Blockchain Dispute Resolution via Third-Party Reversal
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Solution Overview
Problem
Blockchain transactions lack a mechanism for chargebacks, as their immutability prevents transaction reversals, unlike traditional payment systems, leaving consumers without protection against fraudulent or disputed transactions.
Innovation Solution
A third-party system performs a dispute resolution process between consumers and merchants, using digital signatures and smart contracts to facilitate a new blockchain transaction that reverses the disputed transaction, maintaining the immutability of the original blockchain while providing consumer protection.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If blockchain transactions are made immutable to ensure security and fraud protection, then transaction security is improved, but the ability to reverse disputed transactions is lost
Solution Approach 1:
The system segments the transaction reversal process into multiple components: the original immutable blockchain transaction remains intact, while a separate dispute resolution layer processes chargeback requests. The reversal is achieved through a new transaction rather than modifying the original, separating the immutability requirement from the reversibility need.
Solution Approach 2:
A dispute resolution system acts as an intermediary between consumers and merchants, processing chargeback requests and facilitating reversals through coordinated transactions. This intermediary layer enables reversibility without compromising the immutability of the underlying blockchain transactions.
2Reliability
If a dispute resolution mechanism is added to blockchain transactions, then consumer protection is improved, but system complexity increases
Solution Approach 1:
The dispute resolution system uses universal blockchain components (transactions, digital signatures, smart contracts) that already exist in the blockchain ecosystem. By reusing existing multi-functional elements rather than introducing entirely new mechanisms, the system provides consumer protection while minimizing added complexity.
Solution Approach 2:
The system implements feedback loops where chargeback decisions are communicated back to the original transaction parties, and reversal transactions are triggered based on dispute resolution outcomes. This feedback mechanism enables consumer protection through established information flow patterns rather than complex new communication protocols.
3Reliability
If chargeback processing is implemented for blockchain transactions, then fraud protection is improved, but transaction finality is reduced
Solution Approach 1:
The system performs preliminary actions by creating escrow transactions or holding funds in suspense accounts before dispute resolution is complete. This allows the original transaction to appear final while preparing reversal mechanisms in advance, maintaining both transaction finality perception and fraud protection capability.
Solution Approach 2:
The system changes the state parameter of transactions from purely immutable to conditionally reversible based on dispute resolution status. By introducing a status parameter that tracks whether a transaction is subject to chargeback, the system maintains finality for settled transactions while enabling reversibility for disputed ones.
Data Source
AI summary
A method for dispute resolution for a blockchain transaction includes: receiving, by a receiver of a processing server, a blockchain transaction identifier and a dispute reason code from a first computing device of a blockchain network, the blockchain transaction identifier and the dispute reason code comprising a dispute request, the blockchain transaction identifier identifying a transaction on a blockchain; transmitting, by the receiver of a processing server, the blockchain transaction identifier and the dispute reason code to a processing device of the processing server; identifying, by the processing device of the processing server, the transaction, a merchant blockchain address, and a currency amount within a blockchain data value of the blockchain based on the blockchain transaction identifier; determining, by the processing device of the processing server, the transaction is invalid; and performing, by the processing device of the processing server, a dispute resolution process for the blockchain transaction.