diff --git a/Cargo.lock b/Cargo.lock
index 64f12ceb..65e0cde7 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -1356,6 +1356,7 @@ dependencies = [
  "anyhow",
  "common",
  "lee",
+ "logos-blockchain-core",
  "logos-blockchain-zone-sdk",
  "serde",
  "serde_json",
diff --git a/lez/chain_state/Cargo.toml b/lez/chain_state/Cargo.toml
index 337367cc..1fcc052e 100644
--- a/lez/chain_state/Cargo.toml
+++ b/lez/chain_state/Cargo.toml
@@ -10,6 +10,7 @@ workspace = true
 [dependencies]
 common.workspace = true
 lee.workspace = true
+logos-blockchain-core.workspace = true
 logos-blockchain-zone-sdk.workspace = true
 
 anyhow.workspace = true
diff --git a/lez/chain_state/src/chain.rs b/lez/chain_state/src/chain.rs
new file mode 100644
index 00000000..f0b4eddb
--- /dev/null
+++ b/lez/chain_state/src/chain.rs
@@ -0,0 +1,417 @@
+//! Two-tier chain state: a reorg-able `head` the sequencer builds on, plus an
+//! irreversible `final` tier. See `DESIGN.md` for the model and rationale.
+
+use common::block::Block;
+use lee::V03State;
+use logos_blockchain_core::mantle::ops::channel::MsgId;
+use logos_blockchain_zone_sdk::Slot;
+
+use crate::{
+    AcceptOutcome, BlockIngestError, StallReason,
+    apply::{Tip, apply_block},
+};
+
+/// A head block plus the channel message that carried it.
+pub struct HeadEntry {
+    pub this_msg: MsgId,
+    pub block: Block,
+}
+
+/// The head tier (reorg-able, from `adopted`/`orphaned`) over the final tier
+/// (irreversible, from `finalized`). `head_state == final_state` replayed
+/// through `head_blocks`.
+pub struct ChainState {
+    final_state: V03State,
+    final_tip: Option<Tip>,
+    head_state: V03State,
+    head_blocks: Vec<HeadEntry>,
+    final_stall: Option<StallReason>,
+}
+
+impl ChainState {
+    /// Fresh state anchored at the genesis/initial state, no blocks applied.
+    #[must_use]
+    pub fn new(initial_state: V03State) -> Self {
+        Self::from_final(initial_state, None)
+    }
+
+    /// State restored from a persisted final tier; head mirrors final.
+    #[must_use]
+    pub fn from_final(final_state: V03State, final_tip: Option<Tip>) -> Self {
+        Self {
+            head_state: final_state.clone(),
+            final_state,
+            final_tip,
+            head_blocks: Vec::new(),
+            final_stall: None,
+        }
+    }
+
+    /// State the sequencer builds its next block on.
+    #[must_use]
+    pub const fn head_state(&self) -> &V03State {
+        &self.head_state
+    }
+
+    #[must_use]
+    pub const fn final_state(&self) -> &V03State {
+        &self.final_state
+    }
+
+    /// Parent the next produced block must chain on.
+    #[must_use]
+    pub fn head_tip(&self) -> Option<Tip> {
+        self.head_blocks
+            .last()
+            .map(|entry| tip_of(&entry.block))
+            .or_else(|| self.final_tip.clone())
+    }
+
+    #[must_use]
+    pub fn final_tip(&self) -> Option<Tip> {
+        self.final_tip.clone()
+    }
+
+    #[must_use]
+    pub const fn final_stall(&self) -> Option<&StallReason> {
+        self.final_stall.as_ref()
+    }
+
+    /// Applies an adopted head block. On failure the head tip stays at the last
+    /// valid block and no stall is recorded (§4a); the head self-heals.
+    pub fn apply_adopted(&mut self, this_msg: MsgId, block: &Block) -> AcceptOutcome {
+        let tip = self.head_tip();
+        if self
+            .head_blocks
+            .iter()
+            .any(|entry| entry.this_msg == this_msg)
+            || tip
+                .as_ref()
+                .is_some_and(|current| block.header.block_id <= current.block_id)
+        {
+            return AcceptOutcome::AlreadyApplied;
+        }
+
+        let mut scratch = self.head_state.clone();
+        match apply_block(tip.as_ref(), block, &mut scratch) {
+            Ok(()) => {
+                self.head_state = scratch;
+                self.head_blocks.push(HeadEntry {
+                    this_msg,
+                    block: block.clone(),
+                });
+                AcceptOutcome::Applied
+            }
+            Err(err) => AcceptOutcome::Parked(err),
+        }
+    }
+
+    /// Reverts an orphaned head block and everything after it, then re-derives head.
+    pub fn revert_orphan(&mut self, this_msg: MsgId) {
+        if let Some(idx) = self
+            .head_blocks
+            .iter()
+            .position(|entry| entry.this_msg == this_msg)
+        {
+            self.head_blocks.truncate(idx);
+            self.rederive_head();
+        }
+    }
+
+    /// One channel update: revert every `orphaned`, then apply every `adopted`.
+    pub fn apply_channel_update(
+        &mut self,
+        orphaned: &[MsgId],
+        adopted: &[(MsgId, Block)],
+    ) -> Vec<AcceptOutcome> {
+        let earliest = orphaned
+            .iter()
+            .filter_map(|msg| {
+                self.head_blocks
+                    .iter()
+                    .position(|entry| entry.this_msg == *msg)
+            })
+            .min();
+        if let Some(idx) = earliest {
+            self.head_blocks.truncate(idx);
+            self.rederive_head();
+        }
+        adopted
+            .iter()
+            .map(|(msg, block)| self.apply_adopted(*msg, block))
+            .collect()
+    }
+
+    /// A finalized inscription. In steady state the block is already in head and is
+    /// moved into `final`; on backfill (not in head) it is applied directly and may
+    /// set `final_stall`.
+    pub fn apply_finalized(
+        &mut self,
+        this_msg: MsgId,
+        block: &Block,
+        l1_slot: Slot,
+    ) -> AcceptOutcome {
+        // Match by MsgId, or by block identity to handle a re-inscribed but
+        // identical block arriving under a fresh MsgId.
+        let in_head = self.head_blocks.iter().position(|entry| {
+            entry.this_msg == this_msg || entry.block.header.hash == block.header.hash
+        });
+        match in_head {
+            Some(idx) => {
+                self.finalize_through(idx);
+                AcceptOutcome::Applied
+            }
+            None => self.apply_finalized_direct(block, l1_slot),
+        }
+    }
+
+    /// Moves `head_blocks[0..=idx]` into the final tier (already validated in head).
+    fn finalize_through(&mut self, idx: usize) {
+        let finalized: Vec<HeadEntry> = self.head_blocks.drain(0..=idx).collect();
+        for entry in finalized {
+            apply_block(self.final_tip.as_ref(), &entry.block, &mut self.final_state)
+                .expect("a validated head block must apply to the final tier");
+            self.final_tip = Some(tip_of(&entry.block));
+        }
+        self.final_stall = None;
+    }
+
+    /// Applies a finalized block straight to the final tier. On success the
+    /// finalized chain is authoritative, so head rebases onto it.
+    fn apply_finalized_direct(&mut self, block: &Block, l1_slot: Slot) -> AcceptOutcome {
+        let mut scratch = self.final_state.clone();
+        match apply_block(self.final_tip.as_ref(), block, &mut scratch) {
+            Ok(()) => {
+                self.final_state = scratch;
+                self.final_tip = Some(tip_of(block));
+                self.final_stall = None;
+                self.head_blocks.clear();
+                self.head_state = self.final_state.clone();
+                AcceptOutcome::Applied
+            }
+            Err(err) => {
+                self.record_final_stall(block, l1_slot, err.clone());
+                AcceptOutcome::Parked(err)
+            }
+        }
+    }
+
+    /// Rebuilds `head_state` from the final tier plus the current `head_blocks`.
+    fn rederive_head(&mut self) {
+        let mut state = self.final_state.clone();
+        let mut tip = self.final_tip.clone();
+        for entry in &self.head_blocks {
+            apply_block(tip.as_ref(), &entry.block, &mut state)
+                .expect("validated head blocks must replay");
+            tip = Some(tip_of(&entry.block));
+        }
+        self.head_state = state;
+    }
+
+    /// First stall is stored verbatim; later ones only bump `orphans_since`.
+    fn record_final_stall(&mut self, block: &Block, l1_slot: Slot, error: BlockIngestError) {
+        self.final_stall = Some(match self.final_stall.take() {
+            Some(mut existing) => {
+                existing.orphans_since = existing.orphans_since.saturating_add(1);
+                existing
+            }
+            None => stall_for(block, l1_slot, error),
+        });
+    }
+}
+
+const fn tip_of(block: &Block) -> Tip {
+    Tip {
+        block_id: block.header.block_id,
+        hash: block.header.hash,
+    }
+}
+
+const fn stall_for(block: &Block, l1_slot: Slot, error: BlockIngestError) -> StallReason {
+    StallReason {
+        block_id: Some(block.header.block_id),
+        block_hash: Some(block.header.hash),
+        prev_block_hash: Some(block.header.prev_block_hash),
+        l1_slot,
+        error,
+        first_seen: Some(block.header.timestamp),
+        orphans_since: 0,
+    }
+}
+
+#[cfg(test)]
+mod tests {
+    use common::test_utils::{create_transaction_native_token_transfer, produce_dummy_block};
+    use testnet_initial_state::{initial_pub_accounts_private_keys, initial_state};
+
+    use super::*;
+
+    fn msg(n: u8) -> MsgId {
+        MsgId::from([n; 32])
+    }
+
+    fn slot(n: u64) -> Slot {
+        Slot::from(n)
+    }
+
+    #[test]
+    fn adopted_blocks_advance_head() {
+        let mut chain = ChainState::new(initial_state());
+
+        let genesis = produce_dummy_block(1, None, vec![]);
+        assert!(matches!(
+            chain.apply_adopted(msg(1), &genesis),
+            AcceptOutcome::Applied
+        ));
+        let block2 = produce_dummy_block(2, Some(genesis.header.hash), vec![]);
+        assert!(matches!(
+            chain.apply_adopted(msg(2), &block2),
+            AcceptOutcome::Applied
+        ));
+
+        assert_eq!(chain.head_tip().expect("head tip").block_id, 2);
+        // Nothing finalized yet.
+        assert!(chain.final_tip().is_none());
+    }
+
+    #[test]
+    fn adopted_bad_block_freezes_head_without_stall() {
+        let mut chain = ChainState::new(initial_state());
+        let genesis = produce_dummy_block(1, None, vec![]);
+        chain.apply_adopted(msg(1), &genesis);
+
+        // Skips ahead (id 3 while head tip is 1).
+        let bad = produce_dummy_block(3, Some(genesis.header.hash), vec![]);
+        assert!(matches!(
+            chain.apply_adopted(msg(3), &bad),
+            AcceptOutcome::Parked(BlockIngestError::UnexpectedBlockId {
+                expected: 2,
+                got: 3
+            })
+        ));
+        assert_eq!(chain.head_tip().expect("head tip").block_id, 1);
+        assert!(
+            chain.final_stall().is_none(),
+            "head freeze records no stall"
+        );
+    }
+
+    #[test]
+    fn adopted_is_idempotent() {
+        let mut chain = ChainState::new(initial_state());
+        let genesis = produce_dummy_block(1, None, vec![]);
+        chain.apply_adopted(msg(1), &genesis);
+
+        assert!(matches!(
+            chain.apply_adopted(msg(1), &genesis),
+            AcceptOutcome::AlreadyApplied
+        ));
+        assert_eq!(chain.head_tip().expect("head tip").block_id, 1);
+    }
+
+    #[test]
+    fn orphan_reverts_head() {
+        let mut chain = ChainState::new(initial_state());
+        let genesis = produce_dummy_block(1, None, vec![]);
+        let block2 = produce_dummy_block(2, Some(genesis.header.hash), vec![]);
+        let block3 = produce_dummy_block(3, Some(block2.header.hash), vec![]);
+        chain.apply_adopted(msg(1), &genesis);
+        chain.apply_adopted(msg(2), &block2);
+        chain.apply_adopted(msg(3), &block3);
+
+        chain.revert_orphan(msg(3));
+        assert_eq!(chain.head_tip().expect("head tip").block_id, 2);
+
+        // A competing block 3 now applies cleanly on block 2.
+        let block3_prime = produce_dummy_block(3, Some(block2.header.hash), vec![]);
+        assert!(matches!(
+            chain.apply_adopted(msg(13), &block3_prime),
+            AcceptOutcome::Applied
+        ));
+        assert_eq!(chain.head_tip().expect("head tip").block_id, 3);
+    }
+
+    #[test]
+    fn channel_update_reverts_then_applies() {
+        let mut chain = ChainState::new(initial_state());
+        let genesis = produce_dummy_block(1, None, vec![]);
+        let block2 = produce_dummy_block(2, Some(genesis.header.hash), vec![]);
+        let block3 = produce_dummy_block(3, Some(block2.header.hash), vec![]);
+        chain.apply_adopted(msg(1), &genesis);
+        chain.apply_adopted(msg(2), &block2);
+        chain.apply_adopted(msg(3), &block3);
+
+        let block3_prime = produce_dummy_block(3, Some(block2.header.hash), vec![]);
+        let outcomes = chain.apply_channel_update(&[msg(3)], &[(msg(13), block3_prime)]);
+        assert!(matches!(outcomes.as_slice(), [AcceptOutcome::Applied]));
+        assert_eq!(chain.head_tip().expect("head tip").block_id, 3);
+    }
+
+    #[test]
+    fn finalize_moves_head_into_final() {
+        let mut chain = ChainState::new(initial_state());
+        let genesis = produce_dummy_block(1, None, vec![]);
+        let block2 = produce_dummy_block(2, Some(genesis.header.hash), vec![]);
+        let block3 = produce_dummy_block(3, Some(block2.header.hash), vec![]);
+        chain.apply_adopted(msg(1), &genesis);
+        chain.apply_adopted(msg(2), &block2);
+        chain.apply_adopted(msg(3), &block3);
+
+        // Finalize through block 2.
+        assert!(matches!(
+            chain.apply_finalized(msg(2), &block2, slot(100)),
+            AcceptOutcome::Applied
+        ));
+        assert_eq!(chain.final_tip().expect("final tip").block_id, 2);
+        // Head tip unchanged; head still ends at 3.
+        assert_eq!(chain.head_tip().expect("head tip").block_id, 3);
+    }
+
+    #[test]
+    fn backfill_applies_directly_to_final() {
+        let mut chain = ChainState::new(initial_state());
+        let genesis = produce_dummy_block(1, None, vec![]);
+        assert!(matches!(
+            chain.apply_finalized(msg(1), &genesis, slot(10)),
+            AcceptOutcome::Applied
+        ));
+        assert_eq!(chain.final_tip().expect("final tip").block_id, 1);
+        // Head mirrors final during backfill.
+        assert_eq!(chain.head_tip().expect("head tip").block_id, 1);
+    }
+
+    #[test]
+    fn invalid_finalized_block_sets_final_stall() {
+        let mut chain = ChainState::new(initial_state());
+        let genesis = produce_dummy_block(1, None, vec![]);
+        chain.apply_finalized(msg(1), &genesis, slot(10));
+
+        // Skip-ahead finalized block, not in head: parks the final tier.
+        let bad = produce_dummy_block(3, Some(genesis.header.hash), vec![]);
+        assert!(matches!(
+            chain.apply_finalized(msg(3), &bad, slot(20)),
+            AcceptOutcome::Parked(_)
+        ));
+        let stall = chain.final_stall().expect("final stall recorded");
+        assert_eq!(stall.block_id, Some(3));
+    }
+
+    #[test]
+    fn head_state_reflects_applied_transfers() {
+        let accounts = initial_pub_accounts_private_keys();
+        let from = accounts[0].account_id;
+        let to = accounts[1].account_id;
+        let sign_key = accounts[0].pub_sign_key.clone();
+
+        let mut chain = ChainState::new(initial_state());
+        let genesis = produce_dummy_block(1, None, vec![]);
+        chain.apply_adopted(msg(1), &genesis);
+
+        let tx = create_transaction_native_token_transfer(from, 0, to, 10, &sign_key);
+        let block2 = produce_dummy_block(2, Some(genesis.header.hash), vec![tx]);
+        chain.apply_adopted(msg(2), &block2);
+
+        assert_eq!(chain.head_state().get_account_by_id(from).balance, 9990);
+        assert_eq!(chain.head_state().get_account_by_id(to).balance, 20010);
+    }
+}
diff --git a/lez/chain_state/src/lib.rs b/lez/chain_state/src/lib.rs
index 065f643d..c4725ec3 100644
--- a/lez/chain_state/src/lib.rs
+++ b/lez/chain_state/src/lib.rs
@@ -2,10 +2,12 @@
 //! the [`apply_block`] entry point plus [`BlockIngestError`], [`StallReason`],
 //! [`Tip`], and [`AcceptOutcome`]. See `DESIGN.md` for the two-tier model.
 
-pub mod apply;
-pub mod ingest_error;
-pub mod stall_reason;
-
 pub use apply::{AcceptOutcome, Tip, apply_block};
+pub use chain::{ChainState, HeadEntry};
 pub use ingest_error::BlockIngestError;
 pub use stall_reason::StallReason;
+
+pub mod apply;
+pub mod chain;
+pub mod ingest_error;
+pub mod stall_reason;