Zero Confirmation Transaction is a condition where the digital asset has not been confirmed (0 confirmation). This carries the risk of Double Spending, and has the potential to fail, meaning the digital asset will return to the customer’s wallet. This security reason is why the digital asset market (digital asset exchange) usually requires several confirmations on every transaction of depositing digital assets to an exchange account.
Zero Confirmation or unconfirmed transactions are defined as exchanges that have not been recorded or verified on the blockchain. To understand it in context, it helps to remember some basic principles of blockchain technology.
Blockchain is a distributed ledger consisting of a continuous sequence of blocks. The blockchain is managed by a distributed network of nodes that reach a consensus on the integrity of the data recorded on this ledger. Any malicious actor who intends to manipulate the blockchain must control at least 51% of the computing power across the network to sabotage its integrity.
After sending data to the blockchain, the user must wait for one of the network-maintaining modes to register and then verify the data before adding it to the block. When blocks are connected to each other, each verified block confirms all previous blocks as well.
Zero confirmation transactions refer to transactions that have not been confirmed on the blockchain and, as such, are not yet part of the blockchain. Please note that transaction confirmation times will vary depending on the transaction volume on a particular network. To use Bitcoin as an example, a Bitcoin (BTC) transaction that has been forwarded to a node on the Bitcoin network but has not yet been entered into a block is referred to as a zero confirmation transaction.
Zero Confirmation Transactions can be seen in certain scenarios, such as a seller releasing his goods before the Bitcoin payment is confirmed by the network, assuming that the confirmation will, over time, actually be confirmed. Usually, at least six confirmations from the network are required to ensure that the transaction has been verified.