Simple Definition of Settlement
- A settlement layer is a layer that essentially provides an anchor for an entire ecosystem.
- 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.
Modular Settlement Layers
- The modular blockchain paradigm creates many potential configurations in which blockchains can connect. Since modular blockchains only handle a subset of functions, more specialization can be facilitated. Settlement is one function, in particular, that can become optimized and specialized by a modular blockchain.
Settlement layers on providing a purpose for Rollups
Settlement layers provide multiple purposes for rollups:
- Proof verification & dispute resolution: A place for rollups to publish their proofs for external verification. This is especially useful for optimistic rollups that rely on interactive fraud proofs.
- Hub to facilitate bridging: Rollups can bridge between each other if they through a common settlement layer. A hub removes the need for all rollups to have a bridge between each other.
- Liquidity source: Liquidity that lives on the settlement layer can be utilized by all rollups on top.