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Term Structure Institutional Docs
TermMax DocsTerm Structure Institutional Docs
Term Structure Institutional Docs
TermMax DocsTerm Structure Institutional Docs
  • overview
    • Introduction
    • Architecture and Roles
    • Fireblocks Embedded Wallet
  • Features
    • Supported Networks and Tokens
    • Organization Account and Wallet
    • Passphrase and MPC Key
    • Borrowing and Lending
    • Repayment
    • Liquidation
    • Adding and Removing Collateral
    • Withdrawal
    • Settlement Mechanism
    • Transaction Fee
  • Security
    • Security Overview
    • Account and MPC Key Share Security
    • Cloud Infrastructure Security
    • Full Key Recovery
    • Disaster Recovery for Fireblocks Key Share
  • Tutorials
    • MPC Key Generation
    • Wallet Creation and User Invitation
    • Joining Organization
    • Borrowing and Lending
    • Repayment
    • Liquidation
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  • How On-Chain Settlement Works
  • Key Features
  • Benefits of On-Chain Settlement
  1. Features

Settlement Mechanism

TSI employs a robust on-chain settlement mechanism to ensure the secure, efficient, and trustless execution of all transactions on the platform. This mechanism utilizes smart contracts to act as neutral intermediaries, guaranteeing the simultaneous exchange of assets and minimizing counterparty risk for borrowers and lenders.

How On-Chain Settlement Works

  1. Transaction Initiation: When a transaction is initiated (e.g., after orders are matched, during loan repayment, or in a liquidation scenario), both parties involved (borrower and lender, or liquidator and lender) are required to initiate transactions to transfer their respective assets to the other party.

  2. Conditional Execution: The smart contract acts as an escrow agent, receiving signed transactions from both parties. Once all required transaction approvals are received, the contract automatically executes the transfers, moving the funds from one party to the other accordingly.

Key Features

  • Guaranteed Settlement: Ensures either both sides of the transaction are completed, or neither is, eliminating the risk of loss for either party.

  • Automated Refunds: If one party fails to transfer their assets, the smart contract automatically returns the transferred assets to the initiating party.

Benefits of On-Chain Settlement

  • Reduced Counterparty Risk: TSI's design significantly minimizes counterparty risk by ensuring that TSI never has direct control over client assets. Even though TSI deploys the smart contracts, the platform cannot access or manipulate the funds involved in the settlement process. This is achieved through:

    • Restricted Smart Contract Functionality: The smart contracts are purpose-built for settlement with predefined rules encoded in their code. They cannot be altered by TSI, and their execution is automated, triggered only when specific conditions are met. This removes any manual intervention or discretion by TSI in the settlement process. The contracts have limited access and cannot arbitrarily transfer assets outside the predefined settlement flow.

    • Transparency and Auditability: While the smart contract code is not publicly accessible to minimize potential security risks, it is readily available for review by TSI clients. This approach allows clients to verify the functionality of the smart contract and ensure that it adheres to the stated rules, promoting transparency and trust without compromising security.

    • Updates and Notifications: If any updates are made to the smart contract code, TSI clients will be informed to ensure transparency and maintain trust.

  • Increased Efficiency: The automated nature of smart contracts streamlines the settlement process, reducing manual intervention and potential delays.

  • Atomic Settlement: Guarantees that both sides of a transaction are executed simultaneously, preventing any party from experiencing a loss due to non-completion.

  • Automatic Asset Return: If one party fails to fulfill their transfer obligation, the smart contract automatically returns any previously transferred assets to the initiating party. This ensures that funds are not lost due to a counterparty's failure to complete their part of the transaction.

  • Secure Asset Handling: Assets are not deposited into the smart contract for settlement. Instead, the contract facilitates direct transfers between parties, eliminating concerns about assets being locked in the contract or potential rug-pull risks. This approach prioritizes the security and control of user funds.

TSI's on-chain settlement mechanism is a core component of its institutional-grade platform, providing a secure, efficient, and reliable framework for all transactions.

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Last updated 2 hours ago