Cryptocurrencies have certainly made a splash in the digital financial world. They offer myriad benefits, from unprecedented transparency to a decentralized architecture that promotes equality. However, with these innovations come challenges, most notably, how do we ascertain the legitimacy of a crypto transaction?
The answer lies in the structure of the blockchain. Determining the legitimacy of a crypto transaction has two primary aspects:
Inclusion in a Block: Every transaction, once made, doesn't immediately get settled. Instead, it joins a pool of other transactions waiting to be processed. Miners (or validators, in some networks) group these into a block. When your transaction finds its place in such a block, which is then added to the blockchain, it's the first step towards deeming it legitimate.
Confirmations from Subsequent Blocks: But the validation doesn't end there. True legitimacy is fortified by what's called 'block confirmations'. For every subsequent block added after the one containing your transaction, your transaction gains an additional confirmation. The more the confirmations, the harder it becomes for anyone to alter that transaction — embedding it deeper into the blockchain's history.
So, block confirmations serve a dual purpose: they not only signify that a transaction has been recognized by the network, but also that it's been further solidified by subsequent blocks. This mechanism offers a robust layer of security and trust.
In the example shown where six confirmations are required, you can see how the number of confirmed blocks can affect total time.
Of course, with security often comes a trade-off with speed. Especially in a world where instant gratification is the norm, waiting for multiple block confirmations can be taxing. But it's a delicate balance, and at Cybrid, we strive to ensure both safety and efficiency in our transactions.
Avoiding Double Trouble: In cryptocurrencies, there's a problem called 'double spending'. It's like trying to buy something in two different stores using the same dollar bill. Obviously, in real life, you can't spend the same money twice. But in the digital world, this might be possible if not checked. That's where block confirmations help. When a transaction gets more confirmations, it means it's being double-checked many times. This way, we make sure the same coin isn’t being used twice.
Dealing with Forks: Imagine a road that suddenly splits into two paths. Sometimes, the blockchain does something similar, creating two versions, and this is called a 'fork'. Both paths might seem correct for a while, but only one will end up being the main road everyone uses. Multiple confirmations help make sure your transaction is on this main road. So, if the blockchain splits, you know your transaction will still be safe and recognized by everyone.
We always aim to find the middle ground between being super safe and being quick. We want to make sure everything is secure, but we also understand that nobody likes to wait too long. Our team is always working hard, looking for ways to make this balance just right for you.
It should be noted that for a multi-network currency, like USDC, that the number of block confirmations differs based on the network that it is being used on. For example, the block confirmations will differ between USDC on Ethereum and USDC on Solana.
Different cryptocurrencies have different rules. For some, like Bitcoin, you might need four confirmations. Others might have different numbers. Cybrid always looks at the safety of each cryptocurrency and decides based on that. For those who want to know more about how many confirmations are needed for each coin, you can check out our knowledge base article.
Want to delve deeper into cryptocurrency concepts? Visit 'The Academy', our dedicated education hub, to unlock a wealth of knowledge!
