When you buy something at a store, you part with the cash notes and receive the item you paid for in return—there’s a clear transfer of value. With digital banking, like a debit or credit card, the bank communicates with the retailer to ensure the amount is deducted from your account. However, with cryptocurrencies, the process is not as clear. That raises the question of how the blockchain network prevents the cryptocurrency from being spent twice. This is where blockchain technology ensures transaction security through block finality.

What is Block Finality?

Block finality refers to the permanent nature of a transaction once it is recorded on the blockchain. Unlike traditional finance, where transactions can be reversed, blockchain transactions become irreversible once they achieve finality. This is essential for maintaining the integrity of the network, as no participant can tamper with or alter past transactions.

The point at which finality is achieved depends on the consensus mechanism in use on that particular blockchain. Whether through Proof of Work (PoW), Proof of Stake (PoS), or other consensus models, each network has a method for determining when a transaction is confirmed and permanently included in the blockchain.

How Does Block Finality Work?

Each blockchain network is unique, with its distinct features, but block finality—a key concept for security—exists across all networks, achieved through different methods. The consensus mechanism, which verifies transactions and ensures the security of a decentralized network, is central to how finality is reached across blockchains.

Different blockchains employ various consensus mechanisms tailored to their needs. Popular examples include proof of work (PoW), proof of stake (PoS), and proof of history (PoH)—the last two examples are used collectively on the Solana network. These mechanisms define how transactions are verified and when they achieve finality, meaning they are permanently recorded and cannot be reversed.

For instance, Bitcoin uses the traditional proof of work mechanism, where miners compete to solve complex algorithms to validate transactions. A key feature of PoW, particularly relevant to block finality, is the “longest chain rule.” In this system, the chain with the most accumulated work is considered valid. As more blocks are added to the Bitcoin blockchain after a transaction, its finality strengthens, making it increasingly secure and irreversible.

Source: gsr.io

Finality is achieved differently in proof of stake (PoS) networks, such as Ethereum, after transitioning to Ethereum 2.0. Instead of miners, validators are chosen based on the amount of cryptocurrency they have staked. These validators are responsible for proposing and validating new blocks. PoS networks use protocols like “Casper” to enforce finality rules.

Source: unitychain.io

Once a block is validated and added to the blockchain, it requires the consensus of a majority of validators to be reversed, which would involve them sacrificing their staked assets. This economic deterrent, combined with the requirement for multiple confirmations, ensures that once a transaction achieves finality on a PoS network, it is extremely difficult and costly to reverse, making it just as secure as PoW but with greater efficiency and scalability.

Types of Block Finality

Different blockchains have different means of achieving finality. Across all the various networks and corresponding consensus mechanisms, blockchain has four main types of finality. They are classified by the degree of certainty and irreversibility of transactions and blocks once added to the network. The different types of block finality include:

Probabilistic Finality

Most common in proof of work networks like Dogechain, probabilistic finality is a simple chain based finality. Instead of absolute finality once a block has been added to a network it is considered probably final, and the probability and certainty of the transaction increased with the new blocks recorded on top of that initial block. Probabilistic finality is said to have been achieved when a transaction has been mined, recorded on the public chain and a subsequent block has been mined after it.

Absolute Finality

Absolute finality is the highest degree of certainty regarding the permanence of a transaction once confirmed. With absolute finality, once a transaction is confirmed and recorded on the blockchain, it can never be altered or reversed ever. Absolute finality is most common on blockchain networks like Stellar and Ripple which use a federated consensus. A federated consensus mechanism is supported by a group of trusted validators who secure the network by confirming individual blocks.

Economic Finality

Economic finality differs in that security depends on financial gain or loss. It is a characteristic of the proof of stake consensus mechanism, where validators must stake tokens to participate in network security. They also risk losing staked tokens if they act maliciously. Thus, block confirmation is driven by financial incentives, and security is maintained through financial deterrents. In networks like Ethereum, the cost of malicious actions, such as double spending or reversing transactions, exceeds the potential reward for validating blocks, ensuring transaction finality and network security.

Instant Finality

This is the highest level and the hardest type of block finality to achieve, With Instant finality a transaction is deemed confirmed and consequently irreversible once it is recorded on the network. Realistically, this level of finality would require significant modifications to the traditional nature of a blockchain and the process of transaction confirmation.

It cannot be said matter of factly whether any network has achieved instant finality, but some blockchains using the Byzantine Fault Tolerant (BFT) consensus mechanisms like Cosmos are said to achieve near instant finality. The Shardeum protocol is one network attempting to achieve similar results using the Proof of Quorum consensus mechanism which guaranteed a shared ledger in the confirmation of transactions carried out on the network.

State Finality

One other type of finality is more concerned with the bigger picture, being the blockchain itself rather than individual transactions. With state finality, what is considered is whether a state transaction, which is a change in the state of the blockchain like the execution of a smart contract, can be modified or revered once it has been finished. State finality is also important because, for decentralized protocols like Ethereum and Solana, the permanence of executed smart contracts is important for the security and efficiency of decentralized applications.

Why is Block Finality Important?

Block finality is most important in conversations about network security and reliability. However, this foundational concept is best understood in the context of smart contracts and the issue of double spending.

Smart contracts are the backbone of decentralized applications, most common on DeFi networks like Solana and Ethereum. In decentralized finance (DeFi), smart contracts automate financial transactions such as lending, borrowing, and trading without intermediaries. Block finality is essential for these processes to function smoothly and securely.

For example, when a user initiates a swap on a decentralized exchange (DEX) like Uniswap, a smart contract automatically matches the trade and transfers tokens between users. Block finality ensures that the trade is immutable once this transaction is confirmed and recorded on the blockchain. Without finality, a malicious actor could potentially reverse the transaction or exploit the system, undermining the integrity of the DeFi ecosystem. Without block finality, the outcome of these contracts would be uncertain, opening the door for potential disputes or attacks, such as double spending or transaction reversals.

The concept of double spending is another instance where the importance of block finality is seen. Double spending is a problem that occurs when the same token is spent more than once in multiple transactions. It is considered an attack as it allows the malicious actor to spend the same coins more than once. Block finality prevents double-spending by ensuring that it is recorded once a transaction has been executed. Once a transaction has been confirmed and recorded on the chain network, the blockchain ledger has permanently recorded that a token has been spent executing a specific transaction. For example, once the transaction is verified, all nodes share the same blockchain record in a proof of work network that says that those tokens have been spent. That way, a malicious actor cannot spend the same tokens again.

Block Finality in Different Layer 1s

Block finality determines the permanence of each issued transaction on the blockchain. However, blockchain technology is heavily complicated, and many other factors are involved in transaction processing on the blockchain.

Block finality is not the only thing involved in transaction processing. Other concepts like network latency, block time, and TPS (transaction per second) are considerably more important. Network latency can be described as the observed time between when a transaction is issued and confirmed. Block time, however, is the time it takes to mine each block before it can be added to the network. Transaction per second (TPS) is often confused with network latency, but TPS is the total number of transactions a network can manage per second. It can be described as the throughput of a network.

Other concepts like block height, block size, and orphan blocks are worth considering. The block height and size refer to the number of blocks preceding the current block on the network chain, while the size refers to the total amount of fate that can be recorded on the chain. For example, the typical block size on the Bitcoin network is 1MB, while Ethereum’s is 1MB. The orphan blocks on the chain are the consequence of the longest chain rule. As explained earlier, bitcoin follows the longest chain rule by adopting the longest-proofed chain. As a result of that rule, those already mined blocks that get discarded in favor of the longer chain become orphan blocks separate from the rest of the blockchain.

Obstacles to Block Finality

Hard Forks


One major challenge to block finality is the occurrence of hard forks. A hard fork happens when a blockchain splits into two distinct paths due to a change in the protocol or disagreement among participants. This creates two versions of the blockchain, both of which can temporarily claim to be the legitimate chain. In the context of finality, a hard fork disrupts the certainty that transactions are permanent and irreversible. If the forked chain is accepted as dominant, transactions confirmed on the previous chain may be invalidated, undermining the trust users place in the network’s finality.

Network Latency and Communication Delays


Another issue that affects block finality is network latency or slow communication between nodes. In decentralized networks, nodes must communicate frequently to agree on the state of the blockchain and confirm transactions. If there are delays in communication, either due to physical distance or network congestion, it can slow down block validation and lead to uncertainty over the finality of transactions. In proof of stake or proof of work systems, slow block propagation can create temporary forks, leading to potential reorganization of blocks, which delays transaction finality.

Smart Contract Vulnerabilities


Smart contract vulnerabilities also challenge block finality, especially on platforms like Ethereum that support decentralized applications. If a smart contract contains a bug or is exploited by malicious actors, transactions that were initially considered final may need to be reversed or disputed. While blockchains are designed to prevent tampering with transaction history, the complexity of smart contracts creates an additional layer of risk. If a contract is compromised, the consequences can be severe, as even finalized transactions could be invalidated through legal or community intervention.

A prime example is the infamous DAO hack in 2016, where an attacker exploited a vulnerability in the code of a decentralized autonomous organization (DAO) to siphon off $60 million worth of Ether. Although the blockchain technically achieved finality by confirming these transactions, the exploit triggered a hard fork in the Ethereum network, leading to the creation of Ethereum Classic.

51% Attacks


A 51% attack is one of the most serious threats to block finality. It occurs when a single entity or group controls more than 50% of the network’s computational power or staked tokens. With this majority, they can rewrite the blockchain’s history by creating alternative chains, double spending, or reversing previously confirmed transactions. This undermines the core principle of finality, as it becomes possible for attackers to tamper with blocks that were once deemed secure and irreversible. Although such attacks are difficult to execute on large, well-established networks, they remain a significant concern for smaller or less decentralized blockchains.

Conclusion

Block finality is a primary concept of blockchain technology as it ensures that transactions, once confirmed, are permanent and irreversible. It is responsible for securing cryptocurrency networks and for preventing malicious activity like double spending.

As block networks continue to grow, new consensus mechanisms are conceived alongside new processes for achieving blockchain finality. Even then, challenges to block finality continue to exist, highlighting the importance of developing stronger networks.