Bitcoin Payments: How Many Confirmations Are Really Necessary?

[OcTradism]

Confirmation requirement based on transaction value is actually interesting, if it's just a $10 coffee payment, 1 confirmation should suffice.

If it is $10 or smaller, I would like to use Bitcoin sidechains like Lightning Network than Bitcoin on chain because I need something faster. It's annoying to wait for 10 minutes or even longer to get 1 Bitcoin on chain confirmation.

There is even payment gateway that accept 0 confirmation. I think Bitpay has configurable transaction speed for merchant to set which allow merchant to accept zero confirmation for low value digital goods.

Online casinos can accept deposits that have yet confirmed by Bitcoin miners but they only allow to bet, and don't allow withdrawal until that deposit transaction was confirmed, at least 1 confirmation.

However, this 0 confirmation high speed transaction also have risk scoring algorithms. It's not just 0 confirmation because the user could easily make the transaction fail by setting very low miner fee.

There are factors in one blockchain, Blockchain trilemma. They are pillars like Security, Scalability and Decentralization, with transaction time is a part of Scalability. Changing transaction time will affect the Security pillar and if people value security, they will choose Bitcoin blockchain than altcoin blockchains.
https://howmanyconfs.com/

[ObeyKnock]

Online casinos can accept deposits that have yet confirmed by Bitcoin miners but they only allow to bet, and don't allow withdrawal until that deposit transaction was confirmed, at least 1 confirmation.

An interesting thing to note here is that if you can make bets using unconfirmed deposits but cannot withdraw until the payment goes through, then your risk is reduced. However, it depends on what happens if it fails to go through. In this case, you could potentially lose the provisional balance by making bets. Alternatively, you could win some money but not be able to withdraw it. Zero confirmation is low about actually confirming that the transaction is safe and more about how much temporary credit a business is willing to expand before the payment is confirmed.

[Zaguru12]

Thanks for bringing this up, I've been wanting to ask a question pertaining this confirmation before and now see like the perfect time, why did exchanges failed to process withdrawal until certain numbers of confirmation is met?

Even if it's as low as $20 worth of coin you aren't going to be able to withdraw until that confirmation number is met, what is this trying to tell us? That the transaction can be fake or could be reversed if they let customers withdraw before a certain confirmation?

The thing about confirmation is that the more the number of confirmations are more it is hard for the transaction to experience something called a chain reorg.

First example is zero confirmation that’s the transaction hasn’t been added to a block, the sender can simply double spend that transaction to another wallet using even the RBF method.

If you accept one confirmation there is likely chance of a chain reorg this is a process where the block your transaction is added to is dropped by the network and picked the chain with the most proof of work (read about chain reorg to understand this) and if this happens the sender can still double spend that transaction again because it’s back to zero, so as the number of confirmations or blocks added to the one your transaction belongs to, the more difficult it becomes to be affected by chain reorg.

The reason why the number of confirmations varies with the amount sent is because the one can actually be able to take a risk of $20 been double spend than that of $200 or way higher,

Furthermore, a CEX typically will not reflect a balance in your account until the required number of deposit confirmations has been met. In this case, it’s not that you failed to make a withdrawal; rather, you haven't been able to perform any activity at all from the start. It all depends on the platform's internal policies and operational performance.

I know of binance which will show the amount of bitcoin in your wallet just after one confirmation but you can only be able spend it or withdraw after three confirmation.

[Alpha Marine]

1. How many confirmations do you personally consider sufficient?

Personally, I have never heard of a transaction that was reversed after it had one confirmation. So for me, one confirmation is enough. When somebody sends me Bitcoin, I don't think anything of it once the transaction has been confirmed.

2. Would you accept zero-confirmation Bitcoin payments?

It depends on who it's coming from. If it's from people I know and trust or a person I can get a hold of, then once I have seen the transaction on the mempool, I don't mind. What percentage of valid transactions are dropped/rejected by the network?
But if it is a person I don't trust, then I would need to get at least a confirmation.

3. Should exchanges use different confirmation requirements depending on transaction value?

They already do. Different exchanges have different amounts of confirmation for different amounts of money.
Mainly, it's usually one confirmation to receive it in your account and 2+ confirmations to be able to trade it. I think it makes sense like that.

[Renampun]

Would you accept a zero-confirmation payment for a small purchase?

I think 2 confirmations are more than enough for small transactions.. Because the risk is low and it's not practical for someone to try to cheat the transaction.. But if the amount is bigger, like millions of dollars, then 6 confirmations are more recommended because it's almost impossible for someone else to reorganize it.. Waiting for 6 confirmations won't really hurt anything rather than rushing to settle the transaction when the number of confirmations isn't enough.

3. Should exchanges use different confirmation requirements depending on transaction value?

Because the exchange deals with so many users, they need to minimize waiting time so that it doesn't take too long for users' funds to reach their accounts... On average, exchanges usually require 2 confirmations before the funds get into the user's account.. But they have a mechanism where they usually lock withdrawals until the transaction is really safe.

[SeriouslyGiveaway]

I know of binance which will show the amount of bitcoin in your wallet just after one confirmation but you can only be able spend it or withdraw after three confirmation.

It means after one confirmation, Binance credits your deposit to your account and its balance, then you can use it for trading. They only restrict withdrawals that requires more confirmations (3) to be allowed and approved for withdrawal processing.

Depends on exchanges, some exchanges will show your deposit in account deposit history, and a status like Pending, 0 / 1 or 0/3 confirmations but some exchanges don't show it at all. They only show your deposit after it is confirmed and has one confirmation but it's not important. Showing or not, if you can not use your coin for trading, it does not mean anything for you because you fund your centralized exchange account for trading, not just for viewing its balance.

[BlackHatCoiner]

One confirmation can only be considered "risky" in the sense that there are two blocks broadcasted at the same height, and we're not completely sure where the next block will be mined on top of; that is what causes a 2-block reorg, which could make your transaction go back to unconfirmed.

In every other case, to be extremely sure, just ask for 2 or 3 confirmations.

[d5000]

AFAIK accepting zero-conf is too risky. Everybody can try to "double spend" that, and somebody may even try it for $20.

1 confirmation is good enough for low values. Even if what @BlackHatCoiner wrote happens and the transaction is going back, then it's very unlikely that the person who paid that amount has speculated exactly on that to happen, and retires / double spends the transaction. In the case of higher values, it's at least possible.

However if you're an exchange you can of course threaten to freeze and close the account if double spends are detected. This should be enough to deter "opportunists" (those who are using the exchange normally but think they could take advantage of the stale block).

You may also block any withdrawals from an account who has recently deposited until the deposit has reached 2 or 3 confirmations.

Instant exchanges have less margin for these measures, but they can threaten to report your wallet to to chain analysis companies and blacklist you if any irregular / double spending activity is detected. This won't deter professionals but opportunists may be scared enough ...

[NefiSwap]

I can accept zero confirmation of the transaction if it is not having RBF

That check doesn't tell you much anymore. Bitcoin Core 28.0 (October 2024) turned full-RBF on by default, so nodes running it accept a higher-fee replacement of any unconfirmed transaction, whether it signaled RBF or not. The sender of a 0-conf payment without the flag can still replace it with one that sends the coins back to themselves.

[Sticky Bomb]

1. How many confirmations do you personally consider sufficient?

It is not about personal conviction, it's about network requirement. 1 conformation is needed to add your transaction in a block to the blockchain. More confirmations increases its security and makes it more difficult to double spend the coins. Exchanges wait for more than one confirmation to be sure the transaction is more secure before allowing you to withdraw.

2. Would you accept zero-confirmation Bitcoin payments?

Nope, since there is possibility of the sender using a lower priority fees to delay its confirmation and later end up double spending that same transaction to another address of his own. You can be robbed if you accept a payment of 0 confirmations.

3. Should exchanges use different confirmation requirements depending on transaction value?

Exchange is a business, they apply rules in their best interest

4. Do you believe Lightning is a practical solution for everyday Bitcoin payments?

Right now, lightening node has some security issues, if the security of the network can be increased very well, it is a good option. I always advise people to leave only very little amount in their channels

[Ucy]

To be on the safe, better to let confirmations be high for large amounts and low/zero for small/micro amounts  Better still, the higher the amount the higher the confirmation.
Ofcourse, zero or low confirmation could be allowed for small/micro amounts, and with certain arrangement inform of collateral, the zero confirmation can be guaranteed. The arrangement could work in this manner:  a third-party wallet used by shop/seller holds buyer's fund (in smart escrow or multisig setup) that is equal or greater than amount he wishes to spend on the shop. The buyer then pays for something, and the seller immediately accepts the payment with less than one confirmation.
That arrangement can also be used for large transactions, and necessary for less than 1 confirmation for the large transactions, but unnecessary for small/micro ones,  The shop should be mindful of multiple small/micro transactions happening at a time, which could commulatively become large enough to be too risky for low confirmation if they are all double spent

If a transaction is rejected after product/service is delivered, the third-party wallet automatically or manually releases the equivalent of escrowed amount to the seller/shop. If the transaction is accepted, the wallet releases the amount  to the buyer.




Lightening shouldn't be the only solution available. We need solutions for small and large transactions. The solution should also be as transparent as Bitcoin ledger, meaning the transactions should be publicly visible on their blockchains or ledgers.

[ercewubam]

Everybody can try to "double spend" that, and somebody may even try it for $20.

Only if you can produce a second version, before your transaction will be confirmed. But there are cases, where it is extremely hard. For example, double-spending this transaction would cost around 110 $, if we talk about GPUs.

For exactly the same reason, Lightning Network can work with zero confirmations: if not multisig and penalty transactions, then it would be unsafe.

Lightening shouldn't be the only solution available.

And it is not. You can always try sidechains.

[Orpichukwu]

1 confirmation is good enough for the regular transactions but if we are talking about the transferred value in millions then we can consider 3 is almost impossible to reverse and I am saying this because it is already an overkill with the curreny difficulty in the mining a block.

For regular transactions and even transactions which are worth millions, the chances of double spending/reorg are very slim; only miners with good hash power can stand a chance, based on my knowledge, and they will even need more to be in control of more than 10% of total bitcoin mining power, so even if I’m to conduct transactions worth millions, I won’t mind as long as I can see 1 blockchain confirmation.

[Aliciaworld]

3. Does Transaction Value Matter?

Should a $20 Bitcoin payment require the same number of confirmations as a $50,000 transaction?

In my opinion, transaction value and risk tolerance should influence confirmation policies.

I think that transaction size should determine the number of confirmations but personally no more than 3 confirmations because the extended wait time could greatly affect it's use. For small/personal transactions the Lightning Network should be used as it seems to reduce wait time and complexity. But for larger transactions over$10,000 and above higher number of confirmations also serve as a security benefit and increases trust in the transaction.

[X-ray]

Online casinos can accept deposits that have yet confirmed by Bitcoin miners but they only allow to bet, and don't allow withdrawal until that deposit transaction was confirmed, at least 1 confirmation.

Yeah, that's the thing. For 0 confirmation the platform need to have great risk mitigation, for online casino that's easy. Disable withdrawal until the Bitcoin is confirmed and they'd be fine.

For other thing I bet won't be that much easy especially if the transaction is the irreversible kind of transaction.

Even Bitpay labeled the High speed as high risk and could result in fraudulent payment.

[Catenaccio]

Yeah, that's the thing. For 0 confirmation the platform need to have great risk mitigation, for online casino that's easy. Disable withdrawal until the Bitcoin is confirmed and they'd be fine.

With casinos, they don't lose anything by allowing users to bet if they're hurry with betting. No fund loss because they don't allow users to withdraw money deposited into casino account but not yet confirmed. By giving users opportunity to bet, even 0 confirmation for a deposit, it can even increase revenue of a casino.

For other thing I bet won't be that much easy especially if the transaction is the irreversible kind of transaction.

Even Bitpay labeled the High speed as high risk and could result in fraudulent payment.

For other purposes, it's harder or almost impossible to accept 0-confirmation deposits to be used because for example, if a user funds an account and use that fund (not yet confirmed) for buying something, it can result in chaos.