Understanding Unconfirmed Blockchain Transactions
One key concept in how blockchains like Bitcoin and Ethereum process transactions is the difference between confirmed and unconfirmed transactions. When you initiate a transfer of funds on the blockchain, it does not instantly complete with absolute finality.
Rather, the transaction must pass through a transitional pending state called an unconfirmed transaction before it is verified and recorded on the blockchain through a process known as confirmation. Understanding the nature of unconfirmed crypto transactions and how they become confirmed provides important insights into how blockchain networks operate.
In this comprehensive guide, we’ll explore what an unconfirmed transaction is, the risks associated with them, the factors influencing confirmation times, how confirmation occurs, and the importance of waiting for transactions to fully confirm before relying on the funds being transferred.
What we are going to learn?
What is an Unconfirmed Transaction?
An unconfirmed transaction is one that has been broadcast to the network but is not yet included in a new block on the blockchain. It essentially remains in a pending state awaiting verification and confirmation by miners or validators.
The key thing to know is that until confirmation occurs, the transaction is not yet settled and irreversible. The recipient does not yet have full access to the transferred funds.
When you initiate a Bitcoin or Ethereum transaction, here is the flow:
- Your wallet constructs and cryptographically signs the transaction.
- The transaction is broadcast to nodes on the peer-to-peer network.
- Miners pick up the transaction and include it in a new block they are constructing.
- The new block with your transaction is mined and linked to the existing blockchain.
- Your transaction receives its first confirmation and is now immutable.
Before step 5 above, the transaction remains unconfirmed. It is not yet irreversibly recorded on the blockchain ledger.
Risks of Unconfirmed Transactions
Since an unconfirmed transaction is not yet finalized, certain risks exist around them:
- Double Spending – It is theoretically possible for unscrupulous actors to reverse an unconfirmed transaction by double spending the same inputs in a different transaction before confirmation. This is extremely difficult in practice but remains a risk until sufficient confirmations occur.
- Blockchain Reorganizations – If two miners create conflicting new blocks at the same time, the network essentially pauses to determine the valid chain. This could cause initially confirmed transactions to revert temporarily to an unconfirmed state.
For these reasons, recipients of crypto funds should wait for transactions to gain confirmation before considering them irreversible. Exchanges, merchants, and other counterparties often wait for 3-6 confirmations to essentially eliminate the risk of reversals.
As more confirmations accumulate, the probability of a transaction being reversed drops exponentially. But it’s not fully finalized until recorded on the blockchain.
Factors Influencing Confirmation Times
Several factors impact how fast an unconfirmed transaction gets picked up by miners and included in a block to become confirmed:
- Transaction Fees – Miners are more likely to prioritize transactions that pay higher fees. A low fee could leave a transaction lingering unconfirmed.
- Network Congestion – During high-traffic periods with many pending transactions, confirmation takes longer as miners have more candidates than block room capacity.
- Block Frequency – On Bitcoin, a new block is mined every ~10 minutes on average. This limits transaction throughput. Other chains have shorter block intervals that improve confirmation speed.
- Mining Power – Chains with more miners and higher total hashing power can confirm transactions faster as blocks get mined more frequently.
So in general, paying higher fees and submitting transactions during low congestion periods will lead to faster confirmation on the blockchain.
How Transactions Get Confirmed
When an unconfirmed transaction is picked up by a miner, the confirmation process involves:
- The transaction data is hashed and included in a new block the miner is constructing. This adds it to a list of pending transactions.
- The miner successfully mines the new block by being the first to solve the proof-of-work algorithm for that block.
- The mined block containing the transaction is broadcast to the network and appended to the existing blockchain based on consensus rules.
- Nodes add the block to their local copies of the blockchain, completing the confirmation of the transactions within it.
- The deeper a transaction is buried by newer blocks, the more confirmations it accumulates, solidifying its validity.
Once recorded in a block, a transaction becomes computationally immutable and irreversible based on the blockchain’s consensus mechanism. Confirmations prevent double spending or reversal.
Waiting for Confirmations
Since an unconfirmed transaction is not yet finalized, the best practice is to wait for at least 1 confirmation before relying on the transaction.
More significant transactions warrant waiting for additional confirmations (like 6 on Bitcoin) to eliminate any reasonable likelihood of reversal. Some benefits of waiting for confirmations include:
- Removes risk of double spending or blockchain reorgs reversing the transaction
- Ensures the recipient can fully access and spend the transferred funds
- Validates that the transaction propagated across network nodes
- Verifies adequate mining power stands behind the transaction
While boring at the moment, exercising a little patience for your blockchain transaction to gain confirmations significantly reduces risks when transferring value.
Also read: Bitcoin Halving and its Impact on Crypto
In summary, unconfirmed transactions represent a transient pending state on blockchains like Bitcoin and Ethereum before transactions become irreversibly confirmed by miners. Since they are not yet finalized, it is wise to wait for at least 1 confirmation before relying on funds being transferred, and more confirmations for bigger transactions. While usually quick, taking the time to validate key financial transactions remains important to avoid potential risks and headaches down the line. Knowing the difference between unconfirmed and confirmed brings greater clarity to understanding blockchain’s transaction finality guarantees.