Introduction to XRB Nano (Previously RaiBlocks) Part 5

Latency of the Bitcoin network and capacity of XRB.

A confirmation of a transaction on the Bitcoin network happens when a block on the network has information about the transaction. When a miner includes the transaction in a block, it is said that the transaction “has been mined at a depth of one block” or has been confirmed once. Each subsequent block of the Bitcoin blockchain is connected to the previous block via a system of hashes. A hash is a string of data that is typically much shorter than the original data. For example, a cryptography algorithm could take a set of data (1, 1, 1, 1, 1, 3, 4, 6345, 2, 2) and the hash for it would be w1a. With Bitcoin, sets of data are transactions and all the information associated with transactions. The idea is the same as in the example above: a large set of data returns a much shorter hash, making it easy for several parties to compare if they have the same data because they do not actually need to look at the data. All they need is to compare the hashes.

To protect its security, the Bitcoin network uses cryptography algorithm called SHA-256. The algorithm returns one hash for one set of data, meaning that for a set of data, its hash is always the same. For example, block #507601 of the Bitcoin blockchain has information about 1982 transactions. The hash for the block is 0000000000000000001aece64bcb0aef8be0cd03f0ffa5eed4e3e33776e0b7e3. The block also contains the hash of the previous block, which is 0000000000000000000040c1eddbf10646a0fad8baac43a9617bbff6de218775. You can see the information for the block #507601 on the Bitcoin blockchain explorer here: https://blockchain.info/block/0000000000000000001aece64bcb0aef8be0cd03f0ffa5eed4e3e33776e0b7e3

To protect the network against double-spending, the transactions on the Bitcoin network require a certain number of confirmations.

For example, for a transaction from block #507601, the block #507601 serves as a confirmation. After the network added block #507602, the transaction had two confirmations. After the addition of the block #507603, three confirmations and so on.

There are several types of Bitcoin wallet clients. Some would show the status of a transaction as “unconfirmed” until the transaction reaches 6 confirmations. Others would show “n/unconfirmed,” where n is the number of current confirmations. Businesses and exchanges can set their own rules as to how many confirmations they require for a transaction to be valid from their perspective.

There is nothing special about the number six in the “six blocks” requirement. Originally, Satoshi Nakamoto chose it so that the risk of attack is less than 0.1%. In reality, an attacker wouldn’t even get close to this number.

When the Bitcoin network adds new coins by giving them as rewards to the miners, the miner that receives the coins can’t spend them for the next one hundred blocks. Some older clients would not allow for new coin spending for 120 blocks after the network adds the coins to the system.

The biggest problem with this approach to transaction confirmations is that the Bitcoin network creates a block of the network every ten minutes or so. This means that six confirmations on average take an hour or even longer. This is not something that would be acceptable for use of a cryptocurrency for daily needs on a daily basis. Most people are used for immediate transactions, be it when they pay with cash or plastic.

When you, for example, are buying some milk and break from a local grocery store, you would never use a currency that requires you to wait for an hour or longer for a confirmation that the transaction is valid. This would be a complete deal breaker.

The XRB Nano/RaiBlocks network works much faster than the Bitcoin network because the network doesn’t have one blockchain. Each member of the XRB Nano/RaiBlocks network has a separate blockchain that records all the transactions for the account.

All members of the XRB Nano/RaiBlocks network are required to complete a short proof-of-work process when engaging in any kind of transaction on the network. The process takes up to a few seconds. During the process, the users are adding blocks to their own blockchains. Because the process is fast and there are many independent blockchains on the XRB Nano/RaiBlocks network, the network can process thousands transactions per second vs Bitcoin’s 3 to 7 transactions per second.

If a user on the XRB Nano/RaiBlocks network wants to send a large amount that came to an account through a series of smaller transactions, it groups them into one for efficiency reasons, which is yet another difference between XRB Nano/Raiblocks and Bitcoin.