Introducing Split Settlement: Pay the Seller and Refund the Buyer in One Transaction

Most escrow treats the end of a deal as a binary choice. The locked funds go entirely to the seller, or they go entirely back to the buyer. That works when the goods match the contract, or when the deal is cancelled outright. It does not work when the commercial result sits in between.

A shipment can arrive short a few units. A batch of machines can have several that fail inspection. A build can be accepted in part. A court or an arbitrator can award one side a portion of the price and return the rest. In all of those cases, forcing an all-or-nothing payout turns a price adjustment into a standoff. Whoever has less to lose holds out, or both sides leave the platform and settle the split somewhere else.

Tetrapolar now supports split settlement. Buyer and seller can settle a single deal by sending part of the locked bitcoin to the seller and the rest back to the buyer, in one transaction that both sides sign. The custody model does not change. Tetrapolar still cannot move the funds alone.

The problem with all-or-nothing settlement

On a standard Tetrapolar deal, the buyer funds a Bitcoin multisig vault. A multisig vault is an address that needs more than one key to spend from. The buyer holds one key, the seller holds one, and Tetrapolar holds one. On the normal path, release or refund needs the buyer and the seller, two of two. Tetrapolar's key is not used [1][2].

Until now, that spend had a single commercial direction. The buyer's guide describes the choice as it stood: select whether to release funds to the seller or refund them to the buyer, and treat that action as final [3]. The two exceptions were already in the product. On a USD-denominated deal, unused funding buffer returns to the buyer in the same settlement transaction as the seller's payout [4]. On a milestone deal, each step is its own standard escrow, so a later installment can stay unreleased without touching the ones already settled [5][6].

Neither exception covers a price adjustment inside one vault. Milestones help when you know the stages in advance: a deposit at production start, a payment on the bill of lading, a balance on arrival. They do not help when 92 machines out of 100 pass inspection, or when a judge awards the seller 70 percent of the price. In those cases the parties either unwind a deal that mostly succeeded, or they build a split transaction by hand, off the platform, and lose the deal record at the moment they most need it.

This is ordinary commercial practice, not a special Bitcoin problem. The United Nations Convention on Contracts for the International Sale of Goods (CISG), the main treaty that governs many cross-border sales of goods, gives a buyer the right to reduce the price when delivered goods do not match the contract, in proportion to the drop in value, whether or not the price has already been paid [7][8]. Letters of credit under the ICC's Uniform Customs and Practice for Documentary Credits (UCP 600) allow partial drawings and shipments unless the credit says otherwise [9]. Trade already knows how to settle in parts. The escrow should be able to do the same.

Someone asked the practical version of this question on X in October 2026: if Tetrapolar's backup key is there to carry out a court order, what happens when that order includes a partial refund [10]? At the time, we did not support that settlement. We do now.

What split settlement is

Split settlement is a payout from the same vault with two destinations. Part of the locked bitcoin goes to the seller's payout address. The rest goes to the buyer's refund address. Both amounts appear in one Bitcoin transaction, which the required parties review and sign before it is broadcast.

On the normal path, buyer and seller both sign, the same two-of-two rule as a full release or a full refund [1][2]. Neither side can impose a split on the other. Proposing a 90/10 split gives the seller no new power, because the seller still has to sign.

On the backup path, after the deal's timelock, any two of the three keys can sign. Tetrapolar's key can then sign together with one of the parties to carry out a court or arbitration decision [1][2]. If that decision awards a split, the payout can now match the ruling as written, instead of sending everything to one side. Tetrapolar does not inspect goods, review evidence, or decide who is right. It still cannot move the funds on its own.

USD-denominated deals keep the funding buffer they already use. The buyer funds the agreed dollar price plus a buffer of 10 percent to 50 percent. At settlement the seller receives bitcoin worth the dollar amount that is actually being paid, at the current rate, and unused bitcoin returns to the buyer in the same transaction [4]. A split on a USD deal is the same idea with an extra number: the seller's dollar amount can be lower than the original price, and the buyer receives both the unused buffer and the refunded portion of the price.

Nothing about key generation or custody changes. Keys stay with the parties. There is no platform balance and no pooled funds [11].

How a split runs

The commercial conversation happens first. Both sides agree what the seller is still owed and what should return to the buyer, using the same unit the deal already uses: bitcoin, or US dollars on a USD-denominated deal.

Tetrapolar then builds the payout transaction so both sides can see the breakdown before anyone signs: the amount to the seller, the amount back to the buyer, the service fee, and the network fee. Each party signs with their own key. Once the required signatures are in, the transaction is broadcast. After the usual confirmations on the Bitcoin network, the deal is settled [3].

If the parties cannot agree on the numbers, the money stays in the vault. A split is not a way for one side to pull funds out alone. The next step is the same as it was before: keep negotiating, or follow the deal's documented backup path if a court or arbitrator later decides the amounts.

Example 1: Mining hardware with a few failed units

Take a hypothetical order for 100 ASIC miners, which are specialized machines built for Bitcoin mining, priced at $200,000. The buyer funds a USD-denominated deal with a 20 percent buffer, so the vault holds enough bitcoin to cover $240,000 at the rate used when the deal was funded.

The machines arrive. The buyer's technician finds that 8 units fail the agreed hashrate test, which measures how much mining work a machine can do. The other 92 match the contract. Neither side wants to unwind a $184,000 delivery over $16,000 of faults.

They agree to pay for 92 units: $184,000 to the seller. The remaining $16,000 of the price, plus whatever is left of the funding buffer, returns to the buyer in the same transaction. Both sides sign. The seller is paid for what shipped and passed. The buyer is not forced to choose between a full release and a full refund.

A milestone structure would not have helped here. The parties did not plan "step one: 92 machines, step two: 8 machines." The shortfall only appeared at inspection, inside a single delivery.

Example 2: An import that arrives short

An importer orders a container of industrial parts for $120,000, again as a USD-denominated deal. The documents and the packing list promised a full container. On arrival, 10 percent of the line items are missing. The rest is as ordered, and the importer wants to keep it.

Under a price-reduction approach like the one in the CISG, the buyer pays for the goods that conform and reduces the price for what does not [7][8]. The parties agree the seller should receive $108,000. Split settlement pays that amount to the seller and returns the $12,000 difference, plus unused buffer, to the buyer.

Without a split, the importer either releases the full $120,000 and chases a rebate after the fact, or refuses to release anything and leaves the exporter unpaid for a container that mostly arrived. The first option recreates the counterparty risk that escrow was meant to remove. The second turns a 10 percent shortage into a 100 percent dispute.

Example 3: Services accepted in part

A restoration shop agrees to rebuild a machine for $80,000, priced in bitcoin, with payment on delivery. The shop completes the mechanical work the contract required. The custom control software the buyer also ordered is not ready, and both sides agree that work is about a quarter of the price.

They settle $60,000 to the shop and return $20,000 to the buyer. The shop is paid for accepted work. The buyer does not have to refuse the whole job to protect the unfinished portion.

If this project had been set up with milestones (a payment on the mechanical stage, a payment on the software stage), each stage would already have been its own vault [5][6]. Split settlement is the tool for when the contract was a single deal and the mix of accepted and unfinished work is only clear at the end.

Example 4: A ruling that splits the funds

Not every disagreement ends with both sides freely agreeing. After the timelock, the backup path lets Tetrapolar co-sign with one party to carry out a court or arbitration decision [1][2]. Those decisions are often not all or nothing. A tribunal can award the seller most of the price and return the rest, or award damages as a reduction rather than a cancellation.

Suppose a ruling says the seller is entitled to 70 percent of a $200,000 deal, and the buyer is entitled to the remaining 30 percent. The payout can now send $140,000 worth of bitcoin to the seller and $60,000 worth back to the buyer, plus any unused buffer on a USD-denominated deal. Tetrapolar's key signs only a transaction whose outputs match the ruling. It does not choose a winner, and it still cannot spend from the vault by itself.

That is the answer to the question we were asked in October. The backup key is there to execute a legitimate decision, including one that splits the money [10][11].

When to use milestones instead

Use milestones when the contract already has more than one commercial moment: a deposit, a payment against shipping documents, a balance on acceptance. Each moment gets its own standard escrow, independently funded and released, up to twenty steps in one arrangement [5][6].

Use split settlement when a single vault needs two destinations at the end. The two features compose. A milestone can itself settle as a split if that one step ends in a price adjustment.

Do not use either feature as a way to skip inspection, skip a written contract, or ask Tetrapolar to decide a dispute. The platform coordinates the keys and the payout. It does not replace a surveyor, an inspector, or a court [11].

What has not changed

Release still needs the people the wallet was built for. On the normal path that is the buyer and the seller. On the backup path it is any two of the three keys, used to carry out a decision the parties or a tribunal already reached. If Tetrapolar went offline, buyer and seller would still hold two of the three keys and could settle, including a split they both agree on, with standard Bitcoin wallet software [13].

Tetrapolar is in open beta [12]. Create a deal at tetrapolar.com or read the buyer's guide to see the standard flow. Split settlement is available on live deals now.

Questions? Reach us at info@tetrapolar.com.

Sources

1. Tetrapolar, "Smarter Bitcoin Escrow: Flexible Multisig Built for Real-World Deals" (2-of-2 cooperative path; timelocked 2-of-3 backup for court decisions or written instructions; Tetrapolar does not decide disputes): https://blog.tetrapolar.com/smarter-bitcoin-escrow-flexible-multisig-built-for-real-world-deals/
2. Tetrapolar, "Tetrapolar: Building Bitcoin-Native Settlement for Global Trade" (primary 2-of-2 path; dispute and recovery 2-of-3 path; Tetrapolar cannot move funds unilaterally): https://blog.tetrapolar.com/tetrapolar-building-bitcoin-native-settlement-for-global-trade/
3. Tetrapolar, "Tutorial: How to Complete a Bitcoin Escrow Deal (Buyer's Guide)" (resolution as release to seller or refund to buyer; signing and broadcast; settled after three confirmations): https://blog.tetrapolar.com/tutorial-how-to-complete-a-bitcoin-escrow-deal-buyers-guide/
4. Tetrapolar, "Back to Basics: Tetrapolar Is Now Bitcoin-Only" (USD-denominated deals; 10% to 50% funding buffer; unused buffer refunded to the buyer in the same settlement transaction): https://blog.tetrapolar.com/back-to-basics-tetrapolar-is-now-bitcoin-only/
5. Tetrapolar, "Introducing Milestones: Escrow Settlement in Installments" (group of standard escrow contracts, up to 20, each independently releasable): https://blog.tetrapolar.com/introducing-milestones-escrow-settlement-in-installments/
6. Tetrapolar, "Milestones: Settle Your Deal in Installments" (milestones as composition of standard deals; a dispute on one installment does not open the others): https://blog.tetrapolar.com/milestones-settle-your-deal-in-installments/
7. UNCITRAL, United Nations Convention on Contracts for the International Sale of Goods (CISG), Article 50 (buyer may reduce the price in proportion to the reduced value of non-conforming goods, whether or not the price has already been paid): https://uncitral.un.org/sites/default/files/media-documents/uncitral/en/v1056997-cisg-e-book.pdf
8. UNCITRAL, CISG overview (adopted 11 April 1980, in force 1 January 1988): https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg
9. ICC, Uniform Customs and Practice for Documentary Credits (UCP 600), Articles 31 to 32 (partial drawings and shipments; instalment drawings or shipments): https://library.iccwbo.org/content/tfb/RULES/tfb-ucp600-rules.htm
10. Alaa Abbassi, question to Tetrapolar about executing a court order that includes a partial refund (8 Oct 2026): https://x.com/AlaaAbbassi/status/2108083656611057791
11. Tetrapolar, Terms of Service (non-custodial coordination layer; Tetrapolar does not take possession of funds; 2-of-2 and 2-of-3 arrangements): https://tetrapolar.com/terms-of-service
12. Tetrapolar, product site: https://tetrapolar.com/
13. Tetrapolar, "Tutorial: How to Recover Deal Funds If Tetrapolar Goes Offline (BTC Edition)" (buyer and seller can reconstruct the multisig and settle without the platform): https://blog.tetrapolar.com/tutorial-how-to-recover-deal-funds-if-tetrapolar-goes-offline-btc-edition/