If you are doing the transaction, you might have heard of finality, so what is finality in Blockchain and what does transaction finality mean? Let's find out by reading this article.
What is Finality in Blockchain?
On the blockchain, we are transacting all the time. These transactions can be monetary value, voting, transfer of ownership, etc. However, especially when we transfer value in a trustless system, we want to ensure that our transactions are final and irreversible.
In the case of blockchain, this means that a well-formed block cannot be revoked or revoked once it has been added to the blockchain.
Finality is critical in blockchain consensus protocols, but not always immediate. This is why you have to wait for a certain number of confirmations before the transaction is considered final.
What is Finality in Finance?
Exploring finality in the world of traditional finance helps understand why it matters for blockchain. The finality of greatest interest to financial institutions is settlement finality. This is critical because the longer it takes to settle a transaction, the higher the risk that something will happen in the middle.
What does transaction finality mean?
Generally speaking, transaction finality refers to the moment when the parties to a transaction can consider the transaction to be complete. More specifically, this is the moment when it is impossible to restore or alter a transaction that has been added to the blockchain.
Probabilistic finality
It occurs when the finality of a transaction increases as more blocks are added to the blockchain after the transaction. That is, as more blocks are added, the transaction is referenced further in the blockchain and thus becomes increasingly difficult to restore or change (see double spend). For most protocols that provide probabilistic finality, it is recommended to add blocks after the transaction until the transaction can be considered complete.
Deterministic finality
It occurs when a transaction is considered final as soon as it is added to the blockchain. To do this, a "leader" must propose blocks to be added, which must then be approved by a specific section of validators. Deterministic finality is less common and is only provided by Practical Byzantine Fault Tolerance (PBFT) based protocols such as Tendermint (see Byzantine Fault Tolerance).
So I hope now you will know what is Finality in blockchain and what does transaction finality mean. Hence, when it comes to blockchain technology, transactions are called immutable due to their determinism. However, most blockchain protocols only show probabilistic transaction finality - meaning that transactions are not automatically or immediately finalized, but instead become "increasingly certain" over time (with more blocks be confirmed)
