How Do Blockchain-Based Ledgers Fundamentally Address non-DVP Risk?
Blockchain ledgers enable the transfer of both the asset and the payment to be recorded in the same atomic transaction or within the same block, ensuring cryptographic finality. This inherent synchronization eliminates the time lag between the two legs of the trade, which is the root cause of non-DVP risk.
The ledger itself enforces the simultaneous exchange (DVP).
Glossar
DvP
Settlement ⎊ DvP, or Delivery versus Payment, within cryptocurrency and financial derivatives signifies the simultaneous exchange of assets, mitigating principal risk inherent in over-the-counter transactions and increasingly, on-chain settlements.
Atomic Transaction
Concept ⎊ An atomic transaction represents an indivisible sequence of operations that either completely succeeds or entirely fails.
Simultaneous Exchange
Mechanism ⎊ Simultaneous Exchange, within cryptocurrency and derivatives, denotes the concurrent execution of offsetting transactions, typically across different venues or counterparties, designed to capitalize on fleeting arbitrage opportunities or manage counterparty risk.