Custody and cash · 19 / 86
How exchanges fail
Exchanges fail in ordinary ways. They freeze withdrawals, they lose keys, they lend out deposits, or they are robbed. The screen can still show your balance while the money is already gone.
A run
If many people withdraw at once, a fractional reserve shows itself. The firm delays, limits, or closes the door. Your balance is a claim, and claims wait in a queue.
What you can do before that
Do not leave savings on an exchange you do not need for a trade that day. Withdraw to keys you hold when you are done.
A high interest rate for leaving coins on the platform is the firm using your deposit. Ask what they do with it.
Check yourself
If the app still shows your balance, is the money safe?
Not necessarily. The database can show a number the firm cannot pay out.
After this you can treat an exchange balance as a claim that can be delayed, not as cash in your hand.