How Blockchain Works: When Transactions Are Also Settlements, Reconciliation Disappears

Money movement and financial services are underpinned by a timeless question: who is trusted to keep the books, and at what cost?

Digital assets and blockchain have for years tried to muscle and build their way into this conversation. To their proponents, the tokenization of assets and the deployment of on-chain instruments like stablecoins have come to represent somewhat of a panacea for payments and financial infrastructure modernization.

Even to stakeholders with a more moderate view of any “panacea,” digital assets and blockchain are increasingly being embraced as a complementary layer for financial infrastructure.

News broke Monday (Dec. 15) that J.P. Morgan Chase is reportedly deepening its blockchain efforts with its first tokenized money market fund. The private “My OnChain Net Yield Fund” (MONY) is supported by J.P. Morgan’s tokenization platform, Kinexys Digital Assets. Just a few days earlier, on Dec. 11, the bank successfully arranged a U.S. commercial paper issuance on the Solana blockchain in a separate blockchain finance initiative, marking one of the earliest debt issuances ever executed on a public blockchain.

Meanwhile, in a press release emailed to PYMNTS, Visa announced on Monday the launch of its Stablecoins Advisory Practice that serves banks, FinTechs, merchants and businesses.

But what’s often missing from the conversation is a clear understanding of what actually happens when financial activity moves “on-chain.”

What is different, technically and economically, when JPMorgan issues debt on its private blockchain versus when a dollar-backed stablecoin is sent from Latin America to Africa on a public one? And how do these emerging systems compare with the traditional settlement rails they aim to complement or, in some cases, even replace?

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When a Transaction Is No Longer Just a Transaction

In traditional finance, transactions are instructions, or messages that trigger actions across multiple institutions. In blockchain-based systems, transactions are events that are the settlement. That distinction matters because it changes how liquidity is managed, how risk is priced, and how quickly capital can move in response to economic signals.

Compared to traditional settlement architectures, blockchains propose a fundamentally different approach: a shared ledger that multiple parties can read from and write to, governed by cryptographic rules rather than bilateral reconciliation.

At its core, a blockchain transaction is an atomic state change. Assets are represented as digital tokens, and transferring them involves updating balances on a single ledger that all participants agree is authoritative. Settlement and reconciliation collapse into the same event.

But not all blockchains are created equal. The distinction between private (permissioned) and public (permissionless) chains matters enormously for how transactions behave in practice. When JPMorgan issues a debt instrument on its private, permissioned Kinexys blockchain, the bank is not abandoning traditional finance so much as re-engineering its internal ledger architecture.

In this model, only approved participants such as banks, institutional investors and custodians can access the network. Identity is known. Governance is centralized or consortium-based. Compliance rules are embedded directly into the system.

Crucially, risk does not disappear. JPMorgan still stands behind the instrument. Legal enforceability still relies on contracts and regulators.

See also: Making Sense of Public Versus Private Blockchains for Banks

The Public Chain Stablecoin Transaction

Public chains trade institutional control for global composability. Picture a small business in Mexico sending U.S. dollar-denominated stablecoins to a partner in Ghana. The sender acquires stablecoins through a local exchange or FinTech wallet and when the transfer is initiated, a transaction is broadcast to a public blockchain like Ethereum or Solana.

Validators or miners, independent actors distributed globally, verify the transaction according to consensus rules. Once confirmed, the ledger updates universally. The recipient’s wallet balance increases. Settlement is final within seconds or minutes, depending on the chain.

Still, new dependencies emerge. The sender must trust the stablecoin issuer’s reserves, and both parties rely on the security and uptime of the blockchain network, and while settlement may be seamless, off-ramping the stablecoins into fiat presents its own challenges.

“Unless the entire world moves into the stablecoin world, there will still be a need of off-ramping … into the fiat currencies,” Sudipto Das, vice president of engineering at Convera, told PYMNTS in an earlier interviews, noting that foreign exchange and compliance considerations remain paramount.

He outlined three roles companies can play — accepting stablecoin payments, using stablecoin rails in specific corridors or focusing on last-mile off-ramping — but each depends on the maturity of regulation, operational assurance and interoperability with traditional systems.

“There is huge potential,” Das conceded, “but there are certain areas where we need to see maturity … to really see this going fully mainstream.”

Read more: Building the Blockchain Blueprint: How Leading FIs Are Modernizing Money, Markets and Trust

Neither approach, however, is without trade-offs.

Private blockchains risk becoming walled gardens. Interoperability between different banks’ chains remains limited, potentially recreating silos in digital form. The technology improves efficiency but does not fundamentally challenge existing power structures.

Public blockchains face scalability, governance and regulatory uncertainty.

What’s emerging instead is a layered future. Core banking and capital markets infrastructure becomes increasingly tokenized and automated behind the scenes. At the same time, public blockchains serve as open settlement layers for certain forms of money movement, particularly at the edges of the global system.

For example, the Monday news that money movement platform Volt has launched a partnership with stablecoin payment infrastructure provider BVNK that will see Volt offer stablecoin pay-ins at checkout to its merchants and partners only shows that the marketplace is aware of its pain points – and that it is targeting them in order to grow.