Blockchain Settlement

On-Chain Settlement Overview

In the x402 protocol, all payments settle directly on the blockchain, providing transparency, immutability, and instant finality. This contrasts with traditional payment systems where settlement can take days and occurs in opaque, centralized databases.

Why Blockchain Settlement?

Transparency

Every payment is publicly verifiable:

// Anyone can verify a payment
const tx = await avalancheClient.getTransaction(
  "0x8f3d1a2b4c5e6f7a8b9c0d1e2f3a4b5c6d7e8f9a"
);

console.log({
  from: tx.from,           // Payer address
  to: tx.to,               // Recipient address
  value: tx.value,         // Amount paid
  blockNumber: tx.blockNumber,
  timestamp: tx.timestamp,
  status: tx.status        // Success/failure
});

No need to trust a payment processor—the blockchain is the source of truth.

Immutability

Once a transaction is confirmed, it cannot be:

• Reversed (no chargebacks)
• Modified (tamper-proof)
• Deleted (permanent record)
• Disputed (cryptographically proven)

This eliminates chargeback fraud and provides definitive proof of payment.

Instant Finality

On Avalanche C-Chain, transactions achieve finality in approximately 2 seconds:

Traditional ACH:      2-7 days
Credit Card:          24-72 hours
PayPal:               1-3 days
Bitcoin:              ~60 minutes (6 confirmations)
Ethereum:             ~15 minutes (2 epochs)
Avalanche:            ~2 seconds ✓

The Settlement Process

When a payment authorization is submitted through x402, settlement happens through a streamlined three-phase process leveraging EIP-3009's gasless payment standard.

Phase 1: Authorization Verification

The facilitator receives the signed EIP-712 authorization from the client. This cryptographic signature proves the user approved the payment without requiring them to submit a blockchain transaction themselves. The facilitator validates that:

• The signature matches the authorization details
• The payment amount doesn't exceed maxAmountRequired
• The authorization is within its validity window (validAfter to validBefore)
• The nonce hasn't been used before (replay protection)

This verification is trustless—the signature cryptographically guarantees user consent.

Phase 2: Blockchain Submission

The facilitator calls the USDC contract's transferWithAuthorization function with the signed authorization. This gasless payment method (EIP-3009 standard) allows the facilitator to submit the transaction on behalf of the user. The user doesn't pay gas fees or submit any blockchain transactions—they only provide a signature.

The USDC contract verifies the signature on-chain and executes the transfer if valid. This ensures the payment cannot be tampered with after the user signs.

Phase 3: Confirmation and Finality

On Avalanche, the transaction is included in a block and reaches finality in approximately 1-2 seconds. Once finalized, the transaction cannot be reversed—the payment is permanent and immutable.

The facilitator receives the transaction hash from the blockchain and returns it to the merchant. The USDC balances are permanently updated on-chain, and the payment is complete.

Total Time: The entire x402 process from initial request to settlement takes approximately 2-2.3 seconds.

Reference: For detailed technical implementation of TransferWithAuthorization, see x402 Whitepaper (Section 9.3).

Payment Verification

Facilitators verify payments by querying the blockchain to ensure the transaction matches the expected payment details. This verification is trustless—anyone can independently confirm the payment by checking the blockchain.

What Facilitators Verify

When a transaction is submitted, facilitators check:

1. Transaction Existence: The transaction hash exists on the blockchain
2. Transaction Success: The transaction executed without errors
3. Correct Recipient: Funds were sent to the expected payTo address
4. Correct Amount: The transfer amount matches or exceeds maxAmountRequired
5. Recent Timestamp: The transaction was created recently (prevents replay of old transactions)
6. Confirmation Status: The transaction has reached finality

USDC Transfer Events

USDC transfers emit Transfer events on-chain that provide cryptographic proof of payment:

event Transfer(address indexed from, address indexed to, uint256 value);

These events can be parsed from transaction logs to verify payment details without trusting the facilitator. The blockchain is the source of truth.

Trustless Verification

Because all payment data is on-chain, merchants can independently verify payments without relying on facilitators. Simply query the blockchain with the transaction hash to confirm:

• Who paid (sender address)
• Who received (recipient address)
• How much was paid (token amount)
• When it was paid (block timestamp)

This transparency eliminates the need to trust payment processors.

Gas and Fee Economics

Transaction Costs on Avalanche

x402 payments on Avalanche use EIP-3009's gasless payment model, where the facilitator sponsors the gas rather than the payer. This removes the friction of users needing AVAX to pay gas fees.

Typical transaction costs (based on current network conditions - January 2025):

• Gas used: ~77,000 gas units (transferWithAuthorization)
• Gas price: ~0.575 nAVAX per gas unit (current)
• Total cost: ~$0.001 USD (with AVAX at $20)

Who pays gas?

• In x402, the facilitator pays gas fees when submitting the transaction
• The user only signs the authorization—no blockchain transaction needed from their side
• This enables truly gasless payments for end users

Cost Comparison

Key Advantage: For micropayments, x402's flat ~$0.001 gas cost is dramatically better than traditional payment processing's 2.9% + $0.30 per transaction.

Multi-Chain Settlement Timing

Different blockchains have different finality characteristics, which affects the total x402 payment process time. It's important to distinguish between blockchain finality (how fast the chain confirms transactions) and full x402 process time (complete flow from request to response).

Timing Comparison

Note: The full x402 process time includes:

1. Initial request (~100ms)
2. 402 response (~100ms)
3. Payment authorization creation and signing (~500ms)
4. Blockchain settlement (varies by chain)
5. Response delivery (~100ms)

Important: Chains not listed here may not have official x402 support yet. Always verify with your facilitator which networks they support. Check PayAI documentation for their current network list.

Choosing a Blockchain

When selecting a blockchain for x402 payments, consider:

1. Settlement Speed: How fast do you need payment confirmation?
2. Transaction Costs: What are the gas fees on this chain?
3. Facilitator Support: Does your chosen facilitator support this chain?
4. User Base: Which chains do your users already have wallets and tokens on?

For most micropayment use cases, Avalanche and Base offer the best combination of speed (~2 seconds) and cost (~$0.001 gas).

Summary

Blockchain settlement in x402 provides transparent, immutable, and instant payment finality through EIP-3009's gasless payment standard. The complete x402 process takes approximately 2-2.3 seconds on Avalanche, with blockchain finality achieved in 1-2 seconds.

Key advantages:

• Gasless for users: Facilitators sponsor gas fees, eliminating the need for users to hold native tokens
• Cryptographic proof: Every payment is verifiable on-chain without trusting intermediaries
• No chargebacks: Finality is instant and irreversible
• Multi-chain support: Works across Avalanche, Base, Ethereum, and other EVM chains

Facilitators abstract away the complexity of blockchain interactions, making x402 settlement as simple as traditional payment APIs while delivering superior speed, lower costs, and trustless verification.

Next: Learn about Security Considerations including replay attack prevention, signature validation, and settlement monitoring.

Additional Resources

• x402 Whitepaper - Technical Specifications
• EIP-3009: Transfer With Authorization
• Avalanche Consensus