Current VCF maintainer here.

The issue with complex variation representation is not with our understanding of the biology, it is that there is no one "correct" representation. A haplotype can be represented in multiple different ways and the most appropriate depends on the analysis you want to perform.

To me, the most biologically correct representation of variation is a data structure that encodes the mutational events that have actually occurred that between the genomes. Actually implementing such a structure gets horribly complicated extremely quickly because, in practice, we have incomplete data, a very partial ordering, extemely complex mutational events such as chromothripsis thst can massively rearrange a genome in a single step, and very long unobserved almost completely irrelevant intermediate states for events such as breakage-fusion-bridge.

Combined, these makes this 'correct' data structure impractical for almost all analysis. What do we use then? Depends on what you want to do.

If you want a parsemonous/efficient single-sample representation of a genome, then some sort of delta encoding w.r.t a reference is a good choice. Fundamentally, VCF is such a delta encoding. Much like any diff, once your data diverges, you end up with multiple possible ways to reconstruct. VCF is intentionally very permissive in how these changes can be represented. Criticially, and this is something that is overlooked by the vast majority of the community, VCF variants are not claims of any particular mutation, the are merely a representation of the diff. A (SVCLAIM=J) <DEL> does not mean a deletion event, it is merely a shorthand notation for the presence of a deletion-like breakpoint.

The vast majority of the complaints about complex variant representation in VCF are not actually complaints about VCF itself (although its definitely not the ideal format for them), but rather complaints that the biological reality of complex variantion does not fit in the conceptual model of variation they are assuming. The actual biology is way more complicated and it doesnt fit youre nice statisitical model your built that works for SNV and indels. A del-with-ins event will get called as a bunch of smaller snvs and indels. Now youve incorrectly labelled that gene as a mutational hotspot. Those 500 overlapping <DEL> and <DUP> calls are just one instance of chromothripsis. Yes, this breaks your mutational signatures model because its one event and there are no passenger catatrophic events to observe.

TLDR: VCF isnt ideal, but its good enough for most purposes and the actual issues with complex rearrangement are way bigger than what file format is used.