This seems like the correct way to go though.. if you want reversibility, then introduce escrow into the situation, the foundational building block should be irreversible.. as there's no way to make a means of transfer _more_ irreversible if you're inherently giving control to a 3rd party with no choice.
Why?
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.
I've intentionally used irreversible crypto payments to a merchant that is an an industry with high chargebacks. It is highly useful in transactions where the merchant is highly trusted but the buyers tend to be weasels. Such merchants tend to charge high premiums for reversible payment methods.
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.
The existence of wire transfers, cashier's checks, and, you know, CASH undermine your claim that people in payment networks don't desire irreversible transactions.
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.
I am much more likely to buy something if I can pay with a credit card. Making a wire transfer is stressful; I'm worried that I got the wire instructions wrong, and my money will go to the wrong place and be gone forever. Paying with a cashier's check is stressful; I worry that I will get mugged between the bank and wherever I'm spending it, or that I'll just lose it on the way. Cash isn't quite as bad, and I almost always have some cash on me.
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.
That just kicks the can of trust to the entity performing the escrow, and there have been many, many cases of fly by night escrow companies (or companies pretending to be escrow companies) who just take the money and run.
So introducing another third party to trust makes it more complicated than the alternative of allowing transactions to be reversable.
Banking reversibility is also kicking the can to a trusted third party.
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.
Bank of America decided I really had been in rural France buying tires when I had proof I was at work, at my desk, in Boston at the times of the purchases, and the card was in my hand. It's been 20 years and I still won't ever do business with them again.
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!
I agree. Smart contracts or other functionality integrated into wallets could also improve usability e.g. regarding irreversibility and user mistakes. Base layer doesn't have to be the final way to use cryptocurrencies and it isn't.
This just bring in new problems like people thinking they got paid but there being a refund trick.. This happens in the traditional system too, but at least when it exhibits total indifference to an account serving no purpose besides refund scams it is violating KYC principles instead of running as expected.
The point is that trade-offs are a fact of life. Some problems get solved, other problems appear. I'm not saying the new problems shouldn't be addressed, I'm just talking in general and I believe there are many kinds of solutions that can mitigate many kinds of problems. Just like in traditional banking. I just think it's pointless to try to invent and flesh them out here.
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.
There are plenty of options in bank settlement protocols. I think the point under discussion is not banking improvement but bankless user sovereignty via technical means.
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.
The thing is, crypto IS reversible, and has been reversed in the past. The people affected just need to be rich and/or powerful enough. And you and I are not in that club.