In a Decentralized Options Settlement, How Is the Double-Spend Problem Avoided for Collateral?

In a decentralized options settlement, the collateral (e.g. stablecoins or crypto assets) is typically locked in a smart contract before the option is written or executed. This process, called "escrow" or "staking," uses the blockchain's state transition function to ensure the collateral cannot be spent or moved by the user for any other purpose while the contract is active.

The smart contract acts as an immutable third-party custodian, making a double-spend of the collateral impossible.