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Guaranteeing zero confirmed bitcoin transactions

Insights from GAP600 data

Reposted from Linkedin article 

Last summer we launched GAP600, a service that guarantees zero confirmed bitcoin transactions for any wallet. Essentially, we enable instant acceptance of bitcoin transactions before they’re actually included in a block. To this end, we analyze and score every single bitcoin transaction on the network. When our algorithm approves a transaction, we guarantee the value of that transaction regardless of whether it’s included in a block. Our customers include bitcoin service providers, payment processors and exchanges. Since going live, we’ve processed more than 200K transactions for clients that accept zero confirmed transactions.

Looking at the actual data that has passed through our clients networks, we’ve managed to gain real insights about the nature of bitcoin transactions and the risks involved in accepting zero confirmed transactions.

Double Spend is a real issue

Double spend transactions are a known phenomenon in the bitcoin world and are essentially fraudulent transactions. While the actual percentage of successful double-spends on the network is low, we noticed that it still represents significant value. In the month of December 2016 alone, we rejected 121 double-spend transactions which would have amounted to a loss in excess of US $80k had they been accepted. From our observations, providers who offer instant bitcoin acceptance become more susceptible to double spend attacks (to be expected). In the transactions we processed, we saw 0.16% double spends, which is 0.09% higher than our observed bitcoin network average of 0.07%.

Transaction block acceptance takes time

By design, the average time between bitcoin block publications is 10 minutes. This is reflected in our data where we saw that the median time for a typical transaction to be accepted in a block was 8 minutes. It is important to note however that many real transactions don’t necessarily get included in the next block and the real transaction acceptance times can be much longer. For this reason, the average time we saw for a transaction to be accepted in a block was actually 16 minutes.

Block acceptance time is unpredictable

Averages are averages, but the real data shows a very large variance in the time it takes for transactions to be accepted. In many cases, it can take hours to be accepted and in extreme cases it can even take days or weeks.

Zero confirmation is risky business

If, as a bitcoin service provider, you’re willing to wait until your transaction is included within a block, you would have little to no risks. However, in a world where customers expect a minimum level of service that includes instant response from services, providers cannot afford to wait for block inclusion. Zero confirmation acceptance is becoming a standard for bitcoin service providers and as a result these risks need to be mitigated in order to accept zero confirmed bitcoin transactions.

Daniel Lipshitz

Daniel Lipshitz

Founder & CEO - GAP600 Ltd

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