Separate execution, technical finality and legal discharge
By the end, explain the diagram in your own words, solve the case and justify the correction.
Prerequisites : Consensus and finality · Digital asset custody: beyond key storage
Level 3 · Advanced →Reading path · 9 / 17 · Advanced
Settlement is the completion of the obligations created by a transaction.
The essentials
Settlement is the completion of the obligations created by a transaction. On-chain finality, legal finality and recognition in an institution’s ledger are related but distinct. A block explorer showing success does not establish that every contractual obligation has been discharged.
How it works
Track an instruction through approval, signing, broadcast, inclusion, the applicable finality policy and accounting. Reconciliation compares expected and observed amounts, assets, networks, fees and identifiers. Differences may arise from reorganisation, token decimals, fee deductions, delayed crediting or incorrect network selection.
What to watch
Delivery-versus-payment links delivery of an asset with its payment to reduce principal risk. Two independent transfers are not automatically DvP. A cross-chain transfer or off-chain cash leg needs an explicit coordination mechanism and failure procedure. Define cut-offs, unresolved-item ownership and escalation rather than treating a transaction hash as final evidence of completion.
Understand the details
A trade can be agreed before assets move. Settlement completes the relevant delivery and payment obligations under the arrangement. A blockchain transfer provides technical evidence, but the legal effect depends on the asset, participants and governing rules. A token transfer and an off-chain cash payment can complete at different times.
Boundaries and common mistakes
Delivery-versus-payment aims to link the two legs so one is not finally delivered without the other. Atomic code can help within its execution boundary, but cannot automatically control an external bank ledger. Timeouts, failed legs, reversals and reconciliation must therefore be specified for the complete arrangement.
The mechanism at a glance
- Trade agreed
- Delivery leg
- Payment leg
- Reconcile both obligations
Apply the lesson to a case
A token delivery is confirmed while the corresponding bank transfer is still pending. Draw separate status tracks for trade agreement, token delivery and cash payment. Identify when the seller is exposed to an unpaid delivery.
The two ledgers have independent completion mechanisms unless a specific coordination arrangement links them. A blockchain transaction’s atomicity does not extend automatically to the bank transfer. Specify the dependency, failure response and legal completion point for each leg.
Terms in this lesson
- Hash
- A fixed-length fingerprint computed from data by a hash function. It checks consistency, not truth.
- Finality
- The confidence or protocol guarantee that an accepted history will not be reversed, under stated assumptions.
Prepare a correction note
Describe the passage and the proposed correction. This creates a local note for you to share; it sends nothing. Do not include personal or confidential information.