As bitcoin becomes increasingly popular, transaction fees on the network have also been increasing. As a result of the increase in fees, the miners that put the transactions into blocks are becoming pickier on which transactions they will pick up.
The result? An ever-growing number of unconfirmed transactions.
You’ve probably seen it yourself. You log into a blockchain website like blockchain.info, look up your transaction, and see the dreaded “unconfirmed transaction” label in red.
Today we’re going to go over what an unconfirmed transaction is, why it happens, and what you can do if you find yourself with the dreaded red box staring back at you.
What are transaction fees?
If you’re not already a veteran of cryptocurrency, you may not know how transaction fees work. Basically speaking, a transaction fee is sort of like a tip that you give to the miner who picks up your transaction and puts it into a block.
Why are these tips necessary? At the present time, the bitcoin network only has one-megabyte blocks. As a result, only a certain number of transactions can be processed on each block.
Adding a transaction fee makes your transaction much more attractive to process, as the miner who picks it up gets the fee.
On other blockchains such as Vertcoin, transaction fees are often not necessary because the blocks are almost never full. So even if you offer no transaction fee, your transaction will likely be picked up no matter what.
Others like the Dogecoin cost less than a cent. And as mentioned above, some projects allow you to send transactions for no fee at all.
What causes an unconfirmed transaction?
If you log onto blockchain.info, you can see a list of the current set of unconfirmed transactions. During times of high price volatility, this list will fill up, resulting in unbelievably high transaction fees.
Most recently, this list has been as high as 250,000 unconfirmed transactions. Transaction fees have also been growing and during the recent panic, at its height, wallets that automatically set transaction fees like Exodus were listing fees as high as $200 or more to ensure quick delivery.
Overview of Uncomfirmed Transactions. Source: blockchain.info
Usually, a transaction not getting confirmed is the result of the fee being too low. If the fee is too low, it will always be at the bottom of the list, and as a result, will not get picked up by a miner for a long time.
There is a commonly held misconception that there is a set time limit for a transaction to remain on the blockchain waiting for confirmation. This is not true, however. Transactions theoretically could stay in an unconfirmed state indefinitely.
This can be both good and bad.
The good side is that even during times of high transaction fees, low fee transactions can still be submitted. The only downside is that they will not be picked up until at least several days or even several weeks have passed.
There are other options such as transaction accelerators and particular transaction hacks that one can use. However, the transaction accelerators require additional fees and the transaction hacks are not always certain.
What can be done about an unconfirmed transaction?
If you send a transaction on the bitcoin network and it is still not confirmed, you have a few choices. For transactions that are not particularly urgent and you attached a relatively normal fee to it, it will be picked up eventually.
If however, the fee was too low by accident, or with a normal fee, and you feel the transaction is incredibly urgent you do have a few options available.
Let’s go over those now.
Replace By Fee
Your first option is to do what’s called an RBF or Replace-by-fee. This is a concept that has existed in bitcoin for a few years now. Basically what it boils down to is this: if you send a transaction with a fee that’s too low and would like to change the fee, what you can do is send the same set of bitcoin a second time but with a higher fee.
This is what’s known as a double spend. The result is that the first transaction with the lower fee will be cancelled because the network thinks you were trying to spend the same bitcoin twice.
Unfortunately, this feature is only available in very few wallets that allow for a high degree of technical control. If you are using a more user-friendly wallet such as Exodus or Jaxx then this will likely not work.
Child Pays for Parent
If you are waiting for a transaction to hit your wallet that is still uncomfirmed, then you can implement something called a Child Pays for Parent (CPFP).
This basically means that you will send the uncomfirmed funds onto the network in a new transaction. If you provide an attractive fee with this transaction, then miners will want to pick it up.
However, because the funds have being confirmed for the parent transaction, the miners know that they will have to complete that transaction to get those fees plus the attractive fees on your child transaction.
Is there a catch?
Most wallets will not allow you to spend uncomfirmed transactions is not something that is available to most wallets. If you are more technically minded then there are instructions on Reddit.
Be cautious when sending bitcoin with low fees
In the real world though, it can be very dangerous to send bitcoin at too low or zero fees. That’s why most wallets will restrict your ability to set an overly low fee.
Exodus wallet specifically says they made a design decision to not allow users to choose a low fee. Exodus states that if you want better control over the fees you should use a wallet like Electrum.
Finally, it is possible that over time your transaction could cancel itself out. This greatly depends on which nodes on the network are holding your transaction. If enough of them drop it, then it is possible that your transaction could be canceled on its own.
And while this is a significant longshot, to say the least, it may be possible that in future updates to bitcoin, transactions that have been trapped for excessively long periods of time may be processed. This, however, is still conjecture and no one knows for sure what will happen.
Therefore, just like protecting your private keys, ensuring that your transactions include reasonable fee is of critical importance.
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