diff --git a/src/state/state_transition.rs b/src/state/state_transition.rs
index a9f1c41ba..baf70c8e3 100644
--- a/src/state/state_transition.rs
+++ b/src/state/state_transition.rs
@@ -1,4 +1,3 @@
-use super::utils::types::{ Bitfield, U256 };
 use super::bytes::{ BytesMut, BufMut };
 use super::crystallized_state::CrystallizedState;
 use super::active_state::ActiveState;
@@ -54,46 +53,11 @@ pub fn get_attesters_and_proposer(
     }
 }
 
-pub fn process_ffg_deposits(
-    cry_state: &CrystallizedState,
-    ffg_vote_bitfield: Bitfield)
-    -> (Vec<u64>, u64, U256, bool, bool)
-{
-    let active_validators: usize = cry_state.num_active_validators();
-    let finality_distance: u64 = cry_state.finality_distance();
-    let online_reward: u64 = if finality_distance <= 2 { 6 } else { 0 };
-    let offline_penalty: u64 = finality_distance.saturating_mul(3); 
-    let mut total_vote_count: u64 = 0;
-    let mut total_vote_deposits = U256::zero();
-    
-    let mut deltas = vec![0_u64; active_validators];
-    for i in 0..active_validators {
-        if ffg_vote_bitfield.get_bit(&i) {
-            total_vote_deposits = total_vote_deposits
-                .saturating_add(cry_state.active_validators[i].balance);
-            deltas[i] += online_reward;
-            total_vote_count += 1;
-        } else {
-            deltas[i] = deltas[i].saturating_sub(offline_penalty);
-        }
-    }
-   
-    let mut should_finalize = false;
-    let should_justify = total_vote_deposits.saturating_mul(U256::from(3)) 
-        >= cry_state.total_deposits.saturating_mul(U256::from(2));
-    if should_justify {
-        if cry_state.last_justified_epoch == cry_state.current_epoch - 1 {
-            should_finalize = true;
-        }
-    }
-    (deltas, total_vote_count, total_vote_deposits, should_justify, should_finalize)
-}
-
 #[cfg(test)]
 mod tests {
     use super::*;
     use super::super::validator_record::ValidatorRecord;
-    use super::super::utils::types::{ Address, Sha256Digest };
+    use super::super::utils::types::{ Address, Sha256Digest, U256 };
     use super::super::
         utils::test_helpers::get_dangerous_test_keypair;
 
diff --git a/src/state/transition/deposits.rs b/src/state/transition/deposits.rs
new file mode 100644
index 000000000..d181bae34
--- /dev/null
+++ b/src/state/transition/deposits.rs
@@ -0,0 +1,122 @@
+use super::crystallized_state::CrystallizedState;
+use super::utils::types::{ Bitfield, U256 };
+
+pub fn process_ffg_deposits(
+    cry_state: &CrystallizedState,
+    ffg_vote_bitfield: &Bitfield)
+    -> (Vec<i64>, u64, U256, bool, bool)
+{
+    let active_validators: usize = cry_state.num_active_validators();
+    let finality_distance: u64 = cry_state.finality_distance();
+    let online_reward: u64 = if finality_distance <= 2 { 6 } else { 0 };
+    let offline_penalty: u64 = finality_distance.saturating_mul(3); 
+    let mut total_vote_count: u64 = 0;
+    let mut total_vote_deposits = U256::zero();
+    
+    let mut deltas = vec![0_i64; active_validators];
+    for i in 0..active_validators {
+        if ffg_vote_bitfield.get_bit(&i) {
+            total_vote_deposits = total_vote_deposits
+                .saturating_add(cry_state.active_validators[i].balance);
+            deltas[i] += online_reward as i64;
+            total_vote_count += 1;
+        } else {
+            deltas[i] -= offline_penalty as i64;
+        }
+    }
+   
+    // Justify if total voting deposits is greater than 2/3 the total deposits.
+    let should_justify = total_vote_deposits.saturating_mul(U256::from(3)) 
+        >= cry_state.total_deposits.saturating_mul(U256::from(2));
+    let mut should_finalize = false;
+    if should_justify {
+        if cry_state.last_justified_epoch == cry_state.current_epoch - 1 {
+            should_finalize = true;
+        }
+    }
+    (deltas, total_vote_count, total_vote_deposits, should_justify, should_finalize)
+}
+
+#[cfg(test)]
+mod tests {
+    use super::*;
+    use super::super::utils::types::{ Address, Sha256Digest };
+    use super::super::super::validator_record::ValidatorRecord;
+    use super::super::
+        utils::test_helpers::get_dangerous_test_keypair;
+
+    #[test]
+    fn test_deposit_processing_scenario_1() {
+        let mut cry_state = CrystallizedState::zero();
+        let mut bitfield = Bitfield::new();
+        let mut total_deposits = U256::zero();
+        let individual_deposit = U256::from(1);
+
+        
+        // load some validators into the cry state and flag
+        // they have all voted
+        for i in 0..10 {
+            cry_state.active_validators.push(ValidatorRecord {
+                pubkey: get_dangerous_test_keypair().public,
+                withdrawal_shard: 0,
+                withdrawal_address: Address::zero(),
+                randao_commitment: Sha256Digest::zero(),
+                balance: individual_deposit,
+                switch_dynasty: 0
+            });
+            total_deposits = total_deposits + individual_deposit;
+            bitfield.set_bit(&i, &true);
+        }
+
+        cry_state.current_epoch         = 100;
+        cry_state.last_justified_epoch  = 99;
+        cry_state.last_finalized_epoch  = 98;
+        cry_state.total_deposits = total_deposits;
+
+        let (deltas, total_vote_count, total_vote_deposits,
+             should_justify, should_finalize) = process_ffg_deposits(
+                 &cry_state, &bitfield);
+
+        assert_eq!(deltas, [6; 10]);
+        assert_eq!(total_vote_count, 10);
+        assert_eq!(total_vote_deposits, total_deposits);
+        assert_eq!(should_justify, true);
+        assert_eq!(should_finalize, true);
+    }
+    
+    #[test]
+    fn test_deposit_processing_scenario_2() {
+        let mut cry_state = CrystallizedState::zero();
+        let bitfield = Bitfield::new();
+        let individual_deposit = U256::from(0);
+
+        
+        // load some validators into the cry state and flag
+        // they have all voted
+        for _i in 0..10 {
+            cry_state.active_validators.push(ValidatorRecord {
+                pubkey: get_dangerous_test_keypair().public,
+                withdrawal_shard: 0,
+                withdrawal_address: Address::zero(),
+                randao_commitment: Sha256Digest::zero(),
+                balance: individual_deposit,
+                switch_dynasty: 0
+            });
+        }
+
+        cry_state.current_epoch         = 100;
+        cry_state.last_justified_epoch  = 99;
+        cry_state.last_finalized_epoch  = 98;
+        cry_state.total_deposits = U256::from(10);
+
+        let (deltas, total_vote_count, total_vote_deposits,
+             should_justify, should_finalize) = process_ffg_deposits(
+                 &cry_state, &bitfield);
+
+        assert_eq!(deltas, [-6; 10]);
+        assert_eq!(total_vote_count, 0);
+        assert_eq!(total_vote_deposits, U256::zero());
+        assert_eq!(should_justify, false);
+        assert_eq!(should_finalize, false);
+    }
+}
diff --git a/src/state/transition/mod.rs b/src/state/transition/mod.rs
index 2f722f2de..6f2308f3c 100644
--- a/src/state/transition/mod.rs
+++ b/src/state/transition/mod.rs
@@ -1,5 +1,7 @@
 use super::config;
 use super::utils;
 use super::blake2;
+use super::crystallized_state;
 
 pub mod shuffling;
+pub mod deposits;