Coinbase Leverages "Child Payments" to Enhance Bitcoin Transactions

San Franciso-based cryptocurrency exchange and wallet Coinbase revealed an innovative method for handling millions of "Stuck" Bitcoin transactions on its platform, addressing one of the most voiced problems with the rising asset class on an enterprise level.

For the uninitiated, Bitcoin transactions rely on an auction-like, fee-based structure for miners to include transactions on the network.

Such an economic strategy is called the CPFP, which leverages the math behind the Bitcoin protocol for inputting older, low-fee transactions before confirming new, more-fee ones.

At its core, Bitcoin transactions represent inputs and outputs of BTC value on a shared ledger, with each transaction mathematically a "Child" of its parent.

Now, while miners always choose the most profitable transactions to include in a block, the Bitcoin protocol makes it impossible to allow child transactions before a parent transaction is added-the former can either be in a later block or the same block.

When multiple "Dependent" transactions are pending at the same time, the Bitcoin code calls for computing the transactional fees of a whole set of transactions simultaneously, instead of looking at them individually.

Since fees are computed over a group of dependents, a child transaction-with its change output controlled by Coinbase-with a higher fee can be submitted alongside low-fee transactions.

Miners have more profitable transactions available to them, but the CPFP's structure means some less profitable transactions are picked up as well.

Coinbase has implemented this method to speed up bitcoin transactions on their platform, estimating they have "Saved" thousands of users that may not have been possible for hours.

If transactions continue being stuck for more than four blocks, Coinbase pays for a child transaction for "Rescues" the parent transactions, adding they batch all transactions so multiple parent transactions are included with a single child transaction.