-This enables Bitcoin service providers, payment processors, and exchanges instantly settle inbound transactions while awaiting block confirmation-
While Bitcoin and its technology are revolutionary, its blockchain cannot facilitate fast, instant transaction settlement for users because to validate a Bitcoin transaction fully, it takes 6-10 confirmations which can take up to an hour. Waiting that long is tasking for businesses which collect payments with Bitcoin and for crypto exchanges that process mass deposits.
This article looks at Bitcoin transactions, focusing on Zero Block confirmation – a feature that allows for the near-instant settlement of bitcoin deposits/payments while awaiting block confirmation.
What is Zero-Block confirmation?
A zero-confirmation transaction refers to a transaction that has not yet been confirmed on the network, i.e. not recorded on the blockchain. Zero-confirmation transactions reside in the memory pool (mempool) of miners. The transaction has already been initiated but has not been confirmed by the blockchain’s miners. Only the user initiating the transaction is aware of it, and the transaction is considered to have zero confirmation until a block is mined that includes the transaction. Transactions are recorded on the blockchain every 10 minutes; once written on the blockchain; they have one confirmation.
The most common cause of Zero-confirmation transactions is making transactions with too low miner fees. Miners have no incentive to process transactions with low fees. The second is previous unconfirmed transactions. For context, transactions must confirm in order of miner fees and transaction time.
How does it work?
Double-spend transactions, which are fundamentally fraudulent, are well-known in the bitcoin space. Double spending is the risk that a user can spend the bitcoin(s) in the transaction again. For example, it is possible for an attacker to double-spend by broadcasting two zero-confirmation transactions. If this happens, the network accepts the bogus transactions without spending any bitcoin.
The general sentiment within the BTC community is that at least one confirmation is needed to prevent double-spending. After being broadcast to the blockchain, zero-confirmation transactions could wait a few seconds to hours or days to be confirmed. The wait and possibility of a double-spend have caused a general bias toward accepting zero-confirmation transactions.
Accepting a zero-confirmation transaction means that exchanges and businesses are willing to accept the Proof-of-Transaction as sufficient enough to settle a deposit/payment while 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/network. Network nodes store the pending transaction locally in the mempool while the transaction is awaiting confirmation. When the transaction is confirmed, i.e., the cheque clears. However, the cheque bounces/transaction isn’t confirmed if something goes wrong.
How does it benefit You?
In July 2010, Satoshi Nakamoto talked about zero-confirmation acceptance in a “Bitcoin Snack Machine” discussion on Bitcointalk.org. “I believe it’ll be possible for a payment processing company to provide the rapid distribution of transactions with good-enough checking in something like 10 seconds or less,“ Nakamoto details.
The biggest challenge merchants face in accepting Bitcoin transactions is that block inclusion may take anywhere from 10 minutes up to several hours, while customers may want to get what they are paying for immediately. To possibly eliminate this challenge, zero confirmation acceptance is becoming a standard.
THRESH0LD mitigates the risk of double-spend associated with zero block confirmation by monitoring key nodes on the network; once a transaction passes through, it is relayed to most of the network. After about 30 seconds, the possibility of a double-spend disappears, and any attempt to broadcast a new transaction for the same bitcoins will fail.
With THRESH0LD, bitcoin service providers, crypto exchanges, and payment processors can now:
– accept zero block BTC transactions
-enjoy instant settlement of BTC payments/deposits
-save time for your team & your retail users
-enable your users’ access to arbitrage opportunities
-enhance overall business competitiveness.
Want Zero Block Confirmation?