Before we start talking about what it is that impacts the speed with which Bitcoin transactions are confirmed, let’s take a step back and look at the difference between confirmation times and transaction times.
We’ll start with confirmation times as they relate to Bitcoin transactions. This is how long it takes for the network to record the transaction after it’s been submitted. What most people don’t know is that any transaction on the Bitcoin blockchain has to complete several confirmation phases before it’s verified. This is done to prevent transactions from getting canceled or reversed.
Bitcoin’s blockchain requires at least six confirmations for a transaction to be considered valid. However, larger amounts will require more confirmations, which means they’ll take longer to complete.
Once all confirmations are complete, the transaction is then fully validated. The time when confirmations finish is recorded as the transaction time. Something to keep in mind is that the amount of time for confirmations and transactions to complete can vary greatly.
But what causes such a fluctuation in transaction time?
Several factors can impact the transaction speed on the Bitcoin network. Let’s take a look at a few.
Because Bitcoin is the most well-known crypto on the planet, it has to process hundreds of thousands of transactions on a daily basis. This adds up to over ten million transactions each year. When transaction volume gets too high, miners start having a difficult time verifying them. Often, this is what leads to slow confirmation times.
Not only do users get frustrated with slow transaction times, they also become annoyed at being charged higher transaction fees if they want their transactions completed quicker. However, Bitcoin has started using its layer-2 Lightning Network, which is designed to drastically cut down on fees and transaction times.
Bitcoin holders who choose to use the Lightning Network can avoid paying high fees by performing their transactions off-chain. These are done through direct digital payment vendors, which not only helps users avoid increased fees but also reduces the load on the Bitcoin network.
Unfortunately, the Lightning Network isn’t a long-term solution to reducing the long transaction times and network congestion that often plagues the Bitcoin network. For starters, users must pay to open and close vendor channels. Plus, Lighting is more likely to suffer cyberattacks than the Bitcoin blockchain since it's an off-chain payment channel.
Another critical item to consider when thinking about Bitcoin confirmations and transaction times is scalability. Unfortunately, Bitcoin is well-known for its limitations in being able to scale up and support more users or handle a larger network load.
In theory, one block in the Bitcoin blockchain has a capacity of roughly 4MB. Of course, we all know that theory and reality are two different animals. The reality is that the majority of Bitcoin blocks are capable of handling a little less than half of that, which, unfortunately, doesn’t stack up well when compared with other well-known digital currencies.
The average block on the Bitcoin network can support 1,500-2,500 transactions. Since Bitcoin is the world’s most popular crypto, that’s nowhere near enough to handle the demand put on its blockchain. By comparison, some blockchains have block sizes 8x larger than Bitcoin’s, which means they can handle more transactions. As a result, the amount of time a transaction takes to complete is significantly lower, as are the fees charged for each transaction.
Because of its lack of scalability, huge numbers of transactions are getting stuck in the Bitcoin mempool. Think of the mempool as the little room you’re taken to when you visit the doctor. First, you visit the waiting room, which is where you’re told your “transaction” is valid. Then, you head to the little room to wait for the transaction to be confirmed and finalized.
Unfortunately, there are thousands of transactions in front of you, so you’ll sit in your little room waiting until they clear. Who knows how long the delay will be?
In addition to scalability problems and network congestion, Bitcoin also has the challenge of fees. Miners are responsible for verifying and confirming blocks on the blockchain, and when they do so, they earn rewards in the form of transaction fees. Like many of us would, miners focus on the transactions that will pay the most, which means low-paying choices aren’t going to be processed until much further down the line.
That means if you want your transaction confirmed quickly, you’ll have to pay more in fees. If you’re in a hurry for your transaction, you’re going to pay a premium, so a miner will snatch it up and verify it as quickly as possible. Otherwise, you might wind up waiting an hour or more.
Many within the Bitcoin world don’t think it’s fair to pay more in transaction fees, but others are quick to point out that miners need a significant amount of electricity to power the computers that verify transactions. Doing so keeps the Bitcoin network decentralized and safe.
The thing to remember when you buy Bitcoin is that it takes time to confirm transactions on the blockchain. Whether you’re using a Bitcoin Depot ATM or going through the Bitcoin Depot mobile app, it might take a few minutes for your BTC to show up in your wallet. Be patient and remember that some things are worth waiting for.