Settlement Layer

A settlement layer is the part of a blockchain system where transactions are given their final, binding record. In layered designs, activity can happen elsewhere, on a rollup, a payment channel or a sidechain, but results are periodically posted to the settlement layer, whose security decides who ultimately owns what. Ethereum acts as the settlement layer for rollups such as an optimistic rollup, which post their state and proofs to it, and Bitcoin acts as the settlement layer for the Lightning Network. The idea borrows from traditional finance, where trades may be agreed quickly but only become final once money moves across a settlement system run by a central bank. In modular blockchain designs the settlement layer is one of several roles, alongside execution, consensus and data availability, that may be split across different networks. Also see layer 1 blockchain.