A large-sized transaction of a cryptocurrency or related derivative that is negotiated and executed bilaterally or through a specialized venue outside the public, centralized order book, with the eventual settlement or record-keeping occurring on a Distributed Ledger Technology (DLT) network. This approach is frequently utilized by institutional players to execute large orders without disrupting the market price or exposing their trading intent prematurely. It represents an off-chain negotiation coupled with on-chain settlement.
Mechanism
The mechanism begins with the negotiation of terms—price, quantity, and asset—between two parties, often facilitated via a Request for Quote system or voice brokerage. Upon agreement, the trade is submitted to the DLT system, either directly or via an intermediary smart contract. The DLT system then records the trade as a single, large entry, potentially in a designated block separate from smaller, retail transactions. This execution often requires specialized permissioned access to the DLT or a layer-2 solution to ensure the speed and cost efficiency necessary for institutional trade completion.
Methodology
The strategic advantage of a DLT Block Trade lies in its capacity to minimize market impact and mitigate front-running risk, which is especially critical for large institutional orders in crypto markets. The methodology prioritizes security and finality, utilizing the immutable ledger state of the DLT for definitive record-keeping and often leveraging atomic settlement protocols to remove counterparty credit risk associated with the exchange of assets. This systematic process ensures trade integrity and facilitates compliance verification post-execution.
Smart contracts codify and automate block trade settlements on DLT, establishing deterministic execution and immutable records to enhance legal certainty and capital efficiency.
