Bitcoin is currently the most popular and valuable cryptocurrency in the world, and it doesn’t look like that will change anytime soon. But there are flaws within Bitcoin’s network that are frustrating to users, one of the most prevalent being transaction times. Bitcoin transaction times can be incredibly high, but why is that? What Factors Increase Bitcoin Transaction Times?
Bitcoin transaction and confirmation times
Before we get into the factors affecting Bitcoin speeds, let’s make sure we understand the difference between transaction and confirmation times.
The confirmation time of a given transaction refers to the time it takes to be registered by the network after it is submitted. A single Bitcoin transaction must go through a number of confirmation phases during its verification to avoid transaction rollbacks or reversals. It takes at least six confirmations for a single Bitcoin transaction to be fully processed, with larger transactions usually requiring more confirmations, thus taking longer.
Once all the confirmation phases have been completed, the transaction can be fully finalized. This is the moment of the transaction. Bitcoin confirmation and transaction times vary widely from day to day. One day, your transaction will be processed in ten minutes, but this time can reach more than one hour. So why exactly is this the case?
What affects Bitcoin transaction speed?
One very important thing to note about the Bitcoin network is that it suffers from scalability limitations. Scalability refers to the ability of the network to accommodate a larger user base and, therefore, a larger transaction load. A single bitcoin block has a theoretical capacity of up to 4MB. However, most bitcoin blocks are around 1MB to 1.5MB in size (the original limit before it was changed in 2017) and cannot not store as many transactions as the blocks used by other popular cryptocurrencies.
Currently, the average Bitcoin block hosts between 1,500 and 2,500 transactions, but this is still not enough compared to the gigantic user demand. To put this into perspective, Bitcoin Cash, a hard fork of Bitcoin, has a block size of 32MB, which means it can hold many more transactions than Bitcoin and therefore has significantly lower transaction times and fees. .
This means that huge swaths of Bitcoin transactions are stuck in what is known as the mempool. You can think of the mempool as a kind of waiting room for pending transactions. If a transaction is valid, it is sent to the mempool where it waits to be included in a block and finalized. But because the demand for transactions placed on the Bitcoin network is now so high, the mempool is usually congested with transactional traffic, leading to even longer delays.
The problem is so widespread that Bitcoin is well known for its scalability restrictions. Many bitcoin owners see network scalability as an issue that needs to be addressed (which we will discuss later).
If Bitcoin were a relatively small crypto, scalability wouldn’t be such a concern. But, since Bitcoin is so popular, the network processes hundreds of thousands of transactions per day and tens of millions of transactions per year. Because the transactional load is so high, miners working to verify them start to struggle. Unfortunately, this has also led to an increase in Bitcoin transaction fees, which only adds to the frustration felt by BTC holders.
Bitcoin used a layer two solution known as the Lightning Network to reduce transaction times and fees. Individuals can use the Lightning Network to dodge fees by transacting off-chain directly between their wallets through digital payment channels. It also takes some heat off the Bitcoin blockchain in terms of transaction load.
While the Lightning Network is scalable and can be useful to network members, it is not a one-size-fits-all solution to mitigating Bitcoin’s long transaction times. Not only is it vulnerable to cyberattacks via manipulation of payment channels, but it costs users money to open and close payment channels.
In addition to network load and scalability limitations, fees also play a vital role in Bitcoin’s transaction times. When making a Bitcoin transaction, you have the option of choosing the lowest possible fees. While lowering costs in this way might make sense on paper, choosing the lowest fees will make you a low priority for miners.
Bitcoin miners, who are responsible for creating and verifying new blocks, are paid for their work in user transaction fees. Miners are not required to verify the transaction they encounter next. On the contrary, if a miner sees a transaction with a small fee, he will not be very eager to process it because there is not much for him financially.
This is why some Bitcoin users end up paying very high fees. Sometimes a merchant may need a transaction to be completed as quickly as possible and do not have time to wait for verification which may take over an hour. So those who can pay higher fees often do so because it incentivizes miners to process their transactions in less time.
It may seem somewhat unfair, but the Bitcoin community recognizes that miners must expend considerable computing power to verify blocks and ensure network security and decentralization. Bitcoin miners (or nodes) operate their equipment 24/7, so it’s safe to say that they invest a fair amount of electricity to operate. Also, note that your transaction will not stay in the mempool forever if you have chosen the lowest fees. It will just take longer to finalize.
If you are frustrated with Bitcoin transaction times, you can use an accelerator to attempt to speed up the time it takes to process your transaction. These let you rebroadcast your transaction to essentially remind miners that it’s pending, and usually charge a fee to do so. But accelerators don’t guarantee lower transaction time, and many accelerator websites are scams, so it’s a risky business.
Will Bitcoin transaction times continue to increase?
As bitcoin developers strive to reduce high network transaction times and fees, the ever-increasing demand on the bitcoin blockchain could result in even higher fees and waiting periods in the future.