The digital currency bitcoin allows users around the world to make low-cost, peer-to-peer payments with a faster processing time than international bank transfers. How fast? Currently, the average bitcoin transaction takes 116 minutes, give or take a few. Here’s why.
Confirming Bitcoin Transactions
When you make a payment using bitcoin, your transaction needs to be confirmed by the bitcoin network, so the payment can be completed. First, your transaction goes into the “unconfirmed transactions pool,” a list of all the pending bitcoin transactions. From there, it is picked up by participants in the peer-to-peer bitcoin network who then use their computing power to validate your transaction.
For a bitcoin transaction to be fully validated and processed, it requires six confirmations. These transaction confirmations are then condensed into “blocks,” or chunks of code, which are added to the blockchain. (Think of it like a ledger in a checkbook.) Each new block is made up of recently processed bitcoin transactions. This is where the term blockchain comes from, as it is effectively a chain of blocks filled with validated and confirmed bitcoin transactions.
All past and current transactions can be viewed publicly on the blockchain explorer on blockchain.info.
Average Bitcoin Transaction Times and Fees
The bitcoin network has grown substantially over the last two years. Bitcoin’s value (measured by its market capitalization) has increased from $3.5 billion to over $45 billion, while its average daily transaction volume has increased from $12 million to over $2 billion from June 2015 to the time of this writing.
This steep growth in daily bitcoin transactions has led to scalability issues for the bitcoin blockchain. Participants in the bitcoin network are struggling to keep up with the confirmations of the high number of bitcoin transactions. This has produced two outcomes. Firstly, bitcoin transactions take longer now than they used to and, secondly, bitcoin transaction fees have increased.
When bitcoin arose as a viable digital peer-to-peer payment system in 2010, the average time for a bitcoin transaction was around 10 minutes while the average transaction fee was only a few cents. Today, due to the increased activity on the blockchain, the average confirmation time has shot up to 116 minutes, according to the most recent data from blockchain.info. The average transaction fee for a transaction to be processed within 30 minutes is around $2.00, according to 21.co. These figures, however, fluctuate depending on how busy the bitcoin network is at any given time.
Bitcoin Transaction Times Vary According to Network Activity and Transaction Fees
Ideally, you want your bitcoin transaction to be completed within 30 minutes, especially if you are sending money to an exchange to use your bitcoin to purchase other digital currencies.
For that reason, it is important to choose a bitcoin wallet that allows you to adjust the fee you want to put on the transaction or one that dynamically sets the fee for you to ensure your transaction is confirmed and processed within 30 minutes or less.
The higher the fee you include with your transaction, the more likely it will be prioritized by bitcoin network participants, and the sooner it will be processed.
The fee alone, however, is not the only factor that will affect your bitcoin transaction time. If the bitcoin network is particularly busy (for example, due to a rally in price which has led to a lot of bitcoin buying), then your transaction can take substantially longer to process. During times of high activity on the blockchain, transactions can take up to several hours until they are completed.
If you set a reasonable fee and the network is not too active, you will most likely look at one to two hours for your bitcoin transaction to be completed. If you are using bitcoin to send money overseas, then that timeframe is absolutely fine and still much faster than a bank transfer. If you are sending money to an exchange to trade, however, you need to take that duration into consideration.
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