BRIDGING TRADFI AND DEFI: EVENT-DRIVEN INTEROPERABILITY PROTOCOLS FOR REAL-TIME FIAT-TO-CRYPTO SETTLEMENTS

Abstract

The division between traditional finance (TradFi) and decentralized finance (DeFi) continues tohinder seamless capital mobility across ecosystems. Real‑Time Payment Systems (RTPS) achievenear‑instant fiat settlements, yet bridging these assets into blockchain environments remainsdependent on fragmented, high‑latency, and centralized gateways. This gap limits the naturalstrengths of both worlds, especially speed and efficiency. Based on the publish/subscribe model, theEDSP protocol operates as a decentralized oracle system that allows for synchronization of stateupdates between two separate ledgers. This protocol will allow smart contracts to initiate fiatpayments and bank payment systems to trigger corresponding blockchain settlement actions. Themodel stresses cryptographic protections against oracle tampering through multi-party authenticationand zero-trust routing methodologies. A simulation of latency shows that an event-driven architectureis capable of resolving the deterministic nature of TradFi operations and the probabilistic aspect ofblockchain networks. Incorporating compliance events into the settlement process enables institutionsto meet their demands for regulatory and transparency obligations. This article sets a roadmap forfuture liquidity bridging models based on a secure, scalable, and compliant approach to bridgingecosystems. This article proves the value that event-driven models bring to the table in terms ofinterconnectivity and liquidity, which will allow institutional-level interactions to take place withinfiat and decentralized networks.