How Does the “Finality” Concept in Other Blockchains Differ from Bitcoin’s Confirmation Process?
Bitcoin achieves probabilistic finality, meaning the chance of a transaction being reversed decreases exponentially with each new block. Other blockchains, particularly those using Proof-of-Stake, often employ mechanisms that offer "absolute finality" after a certain period or checkpoint.
Absolute finality means the transaction is cryptographically guaranteed to be irreversible without a coordinated attack on the protocol.
Glossar
Absolute Finality
Settlement ⎊ Absolute Finality, within cryptocurrency and derivative markets, denotes the irreversible conclusion of a transaction, eliminating counterparty risk inherent in traditional systems.
Blockchains
Architecture ⎊ A blockchain represents a distributed, immutable ledger structured as a chain of cryptographically linked data blocks, validated and maintained by a decentralized network of nodes.
Confirmation
Attestation ⎊ The term "confirmation" within cryptocurrency, options trading, and financial derivatives signifies a process validating a transaction or event, establishing its legitimacy and finality.
Settlement Risk
Exposure ⎊ Settlement risk in cryptocurrency, options, and derivatives arises from the failure of a counterparty to fulfill contractual obligations post-trade, specifically during the settlement period.