Settlement and Cash Flow

Settlement and cash flow handling define how economic value moves between the real world and the blockchain. Unlike purely digital assets, RWAs require coordination between on-chain records and off-chain payments. This section explains how that coordination is structured, verified, and constrained.

The protocol does not attempt to custody funds or replace payment systems. It provides deterministic settlement logic and auditable linkage between on-chain entitlements and off-chain cash movements.

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Separation of Cash Movement and Accounting

A core principle is separating:

• cash movement (off-chain)

• entitlement accounting (on-chain)

The blockchain records who is entitled to what and when, while cash is moved through traditional rails such as banks, payment processors, or stable settlement providers.

This avoids forcing RWAs into unsuitable on-chain custody models while preserving transparency.

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Settlement Flow (High Level)

A typical settlement cycle follows this structure:

Asset Generates Cash Flow
        │
        ▼
Off-Chain Payment Execution
        │
        ▼
Attestation of Payment
        │
        ▼
On-Chain Settlement Record
        │
        ▼
Token Holder Entitlements Updated

The protocol records that settlement occurred, not the movement of fiat itself.

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Types of Cash Flows

The settlement model supports multiple cash flow types, including:

• periodic yield or interest payments

• revenue distributions

• principal repayments

• redemption payouts

Each cash flow type is defined during asset onboarding and mapped to on-chain logic.

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Entitlement Calculation

On-chain entitlements are calculated deterministically based on token holdings.

At a conceptual level:

$$Entitlementi​=Total Circulating SupplyTokens Heldi​​×Distributable Amount$$

This calculation:

• is transparent

• is reproducible by any observer

• does not depend on issuer discretion

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Distribution Models

Different assets may use different distribution mechanisms.

Model	Description	Use Case
Pro-rata	Equal share per token	Yield-bearing assets
Tranche-based	Priority ordering	Structured products
Event-based	Triggered payouts	Redemptions or exits

The protocol enforces the distribution logic, not the payment rail.

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Stable Settlement and Currency Handling

Cash flows may be denominated in:

• fiat currencies

• stable settlement assets

• other agreed units of account

The protocol:

• records the unit of account

• records settlement amounts

• does not perform FX conversion implicitly

Any conversion logic must be explicit and externally attested.

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Attestation of Settlement

Because payments occur off-chain, settlement relies on attestations.

Settlement attestations confirm:

• that payment occurred

• the amount settled

• the date and scope of settlement

These attestations are:

• attributable to specific roles

• recorded immutably

• subject to audit and dispute

They are inputs to state transitions, not unquestioned truth.

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Handling Partial or Delayed Settlement

Settlement may be incomplete or delayed due to:

• operational issues

• counterparty failure

• legal disputes

When this occurs:

• partial settlement can be recorded

• remaining entitlements remain outstanding

• transfers may be restricted if required

The protocol avoids forcing optimistic assumptions.

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Redemption and Final Settlement

Redemption is treated as a terminal settlement event.

During redemption:

• entitlement calculations are finalized

• settlement amounts are recorded

• redeemed tokens are burned or closed

Formally:

Outstanding Entitlementi→0after confirmed settlement\text{Outstanding Entitlement}_{i} \rightarrow 0 \quad \text{after confirmed settlement}Outstanding Entitlementi​→0after confirmed settlement

Once redemption completes, the asset moves toward lifecycle closure.

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Auditability and Reconciliation

Settlement records provide a full audit trail.

Auditors can verify:

• entitlement calculations

• settlement events

• discrepancies over time

On-chain records act as a single source of accounting truth, even when payments are executed externally.

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What the Protocol Does Not Do

To avoid ambiguity, the protocol does not:

• move fiat or custody funds

• guarantee timely payment

• resolve off-chain payment disputes

It records what should have happened and what was attested to have happened.

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Failure and Dispute Handling

If settlement attestations fail or are contested:

• further transfers may be paused

• escalation paths are triggered

• governance processes may intervene

The system prioritizes capital protection over liquidity.

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Settlement and Cash Flow Summary

Aspect	Responsibility
Cash movement	Off-chain rails
Entitlement logic	On-chain
Calculation	Deterministic
Verification	Attestations
Audit	Public and immutable

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Why This Model Matters

RWA platforms often fail by:

• mixing custody and accounting

• hiding settlement delays

• relying on issuer discretion

This model avoids those failures by:

• separating responsibilities

• enforcing deterministic entitlement logic

• making settlement status explicit

The result is a system that remains trust-minimizing even when cash is not on-chain.