Bitcoin average transaction time

Distributed transaction ledgers need to be secure, unambiguous and irreversible in as short of time as possible to facilitate the most robust and decentralized systems. In practice there are two different aspects to this process: selecting a unique node to produce the block and making the ledger irreversible.

1.1 Proof of Work

The first successful attempt at solving this problem was Bitcoin which used proof of work to make it computationally difficult to produce a longer ledger. Proof of work behaves like a lottery where on average one node finds a block every 10 minutes. If two nodes find a block at the same time then the network decides which block to build on top of based upon the decision of subsequent nodes. From a statistical perspective, a transaction is considered unambiguously confirmed and irreversible after 6 blocks (about 1 hour); however, the core developers require 120 blocks (about 1 day) before they consider the network sufficiently protected from the potential of a longer attack-chain emerging that the newly generated coins may be spent.

Despite it being unlikely that a longer chain could emerge, any actor with significant economic resources could potentially build a longer chain or gain enough hashing power to freeze user accounts.

1.2 Proof of Stake

There have been many variations on proof of stake, but the basic concept is that the difficulty of producing a block should be proportional to your stake (percent ownership) in the network. There have been two working systems deployed to date: Peercoin and Nxt. Peercoin uses a hybrid model where your stake adjusts your mining difficulty and Nxt uses a deterministic algorithm to select a random shareholder to generate the next block. Nxt’s algorithm adjusts the probability of being selected based upon your balance.