Potentially stupid market structure question of the day: are 100% of Coinbase crypto trades executed on-chain? Is it possible for trades to happen off-chain?
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0% are executed on-chain. It's a database update.
Got it. So Coinbase users in theory own a crypto IOU until they transfer assets outside of its ecosystem?
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Correct. They have counterparty risk against the exchange.
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Wait, is this entirely correct? I understand that exchange tx are just internal updates, but you're saying that purchases of crypto aren't necessarily backed by inventory until delivery (transfer)?
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Exchanges hold IOU's. Fun Fact: QuadrigaCX's ToC said all deposited CAD and crypto are converted to "QuadrigaBucks" etc., tokens which aren't necessarily real CAD and crypto.
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Correct, the OG Bitcoin people are fond of saying "not your keys, not your crypto" for this exact reason
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