There's a thing with people who enter the cryptocurrency spaces to adopt it as their currency where they ask if how many confirmations they need to have to accept transactions.

The first thought most will think of is usually 1-6 transactions, but those who are well-versed in cryptocurrency will explain that 0-conf transactions are good for themselves.

Now, one might be thinking, wouldn't 0-conf be insecure at all? Can those transactions be faked and double-spent?

Let me answer that question with a question. Do you know that every transaction you do outside cryptocurrencies starts as a 0-conf transaction?

Let me explain why, and show you why if you want to become a merchant that does want to use cryptocurrency, you shouldn't need to matter why you need confirmations unless you're a merchant of high-risk materials.

A Filipino Example

Let's start with an example that many Filipinos can relate to since most of them have a bank account and a mobile wallet that I have.

Alice has a bank account, and she wants to add funds to her mobile wallet. She goes through their website, pays for the wallet's funds, and Alice smiles in delight as the money was received instantly.

After spending on things such as, say, games and cryptocurrency, Alice goes to send the money back to the bank, but this time it's not immediate. Alice becomes confused for a while and sleeps it out. A few days later, Alice notices that the funds have finally arrived at the bank, and Alice goes on through her day as usual. While that happens, her mobile wallet also updates the amount of money that was paid and shows the true amount that was sent.

Example Breakdown

Now, let's recognize the flow of money from my examples, and let me tell you which ones are 0-conf and which ones aren't.

1. Alice funds her mobile wallet through her bank account

   • This action is a 0-conf transaction. Why?

     • The bank doesn't actually process your transaction immediately because many users are using the bank. Most of the time, you can simply ignore this fact, and it will pass through. Sometimes, however, it can take days for the transaction to be confirmed, which meant that your running balance is actually different from your actual balance.

2. Alice spends her mobile wallet's funds with games and cryptocurrency.

   • This action is a 0-conf transaction. Why?

     • Because other stores are accepting 0-confirmation transactions because their respective banks allow 0-confirmation transactions.

     • For cryptocurrency, however, it is only 0-conf if your mobile wallet natively supports conversion from fiat to crypto.

3. Alice sends her mobile wallet's remaining funds back to the bank.

   • This action is a 0-conf transaction. Why?

     • This is just the action that you're sending your remaining money to the bank. It is dependent on the bank if they confirm it.

4. The bank gives Alice her updated amount of money.

   • This action shows that the transaction created in step 3 was needed to be confirmed by the bank. Why?

     • Security measures. This is why mobile wallets need verification (in the Philippines, at least) for you to withdraw and deposit. This one makes your privacy disappear as they also need to check on it.

5. The mobile wallet updates on how much was truly spent.

   • This action shows that the transaction created in step 2 was needed to be confirmed by the store merchant's bank, the bank you use, and the mobile wallet. Why?

     • Different banks have different confirmation times. It doesn't mean that yours is already confirmed back home that your transaction abroad is. Sometimes, you might find that you actually owe the other merchant more than you should've paid, and that will cause a problem.

In conclusion, you're transacting without confirmations and any delay in the transaction is your bank confirming you're a legit person by (un?)intentionally delaying it.

Unto another example.

Another Filipino Example

You're Bob, and you played a game you paid on your credit card. But you didn't like the game, so you refunded it. The game store warns you that it will take 3-7 business days for your money to return to the bank. After a few mishaps and forms sent, you receive your money 15 days later.

Second Example Breakdown

Bob is a gamer, and he pays with his credit card, which meant that the bank is lending him money to spend. The amount he's able to spend depends on the meaning of the "credit card" in your country, but that's not important here.

What's important in this example is the fact that refunding can take days, which meant that your initial query, the 0-conf transaction, is passed through multiple banks and confirmed and validated.

Sometimes, it takes too long that you need to "remind" the bank of your money, even though it is really theirs. When that happens, change your bank. Or choose cryptocurrency.

Epilogue: Day-to-Day 0-Conf Transactions

As much as you think you're brilliant at cryptocurrencies and investing and trading, you really have no idea what you're stepping into. Cryptocurrencies began as a way to transact without a middleman, without banks and payment processors because back in the day there was no such thing, and PayPal wasn't as large as today.

Bitcoin (BTC) was captured by interested financial companies so it doesn't ruin all these current systems in place, and those that were still true to the original design became Bitcoin Cash (BCH). Those who were influenced by the negativity of Bitcoin's reach created other cryptocurrencies like Ethereum (ETH) and Monero (XMR).

Outside the Internet, physically holding your money to pay on itself is a 0-conf transaction, because you and the merchant already trust that what the money says on its bill/coin is how much its actual value is.

Bitcoin was a solution that the banks and financial institutions didn't like, and this is why you don't see Bitcoin Cash around areas that only consider cryptocurrencies as "assets" or "illegal" or "digital currencies".

By knowing what you actually do when transacting, you slowly learn how the financial world acts around you, and you learn the wisdom to either become one of them, or one of those who teach others what they do.

This is an expanded version of this Reddit post: https://www.reddit.com/r/btc/comments/mwpgnf/0conf_is_what_basically_happens_on_everyday/

Hope you guys enjoy it.

This is Rowan, signing off.