Crypto Chargebacks – Bridging the Dispute Gap With the Blockchain

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There’s a lot of misinformation online about blockchain technology – particularly in the wake of the FTX debacle from last year.

However, there’s also a lot more to the blockchain than you might expect.

Thanks to blockchain technology, fintech might be on the verge of fantastic new innovations that could revolutionize the payments industry.

The technology offers convenience, enhanced security and open-source payment independence that other payment models lack.

For consumers, the appeal is obvious.

Consumers and enthusiasts aren’t the only ones who stand to benefit from blockchain technology, though – merchants and financial institutions are taking notice as well.

One reason for this is the model’s relationship – or lack thereof – to payment reversals.

What are chargebacks

For the uninitiated, a chargeback is a forced payment reversal carried out at the banking level.

This generally happens when a customer is dissatisfied with a purchase but fails to receive a refund from the merchant.

The customer will dispute the charge with their issuing bank, and then the bank will file a chargeback against the merchant with their acquiring bank.

Chargebacks are never a ‘good’ thing for a merchant. The bank doesn’t just claw the money for that transaction out of the merchant’s account – they also charge a fee for each chargeback filed.

Aside from the fees, damage to the merchant’s reputation is another issue with serious potential consequences.

The chargeback process is mandated by law for all credit and debit purchases.

It’s codified in US Uniform Commercial Code, which requires banks and card networks to facilitate this process.

This is what sets crypto payments apart in this regard, though. There’s no process by which cardholders can demand a chargeback because there’s no central authority to mandate or facilitate one.

Crypto payments are not subject to chargebacks

Cryptocurrency transactions, including payments, are not subject to chargebacks due to the nature of the blockchain technology that underpins them.

Cryptocurrencies operate on a blockchain – a distributed and decentralized ledger on which all transactions are recorded.

Once a transaction is confirmed and added to the blockchain, it is practically immutable.

Altering a single entry would require altering all subsequent blocks and getting the majority of the network to agree to this change, which is computationally…