Digital asset settlement is the step that completes a trade in a crypto-asset or tokenised instrument: the asset moves to the buyer and the payment moves to the seller. It can happen in two ways. In on-chain settlement, a transaction is recorded on the blockchain and becomes final once the network's rules for blockchain transaction finality are met. In off-chain settlement, both parties hold accounts with the same exchange or custodian, which simply adjusts its internal ledger; most exchange trades settle this way, with on-chain movement only on deposit and withdrawal. Settlement is one stage of the wider digital asset trade lifecycle.
Where both the asset and the payment are tokens on a compatible ledger, a smart contract can exchange them in one indivisible step, known as atomic settlement, which achieves delivery versus payment without a central counterparty. Instant settlement removes counterparty exposure but requires full funding in advance and gives up the liquidity savings of settlement netting.