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That's probably not what happens in practice. 1. You never got the BTC to begin with. Its on FTX's platform, with a little database entry that says "User Bob h
by dragontamer 4y ago
That's probably not what happens in practice.
1. You never got the BTC to begin with. Its on FTX's platform, with a little database entry that says "User Bob has -1 BTC on margin on the books".
2. The cash never leaves FTX platform either. Because FTX needs to "margin call" (aka: grab your assets somehow) if the market moves against the short position.
3. So really, you're trusting that FTX is going to give you the money back eventually when you zero out all your position entirely.
4. Also remember: exchanges regularly grab the assets. So its not really FTX's bitcoin either. They probably took it from Alice to lend to you.
5. If you wanna say "Well, why doesn't Bob go to Alice directly for this transaction??", its because Alice doesn't trust Bob, and Bob has no trust of Alice, so the entire scheme would never work.