Settlement

Settlement is the process of moving funds from the user's wallet to the merchant. Encrypto's settlement architecture is designed for speed, finality, and minimal counterparty risk.

Settlement Flow

1. Card tap                    → Visa authorization request (< 200ms)
2. Balance check               → On-chain USDC balance query (< 100ms)
3. Authorization response      → Approved/declined (< 500ms total)
4. Hold placed                 → USDC earmarked for transaction
5. Merchant settlement         → Visa batch settlement (same day)
6. USDC debited                → Final debit from user wallet
7. Fiat sent to merchant       → Via card issuing partner

Total time from card tap to authorization: under 500ms. Total time from tap to final settlement: same day (Visa standard).

On-Chain vs. Off-Chain

Encrypto operates a hybrid settlement model:

Component	Settlement Type	Finality
P2P transfers	On-chain	~2 seconds (Base block time)
Card purchases	Hybrid	Authorization: instant. Settlement: same day via Visa.
Cross-chain deposits	On-chain	Bridge-dependent (2-15 minutes)
Yield accrual	On-chain	Per-block or per-epoch

Why Hybrid?

Pure on-chain settlement for card transactions isn't practical today. Merchants don't accept USDC — they accept Visa. So the card side settles through traditional Visa rails, while the user's debit happens on-chain.

This is the right tradeoff. The merchant gets paid through the system they already use. The user gets the benefits of on-chain asset management. And Encrypto handles the translation layer between the two.

Finality

On-chain transactions on Base have probabilistic finality after ~2 seconds (single block) and strong finality after the batch is posted to Ethereum L1 (~10 minutes).

For card transactions, finality is determined by the Visa settlement cycle. Pending authorizations can be modified (e.g., tip adjustments) but settled transactions are final.

Float and Risk Management

Between the time a card transaction is authorized and when it settles, there's a "float" period where funds are held but not yet debited. Encrypto manages this through:

1. Instant hold. The authorization amount is immediately locked in the user's account. They can't spend it elsewhere.
2. Overcollateralization buffer. A small buffer (2-5%) is held above the authorization amount to cover tip adjustments and FX fluctuations.
3. Real-time monitoring. The settlement engine continuously monitors held transactions and adjusts reserves.

This eliminates the risk of insufficient funds at settlement time — a common problem with traditional prepaid card programs.

Settlement Economics

The cost structure of Encrypto settlement vs. traditional banking:

Cost Component	Traditional Bank	Encrypto
Interchange	1.5-3.0%	Shared with card partner
Processing	$0.10-0.30/txn	Negligible (L2 gas)
FX conversion	1-3% markup	Visa rate (no markup)
Settlement delay	1-3 business days	Same day
Chargeback reserve	5-10% holdback	Crypto is non-reversible

The non-reversible nature of on-chain settlement eliminates chargeback risk on the funding side. This is a structural advantage that reduces operational costs and enables lower fees.