<p>When users deposit assets into an exchange, they make an on-chain transaction to their deposit address on an exchange. When they pay to that address, the exchange takes custody of the funds and credits the user a corresponding balance in the exchange’s database.</p>
<p>When users trade on the exchange, the exchange tracks orders in their trading engine and updates the user balances in the database as trades get executed.</p>
<p>When users withdraw funds from the exchange, the exchange makes an on-chain payment to an address provided by the user and correspondingly debits the user’s balance in the exchange’s database.</p>
<p>As far as I am aware, public exchanges only facilitate trades through their orderbook. If you were to perform a private sale, you would perhaps use an OTC desk or directly facilitate the trade with the buyer directly.</p>

CC BY-SA 4.0
2024-10-10T08:34:13.093Z
Thanks for the answer.
Sohail Ghafoor
CC BY-SA 4.0
2024-10-10T08:36:00.480Z
I need the solution for the custody like how's finical custody work with exchanges when we list any assets/commodities with tokenizations on blockchain
Sohail Ghafoor
CC BY-SA 4.0
2024-10-10T08:58:35.663Z
When a user deposits fiat currency through a bank, we need to mint a token on our blockchain. This token is then sent to the exchange’s hot wallet, and the user’s account balance is updated in the exchange’s database. The user can start trading using the balance reflected in the database.
Sohail Ghafoor
CC BY-SA 4.0
2024-10-10T08:58:54.150Z
If the user wins and wishes to withdraw fiat, we must update the balance in the database and either transfer the corresponding tokens from the exchange’s cold wallet or burn that amount to match the custody balance. If the user loses, someone else gains, and we adjust all trade balances in the exchange's database accordingly.
Sohail Ghafoor
CC BY-SA 4.0
2024-10-10T08:58:59.153Z
We only need to update the blockchain during deposit and withdrawal processes or when assets are listed or delisted. During these events, we update custody records, settle balances, and perform reconciliation to ensure that the deposited amount matches the withdrawn amount

That is whole system with centralised exchange & blockchain custody & settlement
Sohail Ghafoor
CC BY-SA 4.0
2024-10-10T09:04:25.797Z
We don’t need to add every exchange transaction to the blockchain. Instead, we only need to update the custody and settlement records and then reflect those transactions on the blockchain.

Custody settlement refers to deposit and withdrawal of tokens like USDC, as well as listing, delisting, or minting tokenized assets such as oil. These actions require transferring tokens to the exchange wallet after updating custody following the listing.
Sohail Ghafoor
CC BY-SA 4.0
2024-10-10T12:05:58.040Z
Hi Sohail, a lot of the things you bring up in these comments were not covered in your question post. Perhaps it would be best if you update your question to provide more detail about what you are trying to do. For what you describe, it’s not clear to me why you would need to take custody and mint tokens instead of just selling them. It sounds to me like you might be trying to create a brokerage for stablecoins. Either way, this page is only focused on Bitcoin, not on other cryptocurrencies, and neither on business design.
Murch
CC BY-SA 4.0
2024-10-11T08:38:47.300Z
Hi Murch.

I totaly agree with you.

The things is i'm trying to get a best solution with custody and exchange so i wana understand when we talk about custody of assets on blockchain and able to trade into centrlized exchange, how we are able to bring the best solution based on tokenizam of assets.
Sohail Ghafoor
CC BY-SA 4.0
2024-10-08T13:12:40.780Z
2024-10-08T13:12:40.780Z
Murch
<p>I read <a href="https://bitcoin.stackexchange.com/q/117978/5406">How does clearing &amp; settlement work on crypto exchanges</a> and have a follow-up question:
Can you explain in more detail how our own custody for settlement on the blockchain would work if we want to integrate it with a public centralized exchange and a private sale?</p>

<blockchain><exchanges><decentralized-assets><custody>
How Custody Settlement Blockchain-Based Solutions Work with Centralized Exchanges
Sohail Ghafoor
# How Custody Settlement Blockchain-Based Solutions Work with Centralized Exchanges

(Asked by: username_0 on 2024-10-08)

I read [How does clearing & settlement work on crypto exchanges](https://bitcoin.stackexchange.com/q/117978/5406) and have a follow-up question:
Can you explain in more detail how our own custody for settlement on the blockchain would work if we want to integrate it with a public centralized exchange and a private sale?

**Tags:** blockchain, exchanges, decentralized-assets, custody


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## 1 answers

### Answer by username_1 on 2024-10-08. Score: 2

When users deposit assets into an exchange, they make an on-chain transaction to their deposit address on an exchange. When they pay to that address, the exchange takes custody of the funds and credits the user a corresponding balance in the exchange’s database.

When users trade on the exchange, the exchange tracks orders in their trading engine and updates the user balances in the database as trades get executed.

When users withdraw funds from the exchange, the exchange makes an on-chain payment to an address provided by the user and correspondingly debits the user’s balance in the exchange’s database.

As far as I am aware, public exchanges only facilitate trades through their orderbook. If you were to perform a private sale, you would perhaps use an OTC desk or directly facilitate the trade with the buyer directly.

> **Comments:**
> **username_0**: Thanks for the answer.  
> **username_0**: I need the solution for the custody like how's finical custody work with exchanges when we list any assets/commodities with tokenizations on blockchain  
> **username_0**: When a user deposits fiat currency through a bank, we need to mint a token on our blockchain. This token is then sent to the exchange’s hot wallet, and the user’s account balance is updated in the exchange’s database. The user can start trading using the balance reflected in the database.  
> **username_0**: If the user wins and wishes to withdraw fiat, we must update the balance in the database and either transfer the corresponding tokens from the exchange’s cold wallet or burn that amount to match the custody balance. If the user loses, someone else gains, and we adjust all trade balances in the exchange's database accordingly.  
> **username_0**: We only need to update the blockchain during deposit and withdrawal processes or when assets are listed or delisted. During these events, we update custody records, settle balances, and perform reconciliation to ensure that the deposited amount matches the withdrawn amount  That is whole system with centralised exchange & blockchain custody & settlement  
> **username_0**: We don’t need to add every exchange transaction to the blockchain. Instead, we only need to update the custody and settlement records and then reflect those transactions on the blockchain.  Custody settlement refers to deposit and withdrawal of tokens like USDC, as well as listing, delisting, or minting tokenized assets such as oil. These actions require transferring tokens to the exchange wallet after updating custody following the listing.  
> **username_1**: Hi username_0, a lot of the things you bring up in these comments were not covered in your question post. Perhaps it would be best if you update your question to provide more detail about what you are trying to do. For what you describe, it’s not clear to me why you would need to take custody and mint tokens instead of just selling them. It sounds to me like you might be trying to create a brokerage for stablecoins. Either way, this page is only focused on Bitcoin, not on other cryptocurrencies, and neither on business design.  
> **username_0**: Hi username_1.  I totaly agree with you.  The things is i'm trying to get a best solution with custody and exchange so i wana understand when we talk about custody of assets on blockchain and able to trade into centrlized exchange, how we are able to bring the best solution based on tokenizam of assets.  

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