Settlement Layer

What Is a Settlement Layer?

A settlement layer is a layer that essentially provides an anchor for an entire ecosystem, and establishes undeniable security as well as objective finality if anything were to happen on a different blockchain that requires arbitration.

Now, a common trope when it comes to the blockchain ecosystem is that of the “maximalist.” Maximalism is accomplished through unwavering confidence that there is a war between blockchains from which one blockchain will emerge dominant and all future systems, as well as applications, will be built on that one protocol. It is now a new concept in the web-connected world.

An ecosystem that is supported by a settlement layer, rather than one monolithic blockchain can be a computational necessity over a philosophical reference.

A settlement means that it is a payment that is final and delivered. When you pay someone using a credit card such as a MasterCard or a Visa, that is not a settlement, as the settlement comes weeks or months after the fact. In the world of cryptocurrencies, a transaction is a settlement after it is stored within the blockchain.

When you conduct a transaction in a cryptocurrency, you want assurance that the transaction cannot be rolled back, and as such, a merchant does not want a customer to purchase something and have the money they just left  taken back to them at a later point in time. A final settlement means that the cryptocurrency cannot be rolled back. 

Whichever chain or protocol ends up serving as the anchor for the ecosystem is who provides the security and immutability, as well as the confidence to support the entirety of the ecosystem itself. The foundational settlement is incorruptible, always available, resilient and only called upon to serve as an arbitrator.