Coinbase announced on 2 October 2018 that it is using Child Pays for Parent (CPFP) to push through Bitcoin transactions that get “stuck” due to fee volatility. Bitcoin transactions sent right before fees suddenly rise often get pushed down the queue in favor of transactions with higher fees; CPFP solves this issue, drastically improving the user experience.
Bitcoin transaction fees are not fixed, rather, the highest bidder gets their transaction confirmed the quickest. Therefore, if someone sends a Bitcoin transaction and the fee rapidly rises by the time the next block is found, the Bitcoin transaction can wait for confirmation for many hours. Essentially, a stuck Bitcoin transaction has to wait for transaction fees to go down before it goes through, since any Bitcoin transaction with higher fees is prioritized.
CPFP solves this problem by broadcasting another transaction connected to the original one. Most Bitcoin transactions have a change output, which is the total amount of Bitcoins from the inputs minus the amount being sent. This is similar to how in a grocery store someone gives USD 20 for USD 5 of milk and receives USD 15 of change.
Bitcoin change is sent back to the original wallet. With CPFP, another transaction is conducted with the change from the original transaction, with a much higher fee added. The second transaction is known as the child, while the original is the parent. Child transactions cannot be confirmed before a parent transaction, but they can be confirmed at the same time as miners will recognize the CPFP association. Bitcoin mining software usually groups pending child and parent transactions together, since they are dependent on one another, and combine their fees.
Thus, if the child transaction has a high enough fee, then the parent transaction will be confirmed. Coinbase uses CPFP after four blocks of a Bitcoin transaction being pending, an average of 40 minutes. Other crypto exchanges will likely adopt CPFP since it drastically improves user experience.
Coinbase reports that over the past few months they have rescued thousands of stuck Bitcoin transactions, and often batch together CPFP transactions to make them more efficient.
Bitcoin users using wallets that puts them in control of their own private keys, such as Electrum or Bitcoin Core, typically can perform their own CPFP transactions easily.
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