Finality in blockchain technology is a critical concept that every enthusiast, developer, and investor should understand.
It refers to the point at which transactions or data entries are irreversible and can no longer be changed.
This characteristic is crucial in the blockchain space as it guarantees the integrity, trust, and security of transactions.
The Principle of Finality
In traditional systems, finality is often immediate and absolute. Once a transaction is made, it is considered final.
However, in the context of blockchains, achieving finality is more complex due to the decentralized nature of these systems.
Finality in blockchains is the guarantee that once a transaction has been included in a block and that block has been added to the chain, the transaction cannot be reversed.
This principle is vital in maintaining the integrity and security of blockchain networks.
It ensures that once a transaction is confirmed, it stays confirmed, thereby preventing double-spending and providing certainty for transacting parties.
Types of Finality
There are two main types of finality in blockchain – Probabilistic and Absolute.
Probabilistic
Probabilistic Finality refers to the scenario where a transaction’s finality increases with time and additional block confirmations.
Bitcoin is a prime example of a blockchain system that uses probabilistic finality.
In Bitcoin’s Proof of Work (PoW) system, each new block added to the chain makes it increasingly difficult to reverse previous transactions, thereby increasing their finality.
Absolute
On the other hand, Absolute Finality means that transactions are final as soon as they are included in a block.
This type of finality is common in blockchains that use Proof of Stake (PoS) consensus mechanisms, such as the Ethereum network post its Ethereum 2.0 upgrade.
Both types of finality have their pros and cons. Probabilistic finality, while providing high security, requires a longer wait time for confirmations.
Absolute finality provides immediate certainty but can be more vulnerable to certain types of attacks.
Finality in Different Blockchain Networks
Different blockchain networks approach the issue of finality in various ways.
For instance, Bitcoin, which uses a PoW consensus mechanism, employs probabilistic finality.
Transactions on the Bitcoin network are considered final after six confirmations, which takes approximately one hour.
Ethereum, on the other hand, has recently shifted from probabilistic to deterministic (or absolute) finality.
This upgrade transitions the Ethereum network from a PoW to a PoS consensus mechanism, allowing for faster transaction confirmations and increased scalability.
Ethereum’s Recent Finality Issues
In the ever-evolving world of blockchain technology, even the most established networks like Ethereum are not immune to technical hiccups.
What Happened?
Recently, Ethereum faced significant issues related to Finality, which had a noticeable impact on the network’s performance.
In May 2023, over 60% of Ethereum’s validators stopped performing their duties, causing a disruption in Finality.
This event led to an unprecedented Inactivity Leak, where inactive validators faced penalties until they either exited the chain or resumed their participation.
This disruption caused a noticeable impact on Ethereum’s active addresses and led to 253 blocks not being proposed on time.
Fast Response: Patching The Network
The issue was eventually resolved with patches for Prysm Labs and Teku clients, two of the main software clients used to interact with the Ethereum network.
These patches were designed to prevent beacon nodes from consuming excessive resources, thereby ensuring the stability and security of the network.
However, the incident served as a stark reminder of the challenges associated with achieving Finality in blockchain networks.
How Can Ethereum Avoid This?
Despite the swift response from Ethereum’s developers, the event highlighted the potential vulnerabilities in the network’s consensus mechanism and the importance of maintaining a diverse set of clients to ensure network resilience.
The incident also underscored the importance of client diversity in maintaining the stability of the Ethereum network.
Not all clients were affected by the Finality issues due to differences in design approach.
Validators running unaffected clients were able to continue processing transactions and producing blocks, demonstrating the resilience of the Ethereum network in the face of unexpected challenges.
Despite the temporary disruption, Ethereum’s Finality was restored, and the network continues to function as expected.
However, the incident serves as a valuable lesson for the Ethereum community and the broader blockchain industry about the importance of robust consensus mechanisms and the challenges of achieving Finality.
Challenges with Achieving Finality
Achieving finality in blockchains is not without its challenges. One of the main issues is the ‘nothing-at-stake’ problem, which is prevalent in PoS systems.
This problem arises because validators have nothing to lose by voting for multiple blockchain histories, leading to potential network instability.
Another challenge is the long-range attack, where an attacker with access to old private keys can create a new chain from a point far behind the current chain.
This new chain can then overtake the existing one, reversing previously confirmed transactions.
The Future of Finality
As blockchain technology continues to evolve, so too will the approaches to achieving finality.
Researchers and developers are continually exploring innovative solutions to the challenges associated with achieving finality.
For instance, Ethereum’s shift to PoS is one such development aimed at improving transaction finality.
Moreover, new consensus mechanisms are being developed that aim to provide the benefits of both probabilistic and absolute finality.
These hybrid models, such as the one used by Polkadot, aim to provide the security of probabilistic finality with the speed and certainty of absolute finality.
Conclusion
Finality is a fundamental aspect of blockchain technology, ensuring the immutability and reliability of transactions.
Understanding the concept of finality, its types, and how different blockchain networks achieve it, is crucial for anyone involved in the blockchain space.
Despite the challenges associated with achieving finality, continuous research and development promise innovative solutions and improvements in the future.
Finality in blockchain refers to the point at which transactions or data entries are irreversible and can no longer be changed or deleted. It is a crucial characteristic that guarantees the integrity and security of transactions on a blockchain.
Probabilistic finality refers to the scenario where a transaction’s finality increases with time and additional block confirmations. In contrast, absolute finality means that transactions are final as soon as they are included in a block. Bitcoin is an example of a blockchain with probabilistic finality, while Ethereum 2.0 exhibits absolute finality.
The ‘nothing-at-stake’ problem is a challenge in Proof of Stake (PoS) systems where validators have nothing to lose by voting for multiple blockchain histories. This can lead to potential network instability and is one of the issues faced when trying to achieve finality in blockchains.
Ethereum 2.0 improves transaction finality by shifting from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism. This allows for faster transaction confirmations and increased scalability, providing absolute finality where transactions are final as soon as they are included in a block.
The future of finality in blockchain technology lies in continuous research and development to overcome current challenges. This includes the development of new consensus mechanisms and hybrid models that aim to provide the benefits of both probabilistic and absolute finality. Ethereum’s shift to PoS and Polkadot’s hybrid model are examples of such advancements.
Ethereum transactions can fail for several reasons, including out-of-gas errors, contract errors, or network congestion. Recently, Ethereum also faced issues with transaction finality due to a disruption in the network’s consensus mechanism.
