ARE BITCOIN’S ZERO CONFIRMATION TRANSACTIONS SAFE?

Transactions are committed to the block chain about every 10 minutes. Zero confirmation transactions do not reside in a block yet. Instead, they reside in the memory pool of miners. Until a block is mined that includes the transaction, it is said to have ‘zero confirmations.’ Once included in a block and written to the block chain the transaction has one confirmation.
Confirmation time is a measurement of a transaction’s depth or age, in the block chain; the higher the number of confirmations, the older the transaction. When transactions are first broadcast to the network, they are zero confirmation transactions. Some exchanges and merchants do not accept these transactions. Instead, Bitcoin payments sit in limbo waiting for confirmations.
Bitcoin’s Six Confirmation Bias
Today, but more so in the past, exchanges and merchants require a minimum number of confirmations before accepting a transaction. Typically this number is six. Why?
Well, after being broadcast zero confirmation transactions could wait as little as a few seconds to as long as hours or days for confirmation. Even though there is no way to rescind a transaction once broadcast, there is a bias towards accepting zero confirmation transactions.

This post was published at Crypto Coins News on January 2, 2015.