Blockchains' Hidden 'Finality' Problem: What It Means for Crypto Payments
Blockchain finality refers to when a crypto payment is considered settled and irreversible. This concept can be complex, as it depends on various factors such as the blockchain's consensus model, wallet or exchange used, and individual risk tolerance.
On proof of work chains like Bitcoin, finality is probabilistic and grows with more confirmations. In contrast, proof of stake designs with checkpoints offer near-deterministic finality once the network reaches a justified and finalized state.
Solana's upcoming Alpenglow consensus overhaul aims to shorten finality from 12.8 seconds to around 150 milliseconds. This change could significantly impact how bridges and market makers manage inventory and risk on that chain.
Layer 2s (L2s) complicate the picture, as they often have local fast finality but may require settlement finality when the L2 state is posted and considered final on the base chain. It's essential to understand how L1 finality impacts these transactions and bridges between different chains.