What Role Do Smart Contracts Play in Automating and Securing Non-Custodial Derivatives Settlement?

Smart contracts are self-executing contracts with the terms of the agreement directly written into code on a blockchain. In non-custodial derivatives, they can automatically manage margin calls, calculate option payouts, and execute the final settlement based on predefined market data inputs (oracles).

This automation removes the need for a trusted intermediary to hold funds, significantly reducing counterparty and operational risk, and enforcing the terms immutably.