What Is a 'Clearinghouse' and How Does a Smart Contract Replace Its Function? ⎊ Path

What Is a ‘Clearinghouse’ and How Does a Smart Contract Replace Its Function?

A clearinghouse is a central intermediary in traditional finance that validates and settles transactions, guaranteeing performance and managing counterparty risk. A smart contract replaces this by acting as a self-executing, decentralized escrow agent.

It automatically verifies conditions, holds collateral, and distributes assets, eliminating the need for the central authority's trust and operational overhead.

What Is ‘Counterparty Risk’ and Why Is It Higher in Forward Contracts?

How Do Options Contracts in CeFi Manage Counterparty Risk via Clearinghouses?

How Can a CEX Prevent a “Wash Trade” from a Large Derivatives Account?

What Is the Role of a Clearinghouse in Traditional Financial Settlement?

What Is the Concept of “Self-Custody” in Cryptocurrency?

What Is the Primary Difference between a Central Counterparty (CCP) and an Over-the-Counter (OTC) Market?

Can a Transaction Be Cancelled or Replaced Once It Enters the Mempool?

What Is the Role of a ‘Smart Contract’ in Automating Financial Derivatives?