Authorised a wrong Cryptocurrency Transaction? You can’t get a chargeback

Financial technology such as mobile money, online banking, PayPal or Cryptocurrency have eased the process of completing or transferring money. One doesn’t need to like financial technology to recognise how they are convenient and makes life stress free. Actually, they are the in thing in this day and age when buying stuff online has become so commonplace. 

Many online financial systems have a function that enables users to retrieve or cancel wrongly authorized transactions. This is a possibility that isn’t available for cryptocurrency and a great cause for alertness when handing the coins. The blockchain’s design is in such a way that transaction happens only one way and that is forward authorization. Maybe this is the same idea that entrenches the safeguards against double spending of cryptocurrencies since nobody can access the coins once a forward transaction is initiated. In short, the coins are cancelled from the ledger and no possible second use becomes possible. 

Just to sharpen starting cryptocurrency investors, it is one field that negligence and recklessness can be very costly. You as a trader or investor must at all times observe diligence when trading, transferring money or swapping the cryptocurrencies because a mistake done at one point may just be impossible to correct which leads to colossal sums of money lost. 

Cryptocurrency transactions at a glance

It goes without saying that many people across the world increasingly have familiarity and comfortability with the concept of cryptocurrencies. Over the past decade, we have experienced a tremendous growth in the investment and ownership of various crypto coins. I am sure you must have seen or rather heard some major companies and agencies beginning to accept cryptocurrencies as a means of completing transactions. Maybe, we don’t just have to be told that all these indicate  a soaring of  crypto coins towards becoming mainstream.

You’ll agree, cryptocurrencies have become attractive to a wide array of consumers. In fact, the majority of merchants have seen it as a game changer, when it comes to methods of making payments. For one, it must be known that when one makes transactions using cryptocurrencies, such process completes almost immediately. This is quite different from transactions that involve other fiat currencies, where delays may be caused by a number of factors. While the payment card may take several days to arrive at the merchant’s bank account, the cryptocurrency transaction completes immediately. The exchange platform helps convert the coins into cash. This attractive feature has become a major attraction to merchants and people, who previously struggled with cash flow issues. 

Wrong Transactions with cryptocurrencies

Although there is an increasing utilization of cryptocurrencies as means of making payments, certain limitations exist. Even the most popular cryptocurrencies such as Ethereum and Bitcoin have flaws. One of such flaws is based on the fact that when one makes a wrong transaction, it is impossible to get their money back.

Fundamentally, the cryptocurrency protocols are irreversible in nature. By design, transactions cannot be cancelled or reversed once they are initiated. Therefore, it implies that if you happen to send money to the wrong address, you will need to contact the recipient and request for their cooperation to return the funds. Unfortunately, it is impossible to retrieve the funds if you do not know the owner of that address. Sadly, you should forget your funds if at all the receiving party refuses to cooperate with your request to return refunds.  

If you are an investor, you should always exercise caution when sending funds. Ideally, it is essential to make sure that the address you want to send funds exactly matches that of your intended recipient. Double checking if you have input the accurate address will help you eliminate such problems, which may end up being a protracted one, without a solution. 

Can I get a chargeback in case of a Wrong Transaction?

A simple and straight answer to this is a big NO.  Wrong transactions on fiat money through banks or other financial platforms can be reversed which is something exciting. In the worst case scenario, the chargebacks are also applicable if funds disappear from the system or the unintended recipient refuses to return the funds.

Transactions involving cryptocurrencies have no function for backpedalling. In Swahili there is a saying that “kiingiacho kwa mganga hakitoki.”  The saying directly translates to “what goes to the sorcerer can’t be reclaimed” and that is literally what happens with cryptocurrency.  Notably, Bitcoin transactions are not subject to chargebacks. In most cases, the funds are put in escrow until both parties agree and confirm the transfer. Once the transaction is complete, it cannot be reversed. Ideally, this kind of arrangement is by design. It originates from the guiding idea behind cryptocurrencies to operate partially like virtual cash. The virtual cash system refers to where the transactions done by parties stays permanently and can’t be traced. In fact, newer stablecoins have been reported to follow the same trend.

There is a simple explanation to this concept. The exchanges platforms occur in a  peer-to-peer to peer platform. Here, the blockchain acts as a primary ledger responsible with the validation of every transaction done on the platform. There is no mechanism for chargebacks whatsoever. Any crypto handler must be aware that there exists no bank or card network to receive appeals should transactions go awry. Crypto hands over all power users which comes with them being ready to shoulder the risks as well. 

In case you’re doing a transaction or purchases using a credit card, it may be subject to chargeback. For merchants who sell cryptos directly, such transactions may cause huge problems.  The idea that the transfer should be irreversible by nature doesn’t make this situation any better. In such cases, both of them may lose the cryptocurrencies as well as the funds used to make payments.

Final Take Away on possibility of getting cryptocurrency chargebacks

In conclusion, we have noticed an immense increase in the cryptocurrency investment in recent times. Many folks around the world are already minting huge profits from such investments. Limitations of chargebacks and the funds sent to wrong addresses are a source of concern. 

You should however note that the cryptocurrency may circumvent the chargeback problem. It can’t be overambitious to expect that developers will sooner than later et a solution. As an investor, we would like to advise you to be watchful about the non-technical aspects of using cryptos. Specific watchfulness should be trained towards those possible pitfalls yet to be resolved. It is also optimistic belief that if the use of credit cards in transactions related to cryptos moves to the right direction, a chargeback function is likely to come.