The remarkably secure, virtually unhackable nature of blockchain is also its Achilles heel. A transaction is confirmed when a miner solves a complex cryptographic math puzzle and uses the solution to seal a bundle of unconfirmed transactions together and lock them into a permanent order on the blockchain.
This type of confirmation is revolutionary because it allows a distributed ledger to exist anywhere and everywhere, and verify itself using math alone. But it takes time. 10 minutes on the bitcoin blockchain on a good day, and several hours on a bad day - an obvious problem when you’re trying to compete with VISA and PayPal, which process thousands of transactions per second.
The answer is “Zero-conf” transactions - they go through without waiting for the mining network to confirm them - but how secure can they be?
Satoshi foresaw the need for this and addressed it in 2010. Zero-conf was also a topic of discussion at the recent Satoshi’s Vision Conference in Japan.
Bitcoin Snack Machine
According to Satoshi, in his famous 2010 “Bitcoin Snack Machine” post - these instant transactions could be made secure, and even almost as secure as confirmed blockchain transactions, by employing “listening nodes” and a delay of more than a second after broadcasting the initial transaction to monitor and receive an alert if a transaction was re-used as a double-spend.
The math works - Satoshi showed that even a delay of one second would give the initial legit transaction a jump on a double-spend attacker, reaching an 80-20 node dominance after only 3 seconds, and increasing exponentially from there.
The network nodes only accept the first version of a transaction they receive to incorporate into the block they’re trying to generate. When you broadcast a transaction, if someone else broadcasts a double-spend at the same time, it’s a race to propagate to the most nodes first. If one has a slight head start, it’ll geometrically spread through the network faster and get most of the nodes.
- Bitcoin founder Satoshi Nakamoto
So it’s a great solution - but it relies on double-spend relay, which doesn’t currently exist on the bitcoin blockchain.
At the Satoshi conference in Japan, Tom Harding introduced a 2-layer model of respend resistance incorporating the founder’s original idea of a respend relay in which the absence of an alert after a certain number of seconds would give the legit transaction an exponentially high probability of beating a double-spend attack.
Respend-resistant security could then be dramatically enhanced on the other end by incentivizing miners not to mine blocks with double-spends. As Harding explained at the conference, the economic penalty of losing a block is severe enough that even a small minority of anti-double-spend miners could make the whole blockchain secure.
Altruism vs. Incentives
Harding emphasized that we currently rely on altruistic miners to ensure the integrity of the blockchain, and this is great while it works, but incentives are a much more sustainable model.
Harding, the developer of Bitcoin XT, has experimented on the Bitcoin Cash blockchain and he confirms that zero-confs work and they are secure, but he cautions that the potential volume of attacks as the network gets busier is still an unknown, so vigilance and careful planning of a multi-layered security solution is warranted throughout the implementation of zero-confirmation transactions.
Successful implementation is sure to boost adoption for whoever gets there first. As Satoshi himself succinctly put it, “You want to walk up to a snack machine, send it bitcoin, and get your candy - you don’t want to wait an hour and the company doesn’t want to give away free candy.”
Images via Shutterstock, Video clips via Youtube