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.

views are my own, protocol @ eigen labs; prev working on decentralization @ gitcoin, llama, stanford medicine.

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.

building @so many products • prev. @everyname (acq) @nethermind @proximacapital @consensysacad • thomphreys.com

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

curious how does liquidation work for this off-exchange settlement mechanism.