What Is the Primary Difference between a Physically-Settled and a Cash-Settled Futures Contract?

A physically-settled futures contract requires the actual delivery of the underlying asset upon expiration. For example, a physically-settled Bitcoin contract would mean the transfer of actual BTC.

A cash-settled contract, however, is settled by paying or receiving the difference between the contract price and the spot price in cash. Cash-settled contracts are often preferred for indices or commodities where physical delivery is impractical.