Understanding Transaction Finality in Bitcoin and Ethereum 2.0

What is Transaction Finality?

Transaction finality in cryptocurrency is the point at which a transaction is irreversible and permanently a part of the blockchain. This is a key concept for ensuring security and trust within the network.

Bitcoin Transaction Finality

In Bitcoin, transaction finality is achieved through mining. Transactions first enter a pool of unconfirmed transactions before being selected by miners to include in a new block, added to the blockchain approximately every 10 minutes.

However, being in a block does not immediately confer finality. Bitcoin requires additional block confirmations to ensure security against double-spending and network attacks. Typically, 6 confirmations are needed, which takes about 1 hour, offering a balance between speed and security.

Ethereum Transaction Finality in Proof of Stake

Ethereum, after its transition to Ethereum 2.0, uses a Proof of Stake (PoS) consensus mechanism. This change significantly impacts how transaction finality is achieved.

In PoS, validators, not miners, propose and validate new blocks. The process is faster and more energy-efficient compared to Proof of Work (PoW). Ethereum's block time remains around 15 seconds, but the PoS mechanism introduces a new concept called 'epoch finality.'

An epoch in Ethereum 2.0 is a set period during which a group of blocks (known as an 'epoch') is finalized. Finality in Ethereum PoS is achieved when validators attest to the validity of blocks. After enough validators have attested to a block and its predecessors (usually within 2 epochs, or roughly 12.8 minutes), the block is considered final.

What It Means for the User Transfers

For users depositing or transferring funds between their funding and trading wallets, understanding finality is crucial for predicting how long they need to wait for their transactions to be completely settled.

In Bitcoin, users should expect to wait about 1 hour for their transactions to achieve finality. This waiting period ensures the transaction is securely embedded in the blockchain and protected against reversals.

In Ethereum, especially post-Ethereum 2.0 with PoS, the wait time is significantly shorter. Users can typically expect finality in around 12.8 minutes. This quicker finality means that Ethereum transfers will generally be settled faster than Bitcoin, allowing for more rapid movement of funds.