Confirmation Thresholds

Confirmation thresholds are the specific number of blocks a transaction must be buried under before a protocol considers it finalized. This is a primary tool for managing the risk of chain reorganizations.

Different assets require different thresholds based on their network security and block production rate. For high-value derivative settlements, a protocol might require dozens of confirmations to ensure the underlying collateral is secure.

This process introduces latency, which can impact the speed of trade execution. If a protocol sets its threshold too low, it risks accepting fraudulent or reversed transactions.

If it sets it too high, it creates a poor user experience due to slow settlement. Designers must balance these factors to maintain both security and efficiency.

This threshold is a key parameter in the protocol's risk management framework.