What Is the Difference between Physical and Cash Settlement in a Smart Contract Derivative? ▴ Learn

What Is the Difference between Physical and Cash Settlement in a Smart Contract Derivative?

Physical settlement involves the actual delivery of the underlying asset upon expiration, while cash settlement involves only the transfer of the monetary difference between the contract price and the market price. Smart contracts can handle both.

Physical settlement requires the contract to manage asset transfer (e.g. token delivery), whereas cash settlement requires an accurate oracle price feed for the final calculation.

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