To truly understand the significant differences between traditional stocks and digital currencies in terms of trading and settlement, we need to deeply grasp the core “components” and “rules” that make up each ecosystem. We can view them as two entirely different games: one a rigorous, multi-party collaborative “professional league,” and the other a code-as-law, open-to-all “open world.”

Regarding the previous two questions, are there any foundational knowledge points we could explore to further expand this understanding? Let’s also compile some resources for you to learn more about this.

Part 1: The Foundation of Traditional Stock Markets – A Chain of Trust Composed of Professional Institutions

The core of traditional financial markets is “trust” and “intermediaries.” The entire system is designed as a multi-layered structure, with each stage played by regulated professional institutions to ensure market stability and security.

The Players

• You (Investor): The starting and ending point of the transaction.
• Broker: The sole gateway for you to enter the market. You cannot directly go to the Shanghai Stock Exchange or New York Stock Exchange to buy stocks; you must use a broker holding a license to execute your trading instructions and hold your funds and securities (as a nominal holder).
• Stock Exchange: The market’s “trading floor”. Examples include the New York Stock Exchange (NYSE) and NASDAQ. Its primary function is to provide a fair, open venue where buy and sell offers meet (matching), thereby discovering prices. The exchange only handles order matching; it does not handle subsequent fund and stock transfers.
• Central Counterparty Clearing Corporation (CCP): The market’s “risk guarantor”. This is at the core of risk management. After a trade is executed, the CCP intervenes between all buyers and sellers, becoming “all buyers to all sellers” and “all sellers to all buyers.” This way, any party’s default risk is borne by the CCP, preventing risks from spreading through the market like dominoes.
• Central Securities Depository (CSD): The market’s “ultimate vault” and “master registry”. Examples include DTCC in the US and China’s ZSDEC. This is a crucial institution that electronically centralizes and custodians the vast majority of securities in the entire market.

Core Concepts: The “Paperless” and “Non-Moveable” Nature of Securities

• Dematerialization: The stocks you buy today are not physical paper certificates, but a series of electronic records within a CSD (Central Securities Depository) database.

• Immobilization: This is key to understanding settlement. When settlement occurs, there isn’t actually an “electronic stock file” being sent from one broker’s server to another. Instead, all the stocks are “fixed” stored in this central vault – the CSD. The settlement process simply involves the CSD making a transfer of shares from the seller broker’s omnibus account to the buyer broker’s omnibus account on its master ledger. Your broker then updates its own internal customer records to reflect that you now hold more shares.

This multi-tiered, clearly defined structure, while introducing time delays (T+N), has established a robust and mature risk isolation and management mechanism – the cornerstone of modern financial markets’ stable operation.

Part Two: The Foundation of the Digital Currency Market – A “Trustless” System Built on Code and Cryptography

Digital currencies aim to reduce or eliminate reliance on traditional intermediaries, with its foundation being “cryptographic proof” rather than “institutional trust.”

Core Technology (The Technology)

• Blockchain / DLT (Distributed Ledger Technology): Think of it as a distributed, globally maintained ledger that cannot be altered, held by countless individuals. Every transaction is publicly recorded and verifiable by anyone, but no single person or institution can control it.
• Public & Private Keys: This is the sole proof of ownership for your assets in the digital currency world.
  • Public Key: Equivalent to your bank account number. You can safely share this with anyone to receive digital currencies. Your wallet address is generated from the public key.
  • Private Key: Equivalent to your bank password + U盾 + signature combination, it’s the only key to access assets associated with that address. Whoever holds the private key has absolute control over the assets in that address. This is also the origin of the encryption world’s golden rule: “Not your keys, not your coins” (If you don’t hold the private key, you don’t own the cryptocurrency).
• Crypto Wallet: It doesn’t store any “coins” (coins always reside on the blockchain). The wallet’s essence is a tool for managing your private key and helping you sign transactions with your private key to interact with the blockchain network.
• Smart Contract: This is a piece of code that automatically executes on the blockchain. Its logic is “If…then…” (IF-THEN). For example, a decentralized exchange’s smart contract could be: “If I receive 1 ETH from User A, then automatically send 2000 USDC to User A’s address.” The entire process is automatically enforced by code with no human intervention and without requiring trust in anyone.

Core Rules: Consensus Mechanism

How do thousands of nodes in a network reach agreement on which transactions are valid when there is no central server? That’s the role of a consensus mechanism. The two most common types are:

• Proof of Work (PoW): As exemplified by Bitcoin. It involves “miners” performing massive hash calculations (like solving an extremely difficult math problem) to compete for the right to record transactions. The first miner to solve the puzzle can package the latest transactions into a block and broadcast it to the entire network, which other nodes verify and accept. This method is highly energy-intensive but provides very high security.

• Proof of Stake (PoS): Adopted by Ethereum after its upgrade. It no longer relies on a competition of computing power; instead, “validators” who hold and “stake” tokens are selected to create and validate blocks. The more tokens staked, the greater the probability of being chosen to record transactions. If they act maliciously, their staked tokens will be forfeited. This method is more energy-efficient and efficient.

Summary and Comparison

To better understand, we can use a table to summarize the fundamental differences between them:

| Asset Type | Electronic Ledger (Dematerialized) in CSD | Native Digital Token on Blockchain |

Summary and Comparison

Summary and Comparison

Summary and Comparison

Summary and Comparison

Summary and Comparison

Summary and Comparison

Through the above additions, you can see that traditional finance relies on establishing a complex “trust chain” to manage risk and complete settlements; while digital currencies attempt to build a system without intermediaries using technological means (cryptography and distributed networks) to achieve self-validation. These two fundamentally different underlying logics determine the stark differences in all aspects of transactions, clearing, and settlement.