The post Circle Explores “Reversible Transactions” Sparking Debate Over Blockchain’s Core Principles appeared first on Coinpedia Fintech News

Stablecoin giant Circle is exploring ways to let users “reverse” transactions, a step which is almost unheard of in the crypto world. This move could challenge some of crypto’s core principles and has already sparked a debate across the industry.

Let us explore what this means and what are its implications for the industry. 

Circle Weighs Reversible Transactions

According to a report from Financial Times, Circle’s President Heath Tarbert explains that if there exists a system to refund money in cases of fraud or disputes, it could make people more confident using stablecoins and help them gain wider acceptance.

“We are thinking through, whether or not there’s the possibility of reversibility of transactions, but at the same time, we want settlement finality,” Tarbert said. He notes that there is a ‘tension’ between sending money instantly and making it irreversible. 

However, introducing this reversibility would mark a significant shift for crypto, which has traditionally valued the “immutability” of the blockchain. Some crypto fans may also see this change as almost breaking the core rules of the industry.

Exploring Reversibility

Tarbert also shared that developers are exploring whether, in certain circumstances, there could be some degree of reversibility for fraud, only if all parties involved agree.

He added that while blockchain, stablecoins, and smart contracts are often seen as technologically superior, traditional systems still have certain advantages that crypto has not fully matched.

Tarbert’s remarks come months after the Trump administration scrapped a proposal that would have required crypto companies to refund customers if their accounts were hacked, a rule meant to bring digital wallets closer to traditional bank standards.

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Circle’s Arc Faces Pushback 

Circle recently revealed that it is testing a new blockchain called Arc for financial institutions. This would let banks and asset managers use stablecoins for foreign exchange payments.

However, some executives and developers have criticized Circle’s Arc blockchain for being too centralized, arguing that it goes against the original idea of blockchain, letting people make transactions without relying on banks or middlemen.

Circle claims that payments on its Arc blockchain cannot be directly reversed. Instead, it could create an extra layer where all parties agree to make counter-payments, similar to how credit card refunds work.

Circle To Add Confidentiality Layer 

Meanwhile, Circle is also planning to improve confidentiality by hiding the size of transactions while keeping wallet addresses visible. Tarbert said that this layer of privacy is useful for banks and clients who wish to keep payment information confidential.

Although Circle’s plans challenges the long-standing principles of crypto, they also highlight the industry’s efforts to bridge the gap between decentralized technology and mainstream finance.

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FAQs

Why does Circle want reversible transactions?

The goal is to increase user confidence in stablecoins by offering a safety net similar to traditional banking, which could lead to wider mainstream adoption.

What is Circle’s new Arc blockchain?

Arc is a new blockchain Circle is testing for financial institutions, designed for foreign exchange payments using stablecoins but criticized for being centralized.

Does this break a core rule of cryptocurrency?

Yes, introducing reversibility challenges crypto’s principle of immutability, creating a tension between finality and user protection that is sparking industry debate.