Blockchains are often touted for facilitating rapid transactions on a global basis.
But what goes on behind the scenes to make this happen? And how can users be sure that transactions are actually final?
This report examines the often overlooked and complex topic of blockchain settlement. It outlines how layer-1 networks come to agreement (i.e., reach consensus) and how this impacts when transactions executed on them can be deemed final, or more precisely, irreversible.
The report covers both proof-of-work and proof-of-stake layer-1 blockchains. It outlines the nuances that need to be taken into account to holistically evaluate the settlement guarantees that different blockchains provide. Additionally, it identifies several real-life events (i.e, chain reorganizations, spam attacks and network congestion/downtime), which routinely impact settlement in live production environments; irrespective of how finality is theoretically achieved.
Finally, the report outlines how layer-2 scaling solutions, which decouple transaction execution and transaction finalization, are introducing new complications when it comes to analyzing finality.
© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.