Delivery-versus-payment and OTC

The settlement problem in one line: neither side should be able to take delivery without paying, or pay without taking delivery. Traditional finance solves it with a clearing house that holds both legs. A market on BATHRON solves it with a covenant: both legs are locked under the same condition, and they settle together or refund together. OTC settlement is the same pattern with one addition — the size of the trade stays hidden.

Delivery versus payment

  Leg A: payment                Leg B: delivery
        │                             │
        └────── one shared secret ────┘
                       │
        claiming either leg reveals it —
        the other leg becomes claimable
                       │
        both settle, or both refund

Both legs are locked under scripts keyed to the same hash. Claiming one leg requires revealing the preimage — which is exactly what the counterparty needs to claim the other. Timeouts (CSV/CLTV) guarantee that an abandoned trade refunds both sides.

The legs do not need to live on the same chain: one can be a native Bitcoin transaction, either proven by SPV (TX_CONFIRMED) or paired as an HTLC keyed to the same hash. That is how the native BTC ⇄ M1 pair works — DvP where one deliverable is bitcoin.

Atomic settlement needs programmability (which Bitcoin refuses) plus verification of Bitcoin facts (which nobody else has without an external attester). The combination is the niche.

OTC: DvP with shielded size

Large trades have two enemies: counterparty risk and information leakage. The paired legs address the first; shielded transfers address the second.

  quote agreed off-chain
          │
          ▼
  both legs locked (HTLC, same hash)
          │
          ▼
  both-or-neither settlement ── amounts shielded
          │
          ▼
  no one saw the size; no one held the funds

1. Two parties agree on a price off-chain — the protocol does not care how.
2. Each locks its leg under a hashlock keyed to the same secret; one leg can be native Bitcoin.
3. The paired legs settle both-or-neither, and the M1 side moves shielded: the market never learns the size.

On a transparent chain, a large settlement is a public event that moves the market against you. Here, Bitcoin sees two unremarkable transactions; the trade itself is invisible.

These pages describe component-level behaviour; see Status & claims.

Primitives: hashlocks (HTLC) · CSV / CLTV · TX_CONFIRMED · shielded transfers

See also: Confidential settlement