If you buy coins, those coins are going to be transferred either from a wallet belonging to the exchange or a wallet from another exchange user which the exchan

If you buy coins, those coins are going to be transferred either from a wallet belonging to the exchange or a wallet from another exchange user which the exchange knows about. The difference between the two is a trade-off of speed vs reliability: if the source is an exchange hot-wallet, then the transfer happens immediately-ish and you, the purchaser of cryptocoin with fiat, can wait however long you wish to wait to confirm that legitimate nodes accept the transaction. If the transfer is from a third-party wallet, then you wait until the third-party authorizes the transfer, and the exchange then has a preset wait time to check that the transfer went through before transferring fiat to the third party. Either way, the counterparty risk is denominated in fiat, not cryptocurrency, and therefore much better understood, controllable, reversible, etc. As you point out, this causes massive transaction fees, but that's built into the model. The transaction fees would be lower if they would increase the block size....