Settlement Layer

Understanding Settlement Layers

A settlement layer is a layer within a blockchain ecosystem that serves as an anchor, providing secure and final settlements for transactions and establishing objective and undeniable security.

It acts as a foundation for the ecosystem, ensuring the immutability and reliability of transactions and serving as an arbitrator when needed.

Exploring Blockchain Diversity

In the blockchain ecosystem, there is a common belief among maximalists that one dominant blockchain will emerge, and all future systems and applications will be built upon that protocol.

However, an ecosystem supported by a settlement layer, rather than a single monolithic blockchain, can be a computational necessity rather than a philosophical choice.

In traditional payment systems, settlement refers to the final and irreversible payment delivery.

The Irreversibility of Transactions

When conducting a transaction with a cryptocurrency, both parties desire assurance that the transaction cannot be reversed or rolled back.

Merchants, in particular, want to avoid the risk of customers reversing payments after making a purchase.

A final settlement in the context of cryptocurrencies ensures that transactions are irrevocable.

The blockchain or protocol that serves as the anchor for the ecosystem provides the necessary security, immutability, and confidence to support the entire ecosystem.

The settlement layer acts as an incorruptible and resilient foundation, always available to serve as an arbitrator when required.