Module 3: How Blockchains and Transactions Work
Blocks, Confirmations, and Finality
Chapter 5 of 13 · about 6 minutes
5.1 "Why is my deposit still pending?"
Node sent bitcoin to an exchange. The wallet showed the transaction as confirmed within ten minutes. But the exchange said "2 of 3 confirmations" and wouldn't credit the deposit for another ten minutes, until the third block arrived.
"It's on the blockchain," Node complained. "Why are they waiting?"
"Because 'on the blockchain' isn't the same as 'permanent,'" said Hash. "The exchange is waiting until reversing it would be practically impossible. That point is called finality, and it works differently on different blockchains."
5.2 Why recent blocks can change
In Module 1, Chapter 3, we learned that blocks link together, and changing an old block would require redoing every block after it. That makes old blocks very secure. But the newest blocks are less settled.
Occasionally, two block producers create valid blocks at almost the same moment. For a short time, different parts of the network see different versions of the latest block. The network resolves this quickly: on Bitcoin, the chain with the most accumulated work wins, and the other block is discarded. This is called a reorganisation, or reorg.
If your transaction was in the discarded block, it doesn't disappear. It usually returns to the mempool and gets included in a later block. But for a brief moment, a "confirmed" transaction wasn't confirmed after all.
Think of wet concrete. When it's just been poured, a footprint can still change it. After an hour, it's harder. After a day, it's set. Each new block on top is more time for the concrete to set.
5.3 Confirmations
A confirmation count is how many blocks have been added since your transaction's block, including that block itself. One confirmation means your transaction is in the latest block. Six confirmations means five more blocks have been built on top.
Each extra confirmation makes reversal harder, because an attacker would need to rebuild more blocks to replace it.
5.4 Probabilistic finality on Bitcoin
Bitcoin never declares a transaction "100% final." Instead, the probability of reversal shrinks rapidly with each block. This is called probabilistic finality.
Bitcoin's original whitepaper included a calculation showing how quickly that probability falls. For an attacker controlling 10% of the network's mining power, the chance of ever catching up and replacing the honest chain after a certain number of blocks is roughly:
| Blocks to catch up | Approximate probability of success |
|---|---|
| 1 | ~20% |
| 2 | ~5% |
| 3 | ~1.3% |
| 4 | ~0.35% |
| 5 | ~0.09% |
| 6 | ~0.02% |
That's the origin of the six confirmations convention, which takes about an hour on Bitcoin. For small amounts, one or two confirmations is usually considered enough. For very large amounts, some businesses wait longer.
"So six confirmations is a convention, not a rule," said Mint.
"Right," said Hash. "It's a risk decision. The bigger the amount, the more confirmations you want."
5.5 Economic finality on Ethereum
Ethereum, using proof of stake, has a more defined idea of finality.
Time on Ethereum is divided into slots of 12 seconds, each of which can contain one block, and epochs of 32 slots, about 6.4 minutes. Validators vote on blocks, and once two-thirds of the staked ETH has voted in the right way across epochs, blocks become finalised. This typically takes about two epochs, roughly 13 minutes.
Once a block is finalised, reversing it would require validators controlling at least one-third of all staked ETH to break the protocol's rules, and their stake would be destroyed, or slashed, as a penalty. That's a cost of many billions of dollars. This is called economic finality: not mathematically impossible to reverse, but enormously expensive.
| Bitcoin | Ethereum | |
|---|---|---|
| Block time | ~10 minutes | 12 seconds |
| Type of finality | Probabilistic | Economic, after validator votes |
| Common practical threshold | ~6 confirmations, about 1 hour | Finalised, about 13 minutes |
| What it would take to reverse | Outpacing the honest network's mining power | Attackers losing a third of all staked ETH to slashing |
Many other blockchains have their own finality designs, some reaching finality in seconds. The trade-offs involved are covered in Chapter 7.
5.6 Finality on Layer 2 networks
Layer 2 networks, which Chapter 8 explains in detail, add another layer to this. A Layer 2 transaction usually goes through three stages.
| Stage | What it means | Typical speed |
|---|---|---|
| Soft confirmation | The Layer 2 operator has accepted and ordered your transaction | Near-instant, often under a second or two |
| Posted to Ethereum | The transaction data has been published to Ethereum | Minutes |
| Finalised on Ethereum | The Ethereum block containing that data is finalised | Around 13 minutes after posting |
For everyday use, soft confirmations feel instant and are reliable in practice. But they depend on the Layer 2 operator behaving correctly. For large amounts or withdrawals to Ethereum, the later stages matter, and for some types of Layer 2s, withdrawals take days, as Chapter 8 explains.
5.7 What this means for you
Exchange deposits take time. Exchanges set their own confirmation requirements for each blockchain, based on the risk of reversal. Faster blockchains don't always mean faster deposits if the exchange requires many confirmations.
Large transactions deserve more confirmations. If you're selling something valuable for crypto, wait for finality before handing it over.
Fast blockchains make trade-offs. Very fast finality often comes from having fewer validators or more centralised infrastructure, as Chapter 7 discusses.
Reorgs are rare but real. On major blockchains, deep reorgs are extremely rare. On smaller blockchains with less security, deeper reorgs, sometimes deliberate attacks, have happened. These are often called 51% attacks, because the attacker controls a majority of the network's mining or staking power.
"So the smaller the network, the less I should trust one confirmation," said Node.
"That's the right instinct," said Hash. "Security comes from the cost of attacking. Small networks are cheaper to attack."
5.8 Try it yourself
Look up the deposit confirmation requirements for Bitcoin, Ethereum, and one other blockchain on any exchange's help pages. Compare the number of confirmations with the block time to estimate how long each deposit takes.
Then open an Ethereum block explorer and look at the most recent blocks. Many explorers label blocks as "finalised," "safe," or "unfinalised." Find the most recent finalised block and calculate how many minutes behind the latest block it is.
Key takeaways from this chapter
- Recent blocks can occasionally be replaced in a reorganisation, so "included" isn't the same as "permanent."
- Each confirmation makes a transaction harder to reverse.
- Bitcoin has probabilistic finality; about six confirmations, roughly one hour, is the common convention for large amounts.
- Ethereum has economic finality, typically after about 13 minutes, when reversal would require slashing a third of all staked ETH.
- Layer 2 transactions go from soft confirmation, to being posted on Ethereum, to Ethereum finality.
- Exchanges set confirmation requirements based on reversal risk.
- Smaller networks are cheaper to attack, so their confirmations deserve less trust.