Contrary to what some “experts” will tell you, it is possible, today, to make reversible transactions on a blockchain.

One of the first “smart contracts” widely used on bitcoin outside of standard p2p payments is the multi-sig escrow, as implemented in projects like Bitrated and OpenBazaar. In this system, a buyer, a seller, and a third party moderator jointly hold the funds sent by the buyer, and if the buyer has an issue with the transaction, they can appeal to the moderator for a refund. This is essentially the same way reversibility works with credit cards and online payment processors.

A similar concept that hasn’t been implemented on bitcoin yet but has been on other blockchains is the concept of covenant smart contracts. Covenants restrict how coins can be sent. They can be used to build a “bitcoin vault” that enables the owner to reverse transactions sent from the vault within a fixed timeout period. After the timeout period, transactions become irreversible.

Notably, while it is possible to build reversible transactions on top of an irreversible base layer, it is not possible to build irreversible transactions on top of a reversible base layer. In this regard, an irreversible base layer such as bitcoin actually gives end users more flexibility than reversible base layers such as card networks and centralized payment platforms.

The natural follow-up question upon learning of the ability to build reversible transactions on top of the irreversible blockchain base layer is, “What is the point of using a blockchain if the transactions can be reversed?”

Let us recall some of the key features of bitcoin as a payment system, which are not shared by any other electronic payment system:

• Global: It works anywhere there’s an internet connection (even via SMS, radio, or satellite)
• Permissionless: Anyone with a low-power computer (e.g. raspi or smart phone) and internet can use it, no third-party permission required
• Censorship-resistant: No one can stop anyone else from using it; all valid transactions paying a market-rate fee will eventually be confirmed
• Default irreversible: By default, transactions are irreversible, like cash (hence, “electronic cash” in the bitcoin whitepaper title)

To answer the question, “why use a blockchain if transactions are reversible?”, we can look at the key features of bitcoin listed above and see that “default irreversible” is only one of the its key features. Even with reversibility built on top, all of bitcoin’s other key features remain intact.

So, if you want to use a payment system where you have a strong guarantee that you can always access it and be able to send your money to whoever you want, from anywhere to anywhere in the world, and you want to be able to opt-in to reversible transactions to protect yourself from fraud or theft, bitcoin or another high-security decentralized cryptographic ledger like it are really your only options.