Transaction
An instruction that cannot be recalled
What is it?
A transaction is the only way anything changes in a blockchain.
It contains three things: which address it comes from, what is to happen, and the holder’s signature as proof. It is then distributed to everyone, checked and recorded.
Between sending and finality lie seconds to minutes. During that time it is publicly visible but not yet valid - a property some attacks exploit.
An example
With an online bank transfer you enter the amount, confirm, and the bank executes. If it later turns out the payee details were wrong, there are routes: recall, goodwill, and a court if it comes to a dispute.
A blockchain transaction to the wrong address is settled once confirmed. The money is there. Nobody knows whose address it is. There is no office that will do anything about it.
Where does a risk come from?
| Finality | A mistake stays a mistake. Wrong address, wrong amount, wrong network - all irreversible. |
|---|---|
| Visible before valid | A large transaction is announced for all to see before it takes effect. Others can act on that. |
| You do not see what you are doing | What is actually being instructed sits inside in machine-readable form. What you see is what the interface makes of it - and that need not be the same thing. |
The third point is the most important and the least understood. Whoever confirms is confirming the content of the transaction, not the picture on the screen.
Why this matters for cover
Because every transaction is verifiable forever - and so is every loss.
A cover needs a condition that cannot be argued about. On the blockchain every movement is recorded with time, amount and the parties involved. Whether an event occurred can therefore be looked up rather than asserted.
The converse also holds: what the holder confirmed themselves is, in many wordings, not a covered event - not even where they were deceived.
Where this leads
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What you sign when the wallet asks - and the four cases that get confused.
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The recipient of many transactions is not a person but a program.