Tuesday, January 28, 2020

Are Bitcoin Transactions Reversible?

Grace Joseph
Freelance Writer, Blogger, and Crypto Enthusiast. Studied Computer Science in University and Undergoing a Masters Degree Programme in Computer Engineering Contact@ reigngracia@gmail.com

Can Bitcoin transactions be reversed? No, confirmed transactions cannot be reversed, but can only be refunded by the recipient at their own will. However, if the transactions have not been confirmed, double spending can occur.

Double spending is a case where sent funds have not been confirmed on the Blockchain, and the user goes ahead to send it to a different wallet address. Thus, this creates conflict and the first transaction to be recorded becomes the irreversible one.

To prevent this, recipients usually wait for the transaction to confirmed and set a number of confirmations that are relied upon. The higher it is, the more unlikely it is to double spend the same funds. Likewise, 0 confirmation creates a loophole for funds to be spent again.

Factors Influencing Irreversible Nature of the Bitcoin

A lot of factors can be attributed to the irreversible nature of Bitcoin transactions and notable among them is the decentralized nature of the Blockchain. Another notable feature that prevents chargebacks, is the immutability of the distributed ledger technology. Let’s take a quick look at each.

Decentralized Nature Prevents Reversible Transactions

The Blockchain is the underlying technology of Bitcoin and other cryptocurrencies. These virtual assets may be backed by their own technology such as the Bitcoin Blockchain, EOS blockchain, and Ethereum Blockchain, but they all have a major feature of promoting decentralization.

The Blockchain is where all transactions that have occurred are recorded and its decentralized nature ensures there are no intermediaries while transactions occur. What this means is that there is no central control or authority that can bring about the reversal of such transactions.

In comparison with financial institutions, payments can be reversed days and even weeks after they have been made due to their centralized nature. The same cannot be said for Bitcoin payments which have the advantage of preventing fraud. The disadvantage, on the other hand, is sending payments to a wrong address or paying for a defective product without being refunded.

Blockchain’s Immutable Nature Makes Records Permanent

One more feature of the Blockchain that ensures that transactions cannot be reversed, is its immutability. Here, transactions recorded cannot be changed or tampered with and as such, the evidence lives on. How else will refunds be made when the records cannot be changed to reflect such changes?

Like Blockchain’s decentralization, its immutable nature also comes with the advantage of preventing data from being manipulated easily. It also aids in traceability since a permanent record means that a few years from now, the same data will be accessed thereby promoting integrity.

Great Care is Required While Making Bitcoin Transactions

Now that you know that confirmed Bitcoin transactions cannot be reversed, great care has to be given when payments are sent in order not to send to the wrong address. There is even malware that hijacks web browsers in order to append the Bitcoin wallet address funds are being sent. Therefore, crosscheck any address you are making payment to before sending in funds.

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