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.