Why it matters
Internal ledger transfers can be reversed, frozen, or invalidated by the custodian's failure. On-chain settlement is final: once confirmed, the bitcoin is yours unconditionally. The ability to settle on-chain is the fundamental test of whether you actually own bitcoin or merely have a claim to it.
How it works
A transaction is broadcast to the Bitcoin network and included in a block by miners. After sufficient confirmations (typically 6 for large amounts), the transaction is effectively irreversible. The recipient now controls the bitcoin at the destination address. No custodian, court order, or system failure can undo it.
Example
A holder withdraws bitcoin from their custody provider to their hardware wallet. The provider broadcasts a transaction, it confirms in a block, and appears in the holder's wallet. The holder now has unconditional ownership. Even if the custody provider fails tomorrow, these bitcoin are safe.
Related terms
- Withdrawal finality
- Exitability
- Withdrawal policy
- Self-custody
- Bitcoin custody provider
- Counterparty risk
