Are Bitcoin transactions really “frictionless” given confirmation time?

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I agree that better client software will inevitably emerge with broader adoption.

Concerning the amount of time it takes for a transaction to confirm, I think that you have to distinguish different scenarios in which Bitcoin is taking the place of the previous solution:

Payment in a store: 0-confirmation is acceptable for tiny payments like getting a sandwich/coffee. Shops offering bigger purchases, say a jewellery shop or car dealership would probably use a payment processor that assumes the double-spend risk or wait for the first confirmation, not a big issue as there is more stuff to talk about anyway. Webshopping (some examples) To read an article for five cents or to pay to watch a movie ~> 0-confirmation is not an issue Ordering food: Delivery will probably take longer than confirmation time anyway, so they will be sure you paid by the time they hand over the food. Ordering physical goods: It's asynchronous anyway, a 10 minute confirmation time is irrelevant....
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see full web version here:

http://www.bitcoinfuturesguide.com/bitcoin-blog/federal-reserve-price-differences-across-exchanges-show-that-bitcoin-is-not-really-frictionless

The New York branch of the Federal Reserve published a paper today called Is Bitcoin Really Frictionless. It digs into the prices of bitcoin on three major USD spot exchanges: Bitfinex, BTC-e, and Bitstamp. It's an overall interesting paper with some good analysis and graphs and appears to be a genuine attempt to investigate bitcoin price issues.

The main point of the paper is to analyze how and why bitcoin price on these three exchanges differs so much, and to state that bitcoin is not really frictionless in this sense. Some of the culprits they point to are volatility, using this graph as a starting point they see the relationship it has between price differentials:

The main reason why price differences would exist between two exchanges on a fungible commodity like bitcoin is that there are...

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In a article by the Federal Reserve Bank of New York, they did a write up on bitcoin and how it holds up as a virtual currency, covering in some detail bitcoin exchange options and opportunities such as arbitrage, and it’s advantages and disadvantages in using bitcoin over other more traditional currencies.

Is bitcoin frictionless?

In the post three well known bitcoin exchanges are covered: BTC-e, Bitstamp, and BitFinex. They discuss how users who wish to use bitcoin, need to enter in typically through a bitcoin exchange, using traditional currencies such as the dollar or euro as their payment gateway in-and-out of bitcoin. It’s also explained in part of how the price of bitcoin gets it value, including arbitrageurs who want to trade bitcoin for profit.

The Fed writes,

Bitcoins are strictly homogenous: a bitcoin bought on one exchange is identical to a bitcoin bought on any other exchange. Therefore, any price differences across major bitcoin exchanges...

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Blockchain technology, the “distributed ledger” in which Bitcoin transactions are recorded, when applied to the information management protocols of the legal profession, has the potential to turn the paperwork delays now endemic to most transactions into quaint memories of how things used to be done.

Using blockchain applications now in development, the execution of a legal transaction can be algorithmically encoded so it happens almost instantaneously. The “proof of existence” that is the required basis for trust among parties is reduced to a mathematical formula that locks out error and eliminates the need for humans to establish trust through time-consuming traditional means.

Bitcoin digital currency gave birth to the blockchain, which serves as Bitcoin’s distributed payment system. Blockchains are still considered by most people to be distributed payment systems, but payments are only one of the applications of distributed ledger technology. The premise is simple:...

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The New York branch of the Federal Reserve published a paper today called

Is Bitcoin Really Frictionless

. It digs into the prices of bitcoin on three major USD spot exchanges: Bitfinex, BTC-e, and Bitstamp. It's an overall interesting paper with some good analysis and graphs and appears to be a genuine attempt to investigate bitcoin price issues.

The main point of the paper is to analyze how and why bitcoin price on these three exchanges differs so much, and to state that bitcoin is not really frictionless in this sense. Some of the culprits they point to are volatility, using this graph as a starting point they see the relationship it has between price differentials:

The main reason why price differences would exist between two exchanges on a fungible commodity like bitcoin is that there are barriers to efficiently arbitraging, or profiting from these price differences. Normally if Exchange A has a price at $400 and Exchange B has a price of $410, you can...

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If you have sent a bitcoin payment in the last couple of weeks, you may have noticed that your transactions are taking much longer than expected to confirm.

We have received your emails.

Since, like the Bitcoin network, we are currently working through a backlog, we want to thank you for your patience. With the high volume of questions we're getting about delayed payments, we decided it would be best to write a short explanation about what's happening with many bitcoin transactions right now.

Transactions on the Bitcoin network itself aren't controlled or confirmed by BitPay, but by the bitcoin miners which group transactions into "blocks" and add those blocks to the Bitcoin "blockchain" – the shared historical record of all transactions. When a transaction has been added to a block six blocks ago, it's considered a done deal.

Currently, bitcoin network traffic is unusually high due to increasing demand for transactions per block. Block sizes are...

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The landscape for Bitcoin continues to intrigue and be unpredictable. This is especially true when it comes to Bitcoin transaction confirmation time and fees. We’ve had a lot of feedback over these past months as transactions sometimes have not been as close to instant (~10 mins) as one may have hoped when sending payments over the Bitcoin network. Industry pioneer, Erik Voorhees sums up these points in his excellent blog post.

The source of increased fees and confirmation times is a result of the popularity of Bitcoin — this is evident both in the rising price and number of bitcoin transactions. It is clear that balancing growth and sustainability of the Bitcoin network is still a work in progress. How this scaling debate plays out between software developers working on the protocol, miners, and vested interests is yet to be seen.

For CoinJar itself, our part in the industry landscape is that of on-boarding users and providing them an interface to Bitcoin. A...

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Zero-conf is fine.

If so, that's only because there's a great deal more trustworthiness in the world than is assumed by Bitcoin (the consensus system).

It was and is a mistake to have imported into the design of the Bitcoin network the inherent reliance of our social species on kinship-level trust to get shit done.

The core protocol of this ecosystem is not the right place for dealing with zero-confirmation transactions; it's literally outside of the scope of Bitcoin.

To build the ecosystem around Bitcoin-protocol transactions with zero confirmations is to build the ecosystem on a foundation of sand.

The whole point of Bitcoin is that it provides a rigorous definition of risk—but only for blocks!

When the Bitcoin network begins producing confirmations of a transaction, that's when the transaction has 'manageable risk', and not a moment before!

It is not possible to apply the term 'manageable risk' to a transaction that—by...

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After sending

If you can’t get your transaction confirmation after sending you have to know how to make “queue jumping” in mempool.

Opt-In RBF – «optional fee replacement»

In order to enable your transaction to make “queue jumping” we recommend you using the option of “optional fee replacement” - Opt-In RBF. Thanks to this option user has the possibility of transaction recurrent sending with bigger amount of commission.

In most cases new payment is declined when sending the same transaction network. Bitcoin nodes treat such action as an attempt of double payment and don’t process it. When sending transaction using Opt-In RBF function you generally notify network that you are sending the same transaction with bigger amount of commission fee. This results at old transaction replacement with new transaction and enables payment to jump a queue.

At the same time it is necessary to take into account one nuance: the inclusion of new transaction into...

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Every bitcoin transaction that's sent flows into what's called the mempool (short for memory pool) before it can be confirmed by miners. When there's a dramatic spike in transaction activity, the mempool can become congested because so many transactions are waiting to be included in the next block.

Bitcoin users across the network may notice their transactions sit as unconfirmed or pending for a longer period of time, and we understand this can cause users to be concerned about the status of their funds.

In most cases, your transactions will eventually confirm. It may just take longer than usual to do so.

Note: The Blockchain Wallet has an Advanced Send option that allows users to specify a custom fee and this can come in handy to help ensure your transaction confirms quickly during periods of congestion. We recommend this option to experienced users with an understanding of transaction fees...

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William Suberg · December 2, 2016 · 9:00 am

The torment of waiting hours for a Bitcoin transactions to confirm is officially over, thanks to a little-known trick called ‘child-pays-for-parent’ (CPFP).

Also read: BLOCK SIZE BLUES: CONFIRMATION TIMES RISING AS 1 MB LIMIT LOOMS

Transactions in Seconds from Most Wallets

A Reddit post by user super3 Friday states that if a transaction is sitting idle due to a low (or ‘standard’) fee, a CPFP transaction may be created to speed it up – drastically.

An unnamed developer reportedly confirmed the validity of the trick, which can be used with a variety of popular wallets.

“I learned from one of the developers that works with me that you can use child-pays-for-parent transaction to move things along,” super3 wrote.

Using CPFP differs depending on the functionality of a user’s...

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A few days ago, I wanted to sell some bitcoins for USD on my debit card. I decided to use Paxful, as I have a well trusted buyer there, whom I have been dealing with for quite a while. So, I transferred my bitcoins to my wallet on Paxful. Surprisingly enough, the transaction was confirmed exactly 30.25 hours after initiating it, which was extremely inconvenient to me and my trading partner. Interestingly, it happened that I sent a couple of transactions after initiating the Paxful transaction, and they were both confirmed much earlier than the Paxful transaction, so why are some transactions confirmed before the others? and why do some transactions take a long time to get confirmed?

Fees versus Confirmation Delays:

Obviously, when traffic across the bitcoin network increases, confirmation delays can be expected. This usually happens during times of bullish rallies. Bitcoin price had just crossed the $1,200 mark, when I had to wait for more than 30 hours for my...

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Bitcoin transactions are instant - the confirmations aren't. It usually takes less than an hour for the first confirmation.

Someone could try a double spend attack and would have a 50% chance that Starbucks gets the money and 50% chance he gets the money back to his other address he used for the double spend.

This said, starbucks should wait for one confirmation before they'd accept the payment.

A few days ago on #bitcoin or #bitcoin-dev on freenode I saw someone explaining this: They could connect to a few big mining pools, then wait about 10 seconds before continuing, then they should be able to detect double spends if there are any. This decreases double spend risk quite a lot.

Charging a transaction fee will increase the chances that a miner will include your transaction in the block he mines.

A few miners don't include transactions without fees, if you want to ensure that your transaction gets included you should set the fee a bit higher than...

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Were you one of those who experienced problems with getting confirmations on your Bitcoin transactions? Well, it was a general issue, at least recently when Blockchain had almost 50,000 unconfirmed transactions and the number is receding.

The rush of complaints about transaction confirmations taking longer than usual comes at a time when the price of Bitcoin is edging closer to the $ 700 mark. As at the time of this publication, the price of the top digital currency stands at $ 687 and that’s about a 5 percent increase since the beginning of the week from $ 656 on Sunday Oct. 23. When these two coincide, there are bound to be speculations that they are, in a way, related.

Rising Bitcoin price

The rising price has been described as a micro bubble caused by short supply on exchanges. There are also suggestions that the surge in price could be because of the upcoming elections in the United States. Others say it is as a result of mere FUD being spread in the...

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Transaction confirmation is needed to prevent double spending of the same money.

Purpose

Usually when new Bitcoins are earned the owner isn't free to utilize them immediately. As soon as transaction is started it is sent to Bitcoin network for proccessing and has to be included in a block before becoming legitimate. The process of implementing a transaction in a newly found block is called a transaction confirmation. Inclusion in one block = one confirmation and when there are six or more of such confirmations the transaction is considered confirmed. This feature was introduced to protect the system form repeated spending of the same bitcoins (double-spending).

Inclusion of transaction in the block happens along with the process of mining.


Number of confirmations

Classic Bitcoin client will show the transaction as "unconfirmed" until there are six confirmations (six found blocks). Sites or services that accept Bitcoin as...

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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

The latest buzz word, in the world of digital currency, is Bitcoin.

Bitcoin is nothing but a virtual currency or a medium of conducting digital transactions, just like any other digital currency. So what make it better than our conventional currency?

Lately, the global interest in bitcoins has grown. So, it becomes extremely important to understand the base of this and all other forms of virtual currencies. Bitcoin, and its alternatives are all based on cryptographic algorithms which are encrypted. This makes the currency decentralized giving ownership to the user.These can be purchased through an online exchange or a Bitcoin ATM. Landmark feature of a bitcoin is that it can curb the chances of fraud and identity thefts, and hence is considered a safe mode of holding money.Bitcoins allow buying of goods and services online, as well as transferring money.

Below are a...

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Bitcoin is the most popular virtual currency yet developed. Proponents assert that bitcoin can remove frictions involved in payment and settlement systems by eliminating the need for the financial intermediaries that exist in traditional currencies. In this blog post, we show that while bitcoin transfers themselves are relatively frictionless for the user, there are significant frictions when bitcoins trade in exchange markets resulting in meaningful and persistent price differences across bitcoin exchanges. These exchange-related frictions reduce the incentive of market participants to use bitcoin as a payments alternative.

The Case for Bitcoin

A virtual currency may be defined as “a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community.” Bitcoin is a virtual currency and online payment system that was launched in 2009. It operates without any central...

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Frequently in popular descriptions of Bitcoin and in the user interfaces of wallet software, a distinction is made between “confirmed” and “unconfirmed” transactions. What is the difference?

At a high level, a transaction is only confirmed when it is permanently included in the Bitcoin blockchain. The blockchain is a ledger of all transactions in the history of Bitcoin. It is append-only, meaning new data can be added to the end of the ledger, but data can never be removed once included. This ledger is necessary to prevent double-spending, which is a key technical challenge in designing any cryptocurrency.

How Bitcoins are Transferred

Recall that if Alice “owns” some quantity of bitcoins, this really means she knows one or more cryptographic keys which have been designated as the controller of those coins in a transaction on the ledger which transferred the coins to Alice. In order to transfer the coins to another entity, Alice will use these keys to produce a...

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With the recent rally in the bitcoin price, there has understandably been a large increase in the amount of users and transactions. This is pushing the already congested bitcoin network to its limits, as the blocks do not have enough room for all the transactions.

This means that your transactions may stay in the Pending state for longer than normal as they wait to be picked up and confirmed on the blockchain.

How to Tell if Your Transaction is Affected

In your transaction history for your Coinbase wallet, click on the pending transaction that you want to check.

In the window which appears, note the number of confirmations that your transaction has received on the blockchain.

If your transaction has already been broadcast to the network (for outgoing Tx), you can click this "# confirmations" link to see your transaction on a blockchain explorer:

If your transaction is already on the blockchain but is waiting for...

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Confirmation of the transaction is necessary in order to prevent repeated expenditure of the same funds.

Once the sender transfers funds, the transaction enters the Bitcoin network for execution and inclusion in the block.

It is the process of adding a transaction to the structure of the found block, called the transaction confirmation, one block includes one confirmation.

Once your transaction is confirmed, Bitcoin coins become available for future use.

The speed of confirmation depends on a number of factors, such as: the workload of the Bitcoin network itself, the amount of commission specified during the transfer, the speed of the Internet connection, the technical serviceability of the resource where your wallet is located, etc. On average, the transaction confirmation lasts from 30 minutes to several hours.

But sometimes confirmation can wait 2-6 days if the Bitcoin network is overloaded.

We, when sending Bitcoin, pay the...

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Last few months Bitcoin transactions take an abnormally large amount of time. So one operation of transferring Bitcoin with 3 confirmations can take from several hours to several days.

For Bitcoin transfer user pays a fee for its performing, which is assigned automatically or set manually. Generally, this amount ranges from 0.0001 to 0.0005 BTC

Why Bitcoin transfer takes long time?

Each operation in blokchain network must be confirmed at least 3 times. That commission which user gives for a transfer affects the speed of bitcoin transfer confirmation.

Earlier translations, even with zero commission carried out fairly quickly, but now the situation has changed dramatically. Delay of the transaction confirmation is related primarily to the manifestation of interest in new users and the increased load on the network, power of it is actually not enough to produce enough resources for confirmation all Bitcoin transfers fast. Bitcoin can continue to work...

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Roughly every ten minutes, a new block is created and added to the blockchain through the mining process. This block verifies and records any new transactions. The transactions are then said to have been confirmed by the Bitcoin network.

For example, if Sean sends one bitcoin to John, this transaction will remain “unconfirmed” until the next block is created. Once that block is created and the new transaction is verified and included in that block, the transaction will have one confirmation. Approximately every ten minutes thereafter, a new block is created and the transaction is reconfirmed by the Bitcoin network. While some services are instant or only require one confirmation, many Bitcoin companies will require more as each confirmation greatly decreases the likelihood of a payment being reversed. It is common for six confirmations to be required which takes about an...

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Contents of Earn Bitcoins

Earn Bitcoins by accepting them as a means of...
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