Blockchain & Cryptocurrency Glossary

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Settlement Finality

1 min read
Pronunciation
[set-l-muhnt fuh-nal-i-tee]
Analogy
Like a printed receipt that permanently records a purchase and cannot be voided after a certain period.
Definition
The assurance that once a transaction is included and confirmed on the blockchain, it cannot be reversed or altered.
Key Points Intro
Finality determines when blockchain transactions become irreversible.
Key Points

Probabilistic: decreases reversal risk with more confirmations

Absolute: instant finality in BFT-based chains

Cross-chain: depends on both source and destination finality

Impact: critical for high-value transfers and DeFi protocols

Example
In Bitcoin, six block confirmations (≈1 hour) are conventionally considered sufficient probabilistic finality for large transactions.
Technical Deep Dive
PoW chains offer probabilistic finality where reorg probability decays exponentially with depth. PoS BFT protocols (e.g., Tendermint) achieve instant finality once >2/3 validators sign a block. Finality gadgets like Ethereum’s Casper FFG layer atop PoW to introduce checkpoint finality.
Security Warning
Assuming finality too early may expose users to double-spend risks during deep reorgs or network splits.
Caveat
Balancing latency and security: faster finality can reduce throughput or decentralization.
Related Terms
Confirmation
Fraud Proof

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