Transactions are Crypto’s Smallest Atomic Unit

A transaction is completely self contained. They have all the information necessary to execute. They include all the security necessary to confirm authenticity. And they do not separate the payment request from its settlement. Either the entire thing executes or none of it does — making the transaction the smallest atomic unit of the cryptocurrency ecosystem.

Compare that to the traditional financial network. A transaction requires some sort of channel to flow through, effectively inheriting the security credentials from the channel. Nor does it describe everything necessary to execute globally — much of that is implied by the channel in which it resides. Individual transactions also don’t include their settlement. Typically transactions are more like payment intents that may or may not be settled in a batch at a later time. This design, while the only practical way to do things when they were first conceived in the 1970's, includes a time lag and therefore risk that the payment won’t settle. Some systems (SWIFT, for example) are simply messaging systems that don’t include settlement at all!

The ramifications of this are vast. In the traditional financial network, that risk exists everywhere. There is a great deal of money trapped in some stage or another all up and down the stack. Aside from being inherently slow, this strategy is also…