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Suppose customers pay me bitcoins for their purchases. As far as I understand, I could check block chain that the proper payment amount has been made to the address I generate for each customer, and after waiting for several confirmations I should then ship the product. Why several confirmations? Wouldn't one be sufficient?

Also, is the method I described above the best way to identify a paying customer?

Thanks

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After one confirmation, the transaction is very unlikely to be double spent. However, each further confirmation reduces the probability exponentially. Basically, the number of confirmations provides additional security that the transaction will not be reversed.

One reason a retail store or individual might wait for more confirmations to ship is time; it only takes an hour for 6 confirmations to go through, which is negligible time for shipping a product, but can provide assurance to the seller.

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One confirmation is not sufficient. Suppose two miners discover a new block hash at roughly the same time. They each send it to their peers, and then to their peers, so maybe half the Bitcoin network has new block A and the other half has new block B, both believing that it is a valid new block for the next one in sequence.

This situation won't be resolved until the next block is generated after that. It is possible (though increasing unlikely) for this kind of situation to happen repeatedly, which is why you should wait for several confirmations before accepting the payment as valid.

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    Yes but even if this happens, it's still extremely unlikely that block A will contain the transaction, and block B (nor the further chain of blocks that follow up on B) doesn't. For regular payments (like up to a few thousand euros) a single confirmation is definitely enough. Only if you literally transact tons of money, then I would await a few more confirmations. – Madzi Konjo Nov 11 '14 at 22:14
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Easier For the retailer, the answer is very much dependant upon the type of purchase.

If I am buying small discretionary purchses then it is mostly not necessary for the retailer to wait for confirmation. Think of a coffee, $4.40 so as soon as the payment notification arrives I can have my coffee. It is not concevable to steal for benefit with such discretionary purchases because I have to fine a new coffee stand every day if I keep robbing with low transaction fee and double spend method. They would sink my coffee. This is suitable for small items and passing trade, the recovery is petty.

For slightly more expensive goods, say I purchase $100 of product at the hardware store, the benefit obtained by the trivial theft is more substantial -- theft is never worthwhile -- and so it should be sufficient to wait for one usually, or at most two conformations after the payment notification. Usually this requres a wait up to twenty to thirty minutes long but depends on the transaction fees and network. The wait is not inconvenient, this is easily suitable for online and for retail purchases, it can be call back to pickup or drop over to my home or office service.

If I require maximum surety say for house mortgage and banks then I require a minimum six confirmations and the record of the transaction is considered permanent.

The method you describe does work, many wallets have a built-in display of the current status for any transaction affecting the wallet to make identifying validated payments much easier.

Kar:

Suppose customers pay me bitcoins for their purchases. As far as I understand, I could check block chain that the proper payment amount has been made to the address I generate for each customer, and after waiting for several confirmations I should then ship the product. Why several confirmations? Wouldn't one be sufficient?

Also, is the method I described above the best way to identify a paying customer?

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