Bitcoin’s fundamental idea was to offer a robust mechanism for digital cash out of the watchful eye of centralized authorities. It was the first blockchain technology that inspired thousands of follow-up crypto projects like Dogecoin (DOGE), ZCash (ZEC), and Monero (XMR) to be created.
Ethereum, on the other hand, strayed further from the original Bitcoin plan. Although it also took the blockchain as its basis, instead of focusing solely on digital-money transfers, it enabled an entirely new application system to be built on top of its network.
As a second-gen blockchain, Ethereum also managed to surpass Bitcoin in scalability — the ability to adjust the time for processing transactions against the growing network congestion. However, the speed of Ethereum transactions isn’t even close to what’s expected from a network with such a large utility.
As crypto users are continuously asking why it takes so long for a crypto transaction to be completed, we’ll take you on a short tour through the Ethereum blockchain. Here, you can see all the stops your Ether coins make while travelling to or from your wallet.
What Is Ethereum?
We’ve all heard that Ethereum is the second-largest cryptocurrency after Bitcoin. But let’s make it clear at the very beginning, Ethereum is a blockchain-based platform designed for creating decentralized apps (dApps), while the cryptocurrency that fuels and maintains that network is called Ether (ETH). In the common crypto jargon, the coin is often addressed with the name Ethereum.
The Ethereum network is a decentralized infrastructure for creating smart contracts — simple computer programs that replace the middleman in a blockchain transaction, which are triggered automatically once the participants meet a set of specified conditions. Smart contracts use the programming language Solidity, and under that code, they’re verified on the blockchain.
The mastermind behind this robust technology was Vitalik Buterin, a Canadian developer of Russian origin, who proactively envisioned the use cases of the blockchain and, as such, presented the new concept to the public in 2015 in the Ethereum whitepaper.
Use Cases of Ethereum
Unlike Bitcoin, which was tailored to serve either as a store of value or a medium of exchange, Ethereum — through the use of smart contracts — enables developers to build multifunctional apps on the Ethereum blockchain. Blockchain-based apps run in compliance with an automated regulatory framework and hence, they’re secure, trustless, and fully transparent. The group of Ethereum products contains a vast array of ERC20, non-fungible tokens (NFTs), DeFi platforms, and Decentralized Autonomous Organizations (DAOs).
As a unity, Ethereum products have the capacity to shift the entire virtual world in a decentralized direction, which will give the ETH coin added market value. However, there are a few aspects that need to be improved for full mainstream implementation.
Apart from scalability, which is our focus today, Ethereum systems are periodically dealing with Ether’s sharp market volatility and some programming issues arising from the obscurity of the Solidity language in terms of authentication and exploitability.
How Is Ethereum Produced?
Ethereum utilizes a unique software solution called Ethereum Virtual Machine (EVM) that powers the creation of decentralized apps and products. However, when it comes to manufacturing new coins, Ethereum has taken Bitcoin’s model — the original blockchain that employs Proof-of-Work (PoW) consensus. This process is popularly known as mining, and apart from generating new coins, it has the purpose of maintaining a secure log of all transactions taking place on its native blockchain.
We can say that the newly-minted units are a product of the mining process since they serve as a reward for miners for validating the transaction. Validation is secured with a mutual consensus of all participating miners instead of letting a centralized institution prove the transaction legitimacy and prevent double-spending. In the section below, you’ll read how the PoW consensus synchronizes the transaction flow and the creation process of new coins in the back.
How Does ETH Mining Work?
Every time you try to send ETH to another Ethereum wallet, you send a request to the network, similar to how you make an online credit card purchase. In the meantime, your transaction is safely accommodated in a mempool — storage space for all pending transactions waiting to be “packed” in blocks and as such, added to the blockchain.
At that point, miners’ computers, also known as nodes, get activated using their computing power to solve a mathematically difficult equation in order to qualify for attaching the new block to the ledger. This process doesn’t take place in a vacuum but rather as a competition between all participating miners for solving the task first. Once we have the winner, they present the task solution to other nodes, thus ensuring the proof of their work. The block of transactions is then added to the blockchain, and from that point on, the transaction can’t be modified or deleted by any means.
Considering the difficulty level of the equation, which rises in proportion with the number of nodes and the current network load, an average Ethereum transaction needs between 12 and 15 seconds to get added to the blockchain. In reality, users have to wait up to 30 minutes to have their coins added to their wallets.
Let’s see what exactly prolongs the journey of Ethereum from one owner to another.
What Is Block Confirmation?
When the block containing your transaction gets attached to the blockchain, that’s the “event” we call a block confirmation. The thing is that a single confirmation doesn’t prove the validity of your transaction. The number of required confirmations depends on the cryptocurrency wallet or crypto exchange to or from which your ETH coins have been sent.
This doesn’t mean that your transaction must be re-confirmed or re-attached to another block. It’s simply the confirmations that happen after “your” block is added to the network. For example, if your transaction is said to have 15 confirmations, this means that 14 more blocks were mined after it was successfully attached to the blockchain.
For example, it can happen for two different nodes to create a block at the same time. For a very short time, this makes a parallel chain that lasts until the miners agree on which blockchain is the “proper” block and which will be abandoned. So, your transaction can likely be the abandoned one after the first confirmation.
For that reason, Ether transmitters (wallets and exchanges) use the next added blocks as a layer of security or a proof that your transaction is truly irreversible — the more blocks mined after yours, the more irreversible the transaction.
How Many Confirmations for Ethereum?
As we mentioned, crypto exchanges and Ethereum wallets individually set the number of confirmations required for completing an ETH transaction. There is an unwritten rule that 6 confirmations are enough to prove the transaction’s validity, yet numbers say something different.
In addition, remember that the total transaction time also depends on other on-chain and external factors. Among others, it’s the transaction fee, called gas in the Ethereum system, which grows together with the network traffic. This makes mining look like a blockchain auction, which means that those users who pay higher fees will have their transactions processed faster on the behalf of miners.
We’ve gathered how many transactions confirmations some of the most popular Canadian crypto exchanges require:
|Crypto exchange||Number of confirmations||Estimated confirmation time|
|Coinbase||14||Up to 10 minutes|
|Binance||12||Under 10 minutes|
|KuCoin||12||Around 5 minutes|
What About Bitcoin Confirmations?
Compared to Bitcoin, Ethereum is a considerably faster-performing network. For illustration, Ethereum can receive 10-15 transaction messages per second, while Bitcoin can process up to 5 transactions per second.
As a result, a single confirmation usually takes around 10 minutes on Bitcoin’s blockchain. Similar to Ethereum, one confirmation is not enough for exchanges to complete a Bitcoin transaction, but the number of confirmations is much smaller than in Ethereum. For example, Bitbuy requires 3 confirmations, Binance requires 1, Kraken requires 4, while Bitbuy and Coinbase need 3 confirmations for a successful BTC transaction.
As for other altcoins, the total number of required confirmations is also variable, depending on the coin itself and the cryptocurrency exchange that processes the transaction. Let’s take the Canadian favourite Bitbuy as an example to see the difference:
|Cryptocurrency||Number of confirmations|
|Bitcoin Cash (BCH)||6|
A Few Words Before You Go…
The Ethereum network is superior to Bitcoin when it comes to the capacity to process transactions and in some way, it’s one of the best improvements Ethereum presented when it appeared on the crypto scene in 2015.
However, these time parameters aren’t sufficient to serve all that machinery that Ethereum creates with full efficiency. Today’s business landscape is fiercely fast-paced, and everything that doesn’t count in seconds is considered slow and unproductive.
Fortunately, Ethereum is currently shifting from the PoW consensus to a more energy-efficient one — Proof-of-Stake (PoS), which replaces mining with staking ETH coins to validate and mint new coins. With the ETH 2.0 version, we expect much cheaper and faster transactions and hence, a more dynamic environment for the development of the Ethereum industry.