How It Works

# Settlement Layer Model

S&F separates settlement from execution.

The protocol does not try to be the fastest trading venue. It keeps the canonical accounting for perpetual exposure: collateral, issuance, redemption, funding rate, oracle rounds, and position-token balances.

Trading can happen on top of that settlement layer.

# Layered model

Execution can be fast and plural. Settlement should be neutral and canonical.

# What the base layer does

ETC and the S&F contracts are responsible for the source of truth:

• who owns position shares;
• how much collateral backs the pool;
• which liquidity is active;
• what oracle price is used for settlement;
• how funding rate and PnL affect the system;
• how many synthetic tokens balanceOf should display.

This is the settlement layer.

# What markets do

Markets provide execution.

An AMM, app frontend, market maker, or another venue can let users trade S&F tokens. Those venues do not become the source of truth for the position. They only move the token.

The position remains portable because the position is represented by a token.

# Example

Alice mints S-BTC through OTC settlement.

After settlement, Alice holds S-BTC tokens. She can keep them, transfer them, deposit them into a market, or sell them to Bob.

If Bob buys those tokens in a secondary market, the S&F protocol does not need to create a new position. Ownership moved, but the settlement layer still defines what the token represents.

# Why this matters

This model lets S&F keep slow, neutral settlement on ETC while allowing faster execution wherever liquidity exists.

The base layer is not the matching engine. It is the court of record.