When is a blockchain transaction final?

Two blocks at once

Sometimes two nodes publish a block at almost the same time.² For a while, different nodes hold different versions of the chain.² Each node works on the block it received first, but keeps the other in case that branch grows longer.⁴ The tie breaks when the next block arrives, and nodes switch to the longer branch.⁴

The dropped block is called stale, or orphaned.^5,2 Its transactions are not lost. Any that are not in the winning chain go back to the pool of pending transactions.²

Bitcoin: confidence grows with each block

On a proof-of-work chain, finality is a matter of probability.^2,1 The more blocks built on top of a block, the less likely it is to be replaced.² A Bitcoin transaction gains one confirmation for each block, starting with the block that includes it.⁶

A double spend is an attempt to spend the same coins twice.⁵ The guide admits that six is "somewhat arbitrary".⁶

The Bitcoin whitepaper worked out how long to wait. Against an attacker with 10% of the computing power, waiting 5 blocks cut the attacker's chance of catching up to under 0.1%. Against 30%, it took 24 blocks.⁴ Even a successful attacker can't create coins from nothing or take other people's money. It can only try to take back its own recent payment.⁴

Ethereum: finalised checkpoints

On proof-of-stake Ethereum, finality is an explicit step rather than a matter of probability.¹ The first block of each epoch is a checkpoint.⁷ When validators holding at least two-thirds of all staked ETH vote for a pair of checkpoints, the newer one becomes "justified", and the older one, justified in the epoch before, becomes "finalised".^7,8

This takes about 15 minutes.³ To reverse a finalised block, an attacker would have to lose at least one-third of all staked ETH.^7,8 ethereum.org describes a plan to finalise blocks within a single slot, but it is still in the research phase.³

Before blocks are finalised, nodes choose between competing branches by picking the one with the greatest weight of validator votes.⁷

Forks that change the rules

The word "fork" has a second meaning: a change to a blockchain's rules.²

• Soft fork. A change that older software still accepts, so nodes that haven't updated can keep working.²
• Hard fork. A change that older software rejects. Nodes that don't update are cut off, and the chain can split in two.²

In 2016 an attacker took about $50 million of Ether through a flaw in a smart contract called The DAO.² A clear majority of users backed a hard fork that returned the stolen funds. The old chain carried on as Ethereum Classic.²