What Happens to Excess Collateral after a Smart Derivative Contract Is Settled?
Once the derivative contract's financial obligations are fully satisfied, the smart contract automatically releases any remaining or excess collateral back to the original depositor's wallet. The contract's code is designed to only disburse the exact required amount for settlement to the counterparty.
This automated return ensures a transparent and trustless closeout of the position without needing a manual reconciliation process.
Glossar
Smart Derivative Contract
Contract ⎊ A smart derivative contract represents a programmatic agreement that defines the parameters of a financial instrument, such as an option or future.
Excess Collateral
Buffer ⎊ Excess collateral is the value of deposited digital assets that surpasses the minimum collateralization requirement mandated by a decentralized lending platform or derivatives exchange.