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Bitcoin Confirmation Wait Time

 

3rd party payment networks, such as VISA and Paypal, are pretty speedy when it comes to transaction validation. The customer is approved or declined in a matter of seconds. With Bitcoin, this is not entirely the case.

Because Bitcoin does not rely on 3rd party trusts, validation is performed by the Bitcoin network. When someone sends a Bitcoin payment, it must first be confirmed by several computers on the Bitcoin network as a valid transaction. Unfortunately this process can take hours. Naturally, a merchant cannot have a customer waiting around for hours for a payment to be validated.

Typically, a merchant will see they have a payment almost immediately, but it will be flagged as pending and it will show “0 Confirmations” at first. So, the merchant knows they have a payment, but it has not yet passed validation and they do not have access to the funds. Slowly, once 6 confirmations have occurred, the payment process will be complete. The merchant can watch this transaction and see the confirmations increment during this time.

There are many theories on how to perceive this. For one, trust in Bitcoin. Even with 0 Confirmations, the transaction has occurred and cannot be reversed or cancelled by the sender. One of the only ways for the payment to fail is if the sender initiated a Race Attack. With a Race Attack, the sender would have to double-spend their bitcoin, with a higher mining fee, and hope it propagates through the network before the first payment. Then, the confirmation system would validate the 2nd payment, and fail the first payment. This seems like a very highly unlikely scenario, incredible expensive for the attacker. Even BitPay CEO Tony Gallippi is on record about this unlikeliness of this event.  With 1 approved confirmation, the likelihood of this being a fraudulent transaction is reduced almost to nothing. So, do you have to wait for all confirmations to trust that this will be a valid transaction? Is 0 enough? Is 1 enough? This is a risk factor, and would be up for you to decide in relation to the type of business you are conducting.