What You Need To Know About Zero Block Confirmation
While Bitcoin and its technology are game-changing, its blockchain is not designed to carry fast, instant transaction settlement for users. For a transaction to be validated fully, it takes around 3-6 confirmations which can sometimes take up to an hour or more. Waiting that long is very demanding for businesses that collect Bitcoin payments and crypto exchanges that process deposits in bulk.
This article talks about Bitcoin transactions, with a major focus on Zero Block confirmation, which is a feature that allows for the near-instant settlement of bitcoin deposits/payments while waiting for the transaction to be confirmed on the blockchain.
What is Zero-Block confirmation?
A zero-confirmation transaction simply refers to a transaction on the blockchain that is yet to be recorded on the blockchain network. Zero-confirmation transactions live in the memory pool (mempool) of the miners.
The transaction has already been initiated but has not been confirmed by the miners on the blockchain. Only the user that initiated the transaction would be aware of it, and the transaction is considered to have zero confirmation until a block is mined that includes that transaction in it. Transactions are stored on the blockchain every 10 minutes; once written on the blockchain; they will have one confirmation.
Transactions with very low miner fees are one of the most common reasons for Zero-confirmation transactions as miners usually avoid processing transactions with low fees. Previously unconfirmed transactions are another common reason. For context, transactions on the Blockchain must be confirmed in the order of miner fees and the transaction time.
How does Zero Block Confirmation Work?
Double-spend transactions, which are basically fraudulent activities, are well-known in the bitcoin space. Double spending is the risk that a particular user can spend the bitcoin(s) used in a transaction more than once. For example, it is possible for an attacker to double-spend a bitcoin by broadcasting two zero-confirmation transactions at the same time. If this happens, the network would accept the bogus transactions without spending any bitcoin.
The general opinion within the Bitcoin community is that at least one confirmation is required to prevent double-spending. After being broadcast to the blockchain, zero-confirmation transactions can wait a few seconds to hours or days to be confirmed. The wait and the possibility of a double-spend have caused a general bias toward accepting zero-confirmation transactions on the network.
Accepting a zero-confirmation transaction means that crypto exchanges and businesses are willing to accept the Proof-of-Transaction as it is sufficient enough to settle a deposit while it is awaiting block confirmation.
You can think of a zero-block confirmed transaction as a traditional cheque. The user signs the cheque (transaction) and gives it to the miners on the network. Network nodes would then store the pending transaction locally in the memory pool while the transaction is waiting to be confirmed (or the cheque is waiting to be cleared). But the cheque could also bounce which in this context refers to the transaction not being confirmed if something goes wrong.
What are the benefits of Zero Block Confirmation?
The biggest challenge that merchants face in accepting Bitcoin transactions is that block inclusion might take anywhere from 10 minutes to several hours, while customers might want to get what they are paying for immediately. To eliminate this challenge, zero confirmation acceptance is gradually becoming a standard.
Zero Block Confirmation enables Bitcoin service providers, payment processors, and exchanges to instantly settle users’ inbound transactions while awaiting block confirmation.
Bitpowr has also reduced the cost and complexity of processing Bitcoin transactions by combining Bitcoin SegWit addresses with layer2.
To find out how this can benefit your company, click here or send an email to [email protected].
