Settlement Layer

The Settlement Layer is a pivotal component of Mugen's infrastructure, designed to bring transparency, accountability, and efficiency to the cross-chain bridging process. It achieves this by introducing a decentralized and robust auction mechanism, ensuring fairness and compliance in order execution.

Why the Settlement Layer is Necessary

1. Transparent Auction Layer

2. • The Settlement Layer establishes a transparent mechanism for solvers to bid on fulfilling user intents. This fosters competitive pricing and ensures fair value for users.

   • By enabling open participation, the auction layer promotes price discovery and discourages monopolistic practices.

3. Proof of Quote

4. • Solvers are required to submit verifiable quotes during the auction process.

   • This ensures that the best and most accurate quotes are selected for execution, providing users with optimal outcomes.

   • Proof of Quote acts as an integrity checkpoint, aligning solver incentives with user interests.

5. Slashing Mechanisms

6. • To maintain trust and security, solvers who act maliciously or fail to fulfill orders as per their quotes are subject to slashing.

   • This deters bad actors and encourages high-quality participation from solvers.

7. Enhanced Transparency

8. • The Settlement Layer enhances transaction visibility, making it easier to track the flow of funds and verify execution integrity.

   • This transparency acts as a natural deterrent to money laundering and other illicit activities.

9. Privacy Through Address Masking

10. • Future updates to the Settlement Layer will incorporate privacy features such as address masking.

    • This balances transparency with user confidentiality, ensuring compliance without exposing sensitive information.

How the Settlement Layer Works

1. Order Submission

2. • User intents are forwarded to the Settlement Layer, through the off-chain relayer service, where solvers can review and bid to fulfill them.

3. Auction Process

4. • Solvers submit quotes that specify the costs and execution timelines for fulfilling the intent.

   • The transparent auction mechanism ensures that the most competitive and reliable solver is selected.

5. Execution and Verification

6. • The selected solver executes the order, and the transaction details are forwarded to verifiers for validation.

   • Verifiers ensure that the solver has adhered to the submitted quote and fulfilled the intent accurately.

7. Slashing for Malfeasance

8. • Solvers failing to meet their commitments or engaging in fraudulent behavior face penalties, including slashing of staked assets or exclusion from the network.

Benefits of the Settlement Layer

1. User Trust

2. • By making every step of the process transparent and verifiable, users gain confidence in the system.

3. Solver Accountability

4. • Proof of Quote and slashing mechanisms incentivize solvers to act responsibly.

5. Scalability

6. • The decentralized auction process allows for dynamic scaling as more solvers join the network.

7. Foundation for Future Features

8. • The Settlement Layer lays the groundwork for advanced features such as automated compliance systems and hybrid public-private transaction models.

The Settlement Layer is a cornerstone of Mugen's commitment to delivering secure, efficient, and transparent cross-chain solutions. It ensures that users, solvers, and verifiers operate within a decentralized framework that balances trust, innovation, and compliance.