Zero Confirmation Transaction

What is a Zero Confirmation Transaction?

An unconfirmed or zero confirmation transaction is a cryptocurrency exchange that has not been permanently recorded or approved on the blockchain. 

Transactions that are initiated on the blockchain have to be verified by the validators on that blockchain who run a sequence of nodes. These validators have to reach a consensus on the authenticity of any data recorded on the ledger before it can be stored on the blockchain. 

After initiating a transaction, users must wait for one of the nodes on the network to verify the data and then register it on the block. Until the miners on the blockchain verify the transaction, it will remain a zero confirmation transaction. Transactions with a higher volume and those with higher gas fees are usually prioritized by miners.

What Happens when a Transaction Remains Unconfirmed?

One of the risks of zero confirmation is double spending. This is a phenomenon that occurs when an individual tries to spend the same funds in multiple transactions. If the initial transaction is not confirmed and included in a block, the sender could potentially attempt to spend the same funds again, causing a conflict or inconsistency in the blockchain’s transaction history.  When such blockchain transactions happen, the miners on the block will only confirm one of these transactions.

If a transaction remains unconfirmed for an extended period, it is possible for it to be reversed or dropped from the mempool (the pool of unconfirmed transactions). In this case, the transaction will not be processed, and the funds involved will not be transferred.