Sending Bitcoin to the wrong address isn’t always the end of the world

A cryptocurrency owner recently told MyBroadband he mistakenly sent R35,000 in Bitcoin Cash to his Luno Bitcoin wallet.

The cryptocurrency proved to be unrecoverable, at least until Luno can implement a system to extract private keys for Bitcoin Cash addresses.

However, sending cryptocurrency to the wrong address doesn’t have to be the end of your funds.

Blockchain addresses

To understand why sending currency to the wrong address is either a disaster or not, you need to understand how addresses work.

Addresses on a blockchain are long strings of numbers and letters, and often have checksums built in to prevent unintended transactions.

Bitcoin addresses are encoded using Base58Check encoding and include a checksum which determines their validity.

This means that although addresses may be of varying length, if you mistype a Bitcoin address, your transaction will probably be rejected by the blockchain and refunded.

Ethereum addresses do not include a checksum, and wallet providers and exchanges are required to implement their own checks.

Ethereum founder Vitalik Buterin has created an open-source capital-based checksum which is compatible with all Ethereum services and greatly reduces the acceptance of mistyped transactions.

There is an average of 15 check bits per address, and the probability that a mistyped address will pass a check is 0.0247%.

Ledger Nano S

Recovery

If you send Bitcoin to an Ethereum address, or to most other blockchains, your transaction will probably get rejected, as the address will not pass the required checksum.

However, the nature of Bitcoin’s development means it is possible to make a mistake and lose your money.

It is technically possible to convert Bitcoin (BTC) into Bitcoin Cash (BCH) using a service like ShapeShift, and then send that BCH to a Bitcoin wallet address.

This is due to Bitcoin Cash coming from a Bitcoin fork, and therefore having the same addresses transaction history.

In the situation above, your Bitcoin Cash would be sent to a Bitcoin Cash address which is identical to the BTC address – and would be accessible by whoever holds the private key.

If you sent your BCH to your original BTC address, you should be able to download a BCH wallet client and use the same private key as your Bitcoin wallet to access the funds.

An important aspect of Bitcoin is that your currency is usually controlled by you, and there is no higher authority to appeal to if you make a mistake.

Problem situations

The problem of sending cryptocurrency to the wrong address usually occurs between exchanges and online wallet providers.

It is also made more confusing by the proliferation of hard forks and support for forked currencies on exchanges.

The best way to avoid these issues is to hold your own private key and keep your cryptocurrency in wallets controlled by you.

If you mistakenly send BCH to your own BTC address which you have the key for, you can easily recover it. But if you send it to a BTC address on an exchange, you will probably never see it again.

There are also many cryptocurrencies on the market at the moment, some of which may not have safety checks in place.

Additionally, there is always a chance of a user entering a mistyped but mathematically-valid address – and subsequently losing their funds.

Always use the clipboard to copy and paste addresses when sending currency on your PC, and always double-check the address.

Now read: Don’t send your Bitcoin Cash to Luno

Latest news

Partner Content

Show comments

Recommended

Share this article
Sending Bitcoin to the wrong address isn’t always the end of the world