Blockchain transactions are different from banking transactions and it is good, bad, and ugly. Let’s talk about the differences in the article and describe the advantages and disadvantages. We will also explain how important is a transaction context.
How a blockchain transaction differs from a bank transaction
Alice wants to send some fiat money to Bob. Alice asks Bob for his bank account and sends him the money from her bank account. This is a very simple and basic scenario. Let’s have a look at a few details.
What if Alice types the Bob bank account number wrongly and the money will be sent to Carol? The transaction is reversible. Alice will contact the bank and explain the situation. It is possible to find out the identity of Carol since the creation of all bank accounts requires KYC. Alice’s bank can send an official request to Carol and ask her to send the money back. If Carol refuses that then Alice’s bank contacts a given authority that will solve the issue. Carol has committed illegal enrichment by keeping money that has been sent to Carol’s account by accident. The law of a given country usually takes this scenario into account and has a solution for it. Notice that Alice is protected by the law from making a silly mistake that would result in losing money.
Alice does not hold all her money by her. She has just a part of her money in cash for daily spending and the majority of her money sits in the bank. The bank is actually responsible for Alice’s money. Alice has some form of internet banking to be able to give the bank a spending order. There is no middleman in the world of blockchain technology that would be responsible for the money of Alice or for your money. Everybody is directly responsible for his or her money and it means that there is no mechanism that could help you to get your money back in case you send coins or assets to the wrong address. Blockchain transactions are irreversible. Once the owner of the coins signs a transaction and the transaction is inserted into a new block the transaction will be in the blockchain forever. What is even worse, there is no authority or mechanism that would tell you whose address you have wrongly sent the coins to. If you are lucky you will find out that you have sent coins…