To understand this, consider the lifecycle of a rollup transaction on Arbitrum or Optimism today. As these networks operate with a centralized sequencer, the sequencer takes a user’s transaction, processes it and issues a transaction receipt that acts as proof of soft finality. Note that this transaction could either come directly to the sequencer or could come from the L1 (when it is a withdrawal request from Layer 2 -> Layer 1). However, as the soft finality is issued from a single centralized sequencer, the guarantee offered here is mostly a “trust me” guarantee. Also in scenarios, where the sequencer goes unavailable, this guarantee is impossible to obtain in the first place.
On the other hand, as rollups in AltLayer have decentralized sequencers via SQUAD, and as these sequencers themselves can potentially run a consensus protocol amongst themselves, the soft finality guarantee here is in fact slightly “harder” than the corresponding guarantee at the same level from rollups with centralized sequencers. We refer to this finality as Tier 1 finality.