How to Cancel a Transaction on Blockchain

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Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on September 07, 2023

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Process to Cancel a Transaction on Blockchain

Transaction Pool

When you initiate a transaction, it doesn't get added to the blockchain immediately. Instead, it goes into a transaction pool, also known as a 'mempool,' where it waits to be picked up by miners.

This pool is a collection of all the transactions that have been initiated but not yet confirmed.

Gas and Gas Fees

On the Ethereum blockchain, every operation, including transactions, requires a certain amount of computational work to be performed, and this work is measured in 'gas.'

Gas fees are the incentives you give miners to include your transaction in the block they are confirming. The more gas you're willing to pay, the more likely miners are to prioritize your transaction.

Race Method

One method of canceling a transaction on the blockchain is to initiate a new transaction with a higher gas fee that uses the same nonce (an arbitrary number used once) as the original transaction.

Because miners are incentivized to confirm transactions with higher fees, they will likely pick up the new transaction first. This method is akin to a 'race' where the new transaction attempts to outpace the original one.

Replace a Transaction

Another method is transaction replacement, which is only possible on certain blockchain networks. On the Ethereum blockchain, for example, a new transaction can replace an old one if it has the same nonce and a gas price that is at least 10% higher.

Process to Cancel a Transaction on Blockchain

How Canceling a Transaction on Blockchain Works

Overview of the Immutability Principle

Blockchain technology is built on a principle called immutability, meaning that data, once written onto a blockchain, cannot be changed.

This characteristic ensures the integrity and trustworthiness of transactions recorded on the blockchain, thereby eliminating the need for a centralized authority.

When a transaction is made on a blockchain, it is bundled with other transactions into a 'block' that is added to the chain of previous transactions, hence the term 'blockchain.'

Exceptions and Loopholes

While the principle of immutability is a core feature of blockchain technology, there are certain exceptions and loopholes that allow transactions to be canceled or replaced before they are confirmed.

The ability to cancel a transaction relies heavily on the particular characteristics and protocols of the blockchain in question. This procedure, however, is far from straightforward and comes with its own risks and challenges.

Role of Miners

Miners play a key role in the transaction confirmation process. When a transaction is initiated, it goes into a pool of unconfirmed transactions. Miners then select transactions from this pool to confirm and add to the next block.

By incentivizing miners with higher transaction fees (or gas fees in the Ethereum blockchain), one can potentially have a new transaction confirmed before the original one, effectively 'canceling' the first transaction.

How Canceling a Transaction on Blockchain Works

Benefits of Canceling a Transaction on Blockchain

Prevent Unintended Transactions

Being able to cancel a transaction on the blockchain can help prevent unintended transactions from being finalized. This can be particularly useful in case of human errors, such as inputting the wrong recipient address or sending the incorrect amount.

Adjust Transaction Speed With Gas Fees

The ability to cancel or replace a transaction also allows users to adjust the speed of their transactions. If a transaction is taking too long due to low gas fees, a user can effectively cancel it by sending a new transaction with a higher gas fee.

Potential Cost Savings

In some instances, the ability to cancel a transaction can lead to cost savings. If the value of a cryptocurrency has fallen significantly while the transaction is still in the mempool, it may be more economical to cancel the transaction than to let it be confirmed.

Drawbacks and Limitations of Canceling a Transaction on Blockchain

Unpredictability and Inconsistency

Canceling a blockchain transaction is not a guaranteed process. It is based on a race condition where you're hoping the new transaction gets picked up before the original one. Additionally, not all blockchain networks support transaction cancellation or replacement.

Potential Additional Costs

When replacing a transaction, you will need to pay a higher gas fee, which can lead to additional costs. If the attempt to cancel the transaction is unsuccessful, you could end up paying gas fees for both transactions.

Ethical and Network Health Considerations

Repeatedly canceling transactions can contribute to network congestion, as it results in more transactions waiting to be processed. This can lead to increased gas prices and longer confirmation times for all users.

Benefits and Drawbacks of Canceling a Transaction on Blockchain

Solutions to Mitigate the Drawbacks

Utilize Escrow Services

Escrow services can serve as intermediaries that hold onto the funds until all parties are satisfied. They can help prevent the need to cancel transactions by adding a layer of security and validation before the transaction is confirmed.

Use Reversible Blockchain Platforms

Certain blockchain platforms are designed to allow for reversible transactions. This can provide users with more flexibility and control over their transactions but may come with its own trade-offs in terms of security and decentralization.

Use Advanced Blockchain Features

Time locks and multisig (multi-signature) features offer additional security measures. Time locks allow transactions to be executed only after a certain time, while multisig requires multiple approvals before a transaction can be confirmed.

These features can prevent the need for transaction cancellation by adding checks and balances to the transaction process.

Conclusion

To mitigate the challenges associated with canceling transactions on the blockchain, several solutions can be employed.

Utilizing escrow services adds an additional layer of security and validation, reducing the need for cancellations.

Reversible blockchain platforms, specifically designed for reversible transactions, offer users more control over their transactions but may sacrifice some aspects of security and decentralization.

Leveraging advanced blockchain features such as time locks and multisig capabilities can enhance security by introducing checks and balances into the transaction process.

Employing these solutions helps address the drawbacks of cancellation, providing users with alternatives to navigate potential challenges and enhance their experience with blockchain transactions.

How to Cancel a Transaction on Blockchain FAQs

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About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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