Citi Research’s latest report points to bitcoin not enabling chargebacks as a possible limitation in it being more widely adopted; considering the well established rules of card networks and the protection thereby offered to consumers.
It is correct that the irreversibility of a transaction is a potential limitation, however, that irreversibility feature was added by design in bitcoin as a means of reducing the cost of a payment system.
According to the Whitepaper, Satoshi’s view was that card chargeback systems placed the financial institution as a mediator of disputes which increases the overall cost of the payment system. Satoshi thought bitcoin would be an equivalent to the irreversibility of physical cash but for the internet. Further, Satoshi thought that consumer protection would be addressed through escrow based transactions. At the moment it is unclear whether bitcoin or any similar digital cash system can effectively reduce the net costs of running a electronic payment system without compromising on certain protections for consumers; in addition, the use of escrow transactions may indeed raise the costs in a way to neutralise any cost benefits achieved.
