The blockchain technology that brought about the existence of Bitcoin and subsequent cryptocurrencies opened up the world to a new kind of digital disruptions ranging from information to industry and looking at the whole financial landscape with a new eye and a new perspective. Along with it came new processes aiming to simplify further modern standards that present societies were already accustomed to.
The Blockchain
It is becoming common knowledge that blockchain technology espouses decentralization, transparency, immutability, security, accountability, speed transactions, and low fees due to the elimination of third parties. And without these intermediating parties, there is a need to confirm transactions before a block is chained to the group of blocks of confirmed transactions.
The Pooling
Every bitcoin transaction is pooled among other unconfirmed transactions until bitcoin miners select a transaction and incorporate it into a block of transactions. Miners are then to solve a complex mathematical puzzle as proof of work before the network verifies the block and adds it to the blockchain. Every single time that there is a new block being added connected to your block means that the transaction is valid and, therefore, confirmed as such by the blocks added.
The Security
Bitcoin miners need very powerful computers that spend huge amounts of electricity just to solve difficult mathematical puzzles before blocks are confirmed. This is the same for every block chained on the network. Undoing a block requires an equal amount of energy that going through blocks just to undo a particular block is next to impossible. This means that a confirmed transaction is secure after being surrounded by other blocks. Blocks are measures of a transaction’s confirmation. The more blocks, the more confirmations, the more secure the transaction will be.
The Confirmation
Sellers and buyers engaged in small transactions $1,000 and below need not wait for another transaction to transpire before their transaction is confirmed. Yet, it is better to wait for one confirmation before proceeding as 0 transactions can be reversed. But for larger ones of $1,000 to $10,000, engaged parties may agree to wait for 3 or more blocks for confirmation. As there is no benchmark for these, 3 blocks are generally accepted as standard. Larger transactions of $10,000 to $1,000,000 may require 6 transactions. For very large ones of $1,000,000 and above, it may reach to as many as 60 transactions before parties agree to be confirmed. Still, there is no general rule for the number of transactions before confirmation on the network.
The Time Frame
Cryptocurrencies have different time frames before transactions are confirmed. With Bitcoin, a single transaction can take more or less than 10 minutes before being confirmed. 6 confirmations may take an hour. Confirmations are very important in crypto transactions as a consensus way of protecting a block from any malicious attack such as double-spending by reversing the transaction.
The Miner Fee
In order to avoid transactions being left in the cold for long periods, incentivizing the miners can do the trick by paying up a substantial amount of miner fee. It will encourage them to pick up a choice transaction as a miner fee can be compared to a shipping fee. It may be good to ask the exchange of choice for this because most often it is not included in the fees.
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