Custody and cash · 37 / 127 · 2 min
Reserves in their own coin
A treasury counted in the project's own token is a circle. The token is not an outside asset.
A reserve counted in their own token moves when the token moves.
A worked case
A firm calls a pile of its token a reserve against customer balances. The token falls. The reserve falls with it. Customers ask for the asset they deposited. The token is not that asset.
The circle
The firm says it holds reserves. A large part of the reserves is a token the firm, or its friends, can mint or dump. The number moves when the token moves.
The queue
Customers, token holders, and lenders are not the same claim. When withdrawals stop, the token does not become a share, and it does not become the missing coins.
The reserve was the token
FTX and Alameda were bound up with FTT, a token of the firm's own world. Customer balances, the token, and the firm's trading were not three sealed rooms. When withdrawals halted in November 2022, holding the token was not the same as holding the asset customers were trying to leave with.
A reserve that rises and falls with a token the firm can influence is a mirror. Ask for the assets that are not the mirror.
Read it yourself
These links are the record. They are not a recommendation, and they are not instructions. A news story or a court paper can still be wrong about a detail. The check does not change because a famous name is in the story.
Apply the check
Open a question. The line is about this topic. It is not a verdict that anything is safe.
Whoever can sell the token into the number.
Whoever can mint it, or pledge it.
The withdrawal desk, which cannot pay deposits with a fallen token.
Check yourself
Write it in your own words. The course's answer opens after that. Nothing is sent.
After this you can ask what the reserve is, in assets that are not their own token.