It’s most likely the grimmest feeling ever when you realize that you’ve sent your precious crypto to the wrong address. Where do you start to request it back and is this even possible?
If this happens to you, rest assured that you are not alone, and although it is a simple mistake to make, it actually happens more often than you might think.
It’s called a cross-chain transaction (aka a cross-chain deposit) and while it might sound complicated, it really is not.
Let me explain.
First, you need to understand that all cryptocurrencies have their own individual blockchain on which they operate, like Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, and Monero for example.
And, when you send crypto from one blockchain, let’s say Bitcoin, to another, maybe Bitcoin Cash, it’s called a cross-chain transaction. This most often happens with transactions that have similar address formats and data structures.
Let me give you an example.
Harry wants to make a deposit at a crypto casino. He uses an exchange for his Bitcoin transactions, let’s say it’s Binance, and requests a Bitcoin address from his wallet at the crypto casino. But instead of requesting a Bitcoin address, he mistakenly requests a Bitcoin Cash address.
He then sends 0.01 BTC from his exchange wallet to the requested Bitcoin Cash address which means that Bitcoin miners will record that the 0.01 BTC has left his wallet and Bitcoin Cash miners will record this transaction on the Bitcoin Cash ledger.
If Harry had a Bitcoin Cash wallet, it would show that the deposit was sent to this receiving address but since Harry doesn’t have a Bitcoin Cash wallet, he no longer has any control of the 0.01 BTC.
But who has control over these funds? Whoever holds the private keys of the receiving address.
Now you may ask, what’s a private key? It is a set of numbers and letters that allow you to access your wallet, like a password and it should not be mistaken with your wallet address because it’s something completely different.
Think of it this way, your wallet address is like a traditional bank account number that you share in order to receive funds. And, the private key is like your online banking password that you never share with anyone because it allows you to access your account.
Now the thing is, crypto casinos work with third parties that process their payments, like Coinbase for example. So, if Harry sent BTC to a BCH address at a crypto casino that uses Coinbase to process payments, the private key of the receiving address would be controlled by Coinbase.
And, although Coinbase is not obliged to recover any transactions because the responsibility of correctly transferring assets lies entirely on the user, they do offer this service, at an additional cost. And, on a case-by-case basis so there is no guarantee that the funds will be recovered.
If you think about it rationally, however, I do understand the thinking behind it.
The exchange sees that Bitcoin was sent to a Bitcoin Cash wallet but they have no idea who should control the coins.
Harry might reason that he can show the details of the transaction and that this evidence should be efficient to prove that he is the rightful owner but it doesn’t really work that way.
This is because the transaction was made from a Bitcoin wallet whose private key Harry doesn’t control, which means that he can’t really prove that he is the legitimate owner.
If Coinbase did send the coins back to Harry’s Bitcoin wallet and it turned out that he simply saw the transaction on the blockchain, they would be held accountable for this mistake.
In the best-case scenario, the coins will be returned to Harry at some point (usually around 60 days) but the only thing he can do to start the process is to contact the crypto casino’s customer support team because exchanges generally don’t work with end-users directly.
If the exchange can recover the transaction, it will also be paid to the crypto casino and the crypto casino will then settle it back to Harry at an extra fee, which is generally around 10%.
Note however that not all crypto casinos are prepared to assist you with retrieving your funds, because every payment processor, as well as every casino, has its own sets of rules and policies, and the only way to know if they will is to ask the customer support team how the casino handles cross-chain transactions.
At the end of the day mistakes like this shouldn’t happen and you should always double, double, and double-check that the receiving address is correct but I do feel that it’s only fair that in such a scenario, the coins should be returned to the wallet where it came from instead of the coins going into nothingness. Fingers crossed that this will be the case in the very near future.
Leave a Reply