Coinbase Tackles Bitcoin Reliability Issues with CPFP System

US-based cryptocurrency exchanges Coinbase has disclosed that it uses the Child Pays for Parent (CPFP) method to improve Bitcoin (BTC) reliability and push through “stuck” transactions.

The confirmation time of cryptocurrency transactions can slow down occasionally due to fee rate spikes and general Bitcoin network congestion, Coinbase noted in a blog post on Tuesday. These “stuck” transactions can remain unconfirmed until the network is decongested and the fee rates drop. To tackle this problem, Coinbase is implementing economic incentives which leverage the math behind the BTC protocol for inputting older, low-fee transactions before confirming new, higher-fee ones.

The exchange went on to explain that CPFP balances the transaction fee and the speed of transaction confirmation. The approach works by sending a second transaction (child) with a higher fee, increasing the overall rewards of miners and hence the likelihood of the initial transaction (parent) getting picked up on the network.

“This is somewhat analogous to a pay-as-bid auction, which is structured as follows: potential buyers will submit bids at different prices, and the auctioneer will select the highest bidders as the winners,” Coinbase explained.

If transactions remain stuck for more than four blocks, Coinbase will try to push through a parent transaction by broadcasting and paying for a child transaction at a sufficient fee rate.

“This is done without any interaction from the end user, and we’ve seen really positive results thus far with its use,” the company added.

Late in September, Coinbase announced it had revamped its listing rules by launching an online application process open to every crypto asset project. According to the exchange, the new policy will lead to a significant expansion as it will result in more cryptocurrencies being added soon.

More recently, reports surfaced that an upcoming deal between Coinbase and Tiger Global. The New York-based investment company is understood to be considering a $500 million investment in Coinbase, which would value the platform at about $8 billion.