer. And regardless, there are many many more purchasers than merchants, and most (if not all) purchasers would at least have a slight preference toward a reversible transaction.
So introducing another third party to trust makes it more complicated than the alternative of allowing transactions to be reversable.
Several years ago my credit card was stolen. I contacted my bank, who then accused my wife of cheating on me in another state (I know this didn't happen because there is no way she left 1000 miles away for several days multiple times between me seeing her, unless she has a hidden personal jet). By 'lying' about it being a fraudster instead of my wife who 'had cheated on me' the bank then accused me of bank fraud.
The bank then obtained fraudulent invoices, which were used to 'prove' I owed the money. They just buried me in false paperwork to the point I could never win. When the bank was done with all that, they closed my regular checking account too, because they had now flagged me as a criminal.
I will take anyday, an 'irreversible' crypto account over a banking system where they just close my other accounts because they think one was fraudulent because I was defrauded.
It was much more fun, at least, when Amazon tried to tell me one of my children must have taken my card and made the purchases. I took it to mean the children I have not conceived yet will have access to time travel, in which case I'm not even mad. Pranking me in the past deserves whatever trinket they bought!
IF reversibility is a desired feature of digital currencies, the market will bear that out. People can and will choose those currencies.
As with any "feature," there are tradeoffs, and it might well be that people en masse decide they would rather everyone control their own money than have central powers supervising, just as it might well be that people opt back into a system very much like the one that exists today, but with new efficiencies.
Adding programmability to money in the digital age was necessary. I don't know why anybody is surprised it hasn't reached some sort of final, settled state this early in the digital age. It basically only came into practical existence after the launch of smartphones and ubiquitous internet access. Give it a minute.
I'm confident that any other country who cares to (i.e., anywhere people bother to try to evade taxes) can also do so.
Obviously, you can't just reverse a cash transaction. It's one of the reasons people try to avoid using it in many situations.
You find the criminal, and the cash and give back the cash to the wronged party. With cash, the criminal can hide the cash in some random location, and nobody can say if they spent it or they lost it. With crypto, everyone knows where the money is. You just have to figure out the passwords to the wallet in some way.
If you feel wronged, you can take appropriate legal recourse.
Crypto offers no such thing.
If you don't then you'll easily get the bad side of it since abusing the power is not that hard.
modulo all the ToS / arbitration clauses, that is still the fundamental difference
and although not a recourse available to most people, still not nothing