Although many Bitcoin proponents have stated the digital money is useful for buying goods at physical stores, the reality is that some merchants are still not comfortable with accepting zero-confirmation transactions. Although the average confirmation time of ten minutes is fine in many situations, there are still plenty of instances where waiting more than a few seconds for a transaction to clear is simply not practical. Bitnet, a Bitcoin payment processing company, has now partnered with BlockCypher to solve this critical issue.
Although often viewed as a secondary-level competitor to Coinbase and BitPay, Bitnet has been able to snatch a few big players such as Rakuten and Universal Air Travel Plan (UATP) over the past year.
Protecting Merchants from Possible Double-Spending Attacks
Bitnet’s new service for lowering the risks associated with unconfirmed transactions is known as “Instant Approval.” Although merchants are sometimes forced to wait 45 minutes or longer for a single confirmation, Bitnet claims their solution will allow merchants to know that a payment has been approved “in less than 10 seconds.” This is an attempt to find a compromise between unsecure zero-confirmation transactions and confirmed transactions that usually require one to ten minutes to clear. As Bitnet VP of Product Seamus Cushley explained in a statement:
“One of the biggest challenges for merchants wanting to accept bitcoin is how to accommodate the delayed confirmation times into their ‘real-time’ checkout flows and still be assured of being funded.”
Perhaps the most important aspect of Bitnet’s new system for approving Bitcoin transactions is the company’s willingness to guarantee payments that the service approves. This means that merchants do not have to worry about the risks associated with accepting an unconfirmed transaction. The fact that Bitnet is willing to put their own money on the line to back this system should say a lot about their confidence in it working properly.
Questions Remain Regarding Zero-Confirmation Transactions
While many bitcoiners have no problem accepting unconfirmed transactions, the debate as to whether or not this is a wise decision is still ongoing. Recently, an anonymous individual messaged the bitcoin-development mailing list regarding successful double-spending attacks he or she was able to perform against Shapeshift and Reddit. The attack was then later confirmed by Shapeshift CEO Erik Voorhees.
When asked about this particular attack, Bitnet Chief Commercial Officer Akif Khan seemed unworried. In an email to CoinJournal.net, Khan noted:
“Whilst the spike in double-spend attempts last week has put the issue back into the spotlight, we’ve analysed the transactions involved against Shapeshift, for example, and are fully aware of the techniques used, which for the most part have no impact on our ability to offer our Instant Approval service to merchants. We’ve designed our service to take into account dust, minimum relay fee and other properties which some peers consider as either non-standard or properties which significantly delay mining.”
Khan went on to explain that the Instant Approval service is about much more than monitoring the Bitcoin network. He then noted that Bitnet can use “techniques such as those utilised in traditional card fraud prevention employed to further improve the accuracy of our transaction assessments.” Due to the involvement of payment industry veterans from Visa and CyberSource at Bitnet, it’s clear that they have plenty of experience with these sorts of issues.
Double spends are still quite infrequent, but it’s important for the entire Bitcoin community to understand that the threat is very much a real one. Although it seems clear that double spends are still going to be a serious issue for Bitcoin over the short term, there also appears to be a business opportunity for companies who are willing to essentially insure merchants against possible losses.