Finality of a Blockchain Transaction
Due to the decentralized nature of blockchain technology, transactions are not final just after being incorporated into a block. It has to be validated by block producers using an approved consensus algorithm which ensures integrity and security of distributed ledger data. The finality of a transaction refers to the state after which it can not be reversed anymore.
Types of Consensus Algorithm Used
To attain finality, types of consensus algorithms that came into existence encompass Proof of Work (PoW), Proof of Stake (PoS), Delegated Proof of Stake (DPoS), Proof of Authority (PoA), Proof of Capacity (PoC), and more.
Types of Finality
Different types of finality used in blockchain technology are:
1) Probabilistic finality
2) Instant finality
3) Economic finality
4) Unconditional finality
5) State finality
1) Probabilistic Finality
Probalistic finality is used in PoW, PoS, and DPoS blockchains.
The probability of a transaction being reversed diminishes exponentially as more and more nodes verify the transaction or more and more blocks are added to the blockchain on top of it.
2) Instant Finality
In this type of finality, the transaction is considered to be confirmed immediately after incorporation into the ledger.
3) Economic Finality
In this type of finality, at some point in time. reversing a transaction becomes economically not viable.
4) Unconditional Finality
A transaction is considered to be unconditionally final once it has been confirmed and under no circumstances can it be reversed.
5) State Finality
State finality refers to the whole state of the blockchain network, not just the state of transactions or blocks. A state of blockchain can not be reversed once it is completed.
Conclusions
Finality abolishes the risk of double spending. It not only ensures the security, reliability, immutability, and integrity of blockchain technology but is also key to increasing the rate of transaction per second for scalability and mass adoption.
