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kydo
@kydo
Can someone explain to me how does the Ethena’s off-exchange settlement work? It says that the asset is not deposited on a centralized exchange at all and only uses an “off-exchange settlement” mechanism.
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Thomas Humphreys
@so
Off-exchange settlement is a product of Fireblocks. Some exchanges have an agreement with Fireblocks to deposit user funds in their custody rather than on exchanges. So ethena trades pk exchanges based on their collateral on a fireblocks vault.
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kydo
@kydo
curious how does liquidation work for this off-exchange settlement mechanism.
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Thomas Humphreys
@so
P&L is settled in real-time. Your funds are "frozen" on Fireblocks, so you can't withdraw if you lose all your funds. In the event of a counterparty hack, Fireblocks can "unfreeze" those funds but there are T&C. Ethena went with Fireblocks and Copper to reduce risk. fireblocks.com/platforms/off-exchange
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kydo
@kydo
Ah this is really interesting, so the failure case changes from CEX-along in the before-world, to CEX+Fireblocks in the Ethena-world. Is this the correct understanding of things? Is there a way for the CEX to lie to Fireblocks? Curious to learn what is the edge case here.
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Thomas Humphreys
@so
good question. I'm not sure. This is likely an edge case Fireblocks have thought thru. I'd be surprised if the CEX could falsely report their user balance sheet.
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