How do I trust Bitcoin transactions?

First of all, when making Bitcoin transactions, there are two things you need to trust. First, you must trust the entire Bitcoin network. If the network fails, then no transactions will be trustworthy.

Second, you must trust your method for interacting with the Bitcoin network – in other words, your wallet or your account.

The Bitcoin Network

There are many who discuss some of the potential downfalls of the Bitcoin Network, but the reality is that it has been going strong for over 10 years. One of the reasons for this success is that Bitcoin is secured by enormous computation power. To perform malicious transactions on the network would require an extremely powerful computer (or more likely a collection of computers). The benefit is that there is very little incentive for someone to do this. Crashing the Bitcoin Network would ruin their investment as well.

In terms of singular transactions, the transactions are extremely secure. It is recommended that you wait for 6 new blocks to be put on top of the block with your transaction (these are called confirmations) before you consider a Bitcoin transaction to be confirmed. This is due to the way that mining works. If two people solve the Bitcoin algorithm at the same time (find the nonce), then each one creates a new block. Which miner’s chain is considered legitimate depends on who creates the next block first. If Miner 1 loses to Miner 2 on the second block, all the transactions in Miner One’s block fail and must be verified again. This is why you shouldn’t consider a transaction final until the entire chain goes to the sixth block. The logic is this: If the Miners tie again then it goes to the third block, and fourth, and so on. 6 ties in a row is so probabilistically unlikely that it’s largely considered impossible. So once you’ve hit six confirmations your transaction is good as gold (see below how most block explorers list the number of confirmations).

How you interact with the Bitcoin Network

It’s important to recognize that no matter how secure the Bitcoin network is, if your method of interacting with the network is insecure, then you can’t trust the transactions. We interact with the Bitcoin Network either directly with our own wallet, or we use a custodian who interacts with the network on our behalf. Custodians are easier to use since, with custodian platforms (like exchanges or Coinbase), you can log in with a password and username. However, they’re frequently hacked and can pose other security problems. It’s best to manage your own Bitcoin.

That’s why many people use secure wallets. A secure wallet is a wallet with an active development team, a responsive and responsible organization, and strong cryptography. If you look, many of even the most popular wallets today have had histories of security breaches. For a wallet with no history of hacks, you can look at ZenGo, who I work for. We’ve removed the need to remember a private key while still making sure you’re the only one in charge of your crypto.

The bottom line is that if you use a secure wallet, Bitcoin transactions are extremely trustworthy. Just make sure to wait until you’ve had six confirmations before writing home about it.

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