Understanding the settlement lifecycle state machine
A settlement goes through a defined sequence of states before it concludes. Each transition has guards that must pass, events that get emitted, and an on-chain effect. This post maps the full lifecycle.
The settlement lifecycle is a formal state machine. Every escrow record starts in the Created state and moves through a defined set of transitions before reaching a terminal state. There are no shortcuts, no undefined transitions, and no way to skip a guard.
Created → Funded: The depositor transfers USDC into the escrow contract. The contract verifies the amount matches the authorized figure and records the funding block. From this point, the funds are locked.
Funded → In Review: The lifecycle service picks up the escrow record and begins evaluating delivery conditions. This is the only state where off-chain logic has full authority. The contract doesn't change; the service is deciding what outcome to authorize.
In Review → Released: All delivery conditions pass. The lifecycle service signs a release authorization. The contract verifies the signature, transfers USDC to the recipient, and marks the escrow as settled. This is the happy path.
In Review → Refunded: Delivery conditions are definitively unmet, or the evaluation timeout expires. The lifecycle service authorizes a refund. USDC returns to the depositor. The escrow is closed.
In Review → Disputed: A party contests the outcome before the lifecycle service finalizes its decision. Funds freeze. A dispute record is written on-chain. The flow pauses until the dispute is resolved through an authorized resolution path.
The state machine's value is in its predictability. Every participant — depositor, recipient, operator, auditor — can inspect the escrow's current state and understand exactly what can happen next and what authorization is required to make it happen.