How Does a Permissioned Blockchain Improve Settlement Speed for Derivatives?
Settlement speed is improved because the network has a smaller, known group of validators, eliminating the need for extensive consensus mechanisms like Proof-of-Work. This streamlined process allows transactions, such as those involving over-the-counter derivatives, to be confirmed nearly instantly.
The reduced number of nodes minimizes latency and increases transaction throughput. This efficiency lowers counterparty risk and operational costs.
Fast settlement is key for managing collateral in volatile markets.
Glossar
Speed
Velocity ⎊ Speed within cryptocurrency, options, and derivatives contexts primarily denotes the rate at which transactions are processed and confirmed, impacting market efficiency and arbitrage opportunities.
Permissioned Blockchain
Architecture ⎊ A permissioned blockchain distinguishes itself through controlled network access, diverging from the open, permissionless nature of systems like Bitcoin.
Settlement Speed
Finality ⎊ Settlement Speed, within cryptocurrency and derivatives, denotes the confirmed and irreversible transfer of an asset or value; it represents the time elapsed from trade execution to guaranteed completion, mitigating counterparty risk.