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Accidentally Sent Crypto to the Wrong Address – What Can I Do?
Anyone who accidentally sent their cryptocurrency to the wrong address knows that horrible feeling you get in your gut. Unfortunately, taking a loss due to human error is sadly more common than you think in the sector. The technical learning curve and overall censorship-resistant nature of cryptocurrencies mean they’re great for many things. However, refunds are not one of those items.
The recent surge in the popularity of cryptocurrencies has put the capabilities of these unique financial instruments in the spotlight. They are fast and efficient, but no matter how secure they are, there is no full-proof way to keep your crypto safe from human error.
Every day, thousands of cryptocurrencies are lost due to simple send mistakes. Sending your crypto to the wrong address, a scammer, giving out your private keys, or sending your coins to the wrong blockchain are all common examples of ways cryptocurrencies are lost.
Step One – Where Did You Send Your Coins?
When you realize you made an error sending your crypto, the first thing to consider is to figure out where you sent the coins. If you sent them to an individual’s wallet, you would need to contact them directly. This task may require you to play detective. In the past, Reddit has been a helpful way to start your search. If you can contact the person, you may be in luck. They may be kind-hearted and refund you. If not, your coins are gone.
Private vs. Public Blockchains
Another thing to consider is the type of blockchain you sent the transaction on. Private and hybrid blockchains offer more options to users in terms of refund capabilities. These networks have a centralized group that can help you in most scenarios. Of course, there is a trade-off for these features, as private blockchains that offer refunds can’t provide censorship resistance and decentralization on par with public blockchains.
No Refunds on Bitcoin
Bitcoin functions as a peer-to-peer cash system and store of value. Since Bitcoin operates as pure code and its decentralized nature, there is no way to provide refunds to users. For these reasons, you must take extra care before you send your sweet Satoshis out. The internet is filled with horror stories of millions in Bitcoin lost forever due to simple human error.
800 BTC Lost
One of the largest losses incurred due to wrongly sent funds happened in June 2014. In this incident, an investor known only by their Reddit handle, TheDJFC, sent 800 Bitcoin to the wrong address. He explained in his post that he was moving the coins between wallets when he accidentally selected the wrong address.
After posting his struggle on Reddit, a helpful user came to his rescue and located the now bountiful Bitcoin address owner. Sadly, the address belonged to the defunct exchange Mt.Gox. Consequently, he was unable to retrieve any of these coins. In later comments, he explained that he was contacting the exchange to get a refund but to no avail.
At the time, the coins were worth $520,000. Today, these coins are worth around $14M. This incident stands as one of the largest Bitcoin miss-sends to date. However, it’s hardly the last time Bitcoin was lost on a large scale. Notably, according to a report by Newsweek, around 2.78 million Bitcoins have been lost since the cryptocurrency was created in 2009.
Invalid Address Send – There’s Hope
Nowadays, most wallets will verify an address; validity before allowing you to send your tokens. In most networks, including Bitcoin, the protocol will recognize that the network address is invalid and not process your transaction in the first place. This scenario is ideal because it means your coins never leave your wallet.
Accidentally Sent Crypto to a Different Blockchain
While it may seem like a worst-case scenario to send your crypto to a different blockchain completely, it can turn out better than a contract sent. Depending on the blockchain you sent it to and the platform you used, there may be some help.
For example, some platforms like Trust Wallet support Derivation Path functions which can help you recover your lost crypto in this scenario. Trust Wallet users who have accidentally sent BEP-20 or ERC-20 tokens to the wrong network can use this feature. In addition, MetaMask, Trust Wallet, Math Wallet, SafePal, and TokenPocket support this feature.
Accidentally Sent Crypto Token to a Smart Contract
The growing complexity of the DeFi sector has been one of the main contributing factors to sending errors as of late. Since there are well over 200,000 tokens currently available across multiple blockchains, wallets can’t come preloaded with all the tokens. Instead, to add a token, you must go to the issuer’s platform and locate their token contract.
Importantly, these smart contracts are designed to manage the logic for the tokens. They are not meant to store any tokens directly. Additionally, these addresses look very similar to other network addresses. However, sending your crypto to a network contract removes it from circulation forever.
Example of Contract Accidental Sends
Sadly, there are plenty of examples of accidental token sends. A simple internet search will pull up a long list of frustrated users who did not double-check their recipient address before clicking send. In one incident, a Reddit user named Mpaler accidentally sent $15,000 worth of DAI to the token’s contract address.
Mpaler asks the community what recourse he has before going into some possible ways to alleviate this problem in the future. He explains that he sent the stablecoin DAI from the popular cryptocurrency exchange Coinbase when the incident occurred.
According to his posts, he was trying to send his Dai from the exchange to his private MetaMask. The mistake cost him $15,000 worth of Ether at the time. You could imagine losing $15,000 due to a simple error that didn’t sit well with the user. Despite the hefty loss, Mpaler didn’t curse out the entire network for his mistake. However, he suggested that the network introduce some roll-back mechanism to protect users from these errors.
1 Million Sent in Tether (USDT)
In another highly publicized incident, an unnamed investor sent 1 million in Tether (USDT) to the Swerve Finance token contract in September 2020. The incident became a major discussion on social media, where users debated whether the person was a newbie as the mistake was so simple to avoid. However, many users disagreed because they sent $1 million in USDT.
Luckily for the investor, they had sent Tether. By the end of the day, Paolo Ardoino, CEO of Bitfinex, and Tether stepped into the discussion. He Tweeted directly to the user,” If its [USDT] ERC20 stuck in an address, we should be able to recover it but to be sure, please contact our customer support, and we’ll try our best.” The move saw praise and opposition; some felt it proved USDT’s centralization.
Buffering Your Permanent Crypto Losses
If you know you lost your crypto forever, there are some ways you can buffer your losses and possibly keep your sanity. In some world regions, these losses can be claimed as a casualty loss on your taxes. While this doesn’t provide the ROI potential of getting your precious crypto back, it still provides you with something rather than a huge loss.
Protect Your Crypto
The story’s moral here is that you need to be very careful when sending your cryptocurrency. Remember, there are no refunds on most blockchains. As such, you need to verify an address before you hit send fully. If not, you could have a costly reminder for the future.