What are Blockchain Confirmations?
Blockchain confirmations allow users to know that their transactions over blockchain networks have been secured. When a transaction is made on a blockchain network — for instance, when you send a few coins to your friend’s digital wallet address — that transaction must be recorded on that blockchain’s digital ledger. This immutable ledger is a sequence consisting of digital blocks attached to each other, ordered down to the millisecond in a chronological chain, thereby known as a “blockchain.”
After being placed on the blockchain, each transaction must be validated through a process called consensus. Consensus validation is performed by miners on the network using a Proof of Work scheme that rewards miners new coins in exchange for securing and validating transactions, as long as their new blocks are approved by the other miners on the system through participant consensus. However, if your transaction is on the latest block on the blockchain, it is still subject to rejection and reversal by the network. This is because a malevolent user on the network could want to make copies of the same transaction immediately after, pretending as if the previous one did not happen. In this case, the blockchain network can check its own transaction history on its own ledger before reversing the transaction. So yes, while a true transaction is not reversible, mistook transactions and malevolently copied transactions can be reversed. If a user is in fear that their true transaction is in jeopardy of being reversed, there is a security protocol that is built into all blockchains. This is where blockchain confirmations become useful.
Simply put, a blockchain confirmation is a number of times another block or transaction is placed chronologically after your transaction’s block. For example, if your transaction is placed on one block, it is very likely that a new block will be appended to your block soon after as more transactions are made on the network. If a malevolent agent on the network wishes to reverse or corrupt a transaction, not only will they have to get through that block’s security by decrypting its encrypted data, but they will also have to decrypt all of the other data on the blocks ahead of this block since the blocks are all linked together in a chain. Blockchain confirmations therefore work as a measure of security, since for every block that is added after your transaction, your transaction is much less likely to be reversed and is therefore more secure.
In a definitive sense, if you make a transaction on a block, each block afterwards is a confirmation. If there are 3 blocks after your transaction’s block, there would currently be 3 blockchain confirmations on your transaction.
Blockchain Confirmations and Security Standards
In terms of financial blockchain applications, most cryptocurrency exchanges, wallets and networks require a minimum of 3 confirmations for a transaction to be fully valid and irreversible. Each case is different given the various security protocols of each blockchain ecosystem, but it really boils down to the size of each transaction made on the network. Using this logic, it is correct to assume that larger transactions require more confirmations before they are validated by a network and secured on both sides, while a smaller transaction requires fewer confirmations. For example, the Bitcoin blockchain claims that 1 confirmation is enough to secure a transaction under $1000 United States Dollars while 6 confirmations will be needed to secure transactions greater than $1,000,000 United States Dollars. Fortunately enough, the average time to create a block on the Bitcoin blockchain is 10 minutes; likewise, almost all Bitcoin transactions will be secured and irreversible after an hour’s time.
Unfortunately, there are some innate issues with this process. While early stage blockchains like Bitcoin made efforts to seek alternatives to traditional financial networks, their confirmation speeds are not nearly fast enough to compete with current supercomputers on Wall Street. Bitcoin made only 3-7 transactions per second at the beginning of 2018, while the more efficient Gas System running the Ethereum blockchain was unable to break 30 transactions per second on most days.
Fortunately enough, blockchain confirmations are not to blame — instead, the culprit is the data storage waste of Proof of Work. Proof of Work gives all nodes or computers access to all of the data on the blockchain for viewing purposes. Newer Proof schemes, such as Proof of Stake, make use of database sharding techniques to break the blockchain across nodes in the network. This links each set of data with another set with corresponding keys, so that miners must combine their power together to access the whole blockchain if desired, while individual users who do not wish to keep all of the blockchain data are not compelled to.
Blockchain Confirmations as an Industry Standard
While the blockchain community is cranking out more innovative solutions to simplify transaction velocity and security confirmation every day, blockchain confirmations still remain an important feature for blockchain networks, especially on the user side. This feature has become an industry standard and will maintain its presence in the blockchain industry for the foreseeable future. Confirmations are one of the most important aspects in evaluating both the legitimacy and the security of a given blockchain, as a blockchain that requires more confirmations and can produce more confirmations in a given time interval is considered more secure and reliable than others.