Coinbase to Speed up Bitcoin Payment via Child Payment System
U.S. based cryptocurrency exchange Coinbase has announced that it will be rolling out its Child Pays for Parent (CPFP) technology. The technology will allow for more reliable transaction fees and transaction confirmation times (lower volatility).
In brief, CPFP works by pooling interconnected low fee transactions with high fee transactions. Since miners must confirm interconnected transactions together, they look at the total pool of fees rather than individual transaction fees.
High volatility of Bitcoin (BTC) transaction fees and confirmation times
Child Pays for Parent (CPFP) to improve Bitcoin payments
Coinbase has launched several digital products over the past few weeks to make it easier for their users to navigate the cryptocurrency world.
The exchange is now launching its Child Pays for Parent (CPFP) initiative, a system which has been designed to improve the reliability of Bitcoin transactions for customers by eliminating the volatile nature of blockchain fees and transaction times.
In a blog post, the exchange explained how it makes use of this technique to rescue thousands of transactions on its network.
Sending cryptocurrency today can be difficult; transaction fees are volatile and unpredictable, which can result in significant swings in the amount of time it takes for a transaction to confirm.
This has led to some users transactions getting stuck due to fee rate spikes and general Bitcoin network congestion. Coinbase has created CPFP to make it easier for clients to transfer Bitcoin more reliably in an effort to improve its usability.
How it works
The blog post explains that CPFP uses economic incentives enabled by the Bitcoin protocol to improve the confirmation time of transactions.
If a customer’s transaction is stuck on pending for roughly 4 blocks, Coinbase says the exchange would broadcast it and pay for a child transaction at a good rate to help push the initial transaction through.
Since these transactions are only valid when confirmed together, miners compute the fee rate over this group of dependent transactions.
Miners would be able to able to submit a child transaction which has a higher fee rate than the initial one and boost the overall fee rate of the group of transactions.
Coinbase is enabling miners to profit from approving priority transactions faster in an innovative attempt to solve a very critical problem on the Bitcoin network.
On Tuesday, there were reports that Coinbase entered a partnership with Tiger Global, a U.K. hedge fund, which is considering a $500 million investment in Coinbase.