Exchange Backed Assets

Exchange Backed Assets

Exchange Backed Assets represent deposit receipts that are issued by a centralized entity, such as exchanges, banks or other institutes. These can either be interpreted as I owe you (IOUs) or certificates for a deposit at that institute.

From the blockchain perspective, EBA are equivalent to a User Issued Assets that is created and issued by an exchange, bank or financial institute. Hence, it is their responsibility to credit you with the corresponding blockchain token (the EBA) on deposits.

Use Case

The most common use case would be a centralized exchange that allows their users to deposit crypto currencies in their wallets. These deposits are usually stored in their own database and the customers internal account balance is matched accordingly. These database balances serve as deposit receipts but obviously require some trust that the database is properly secured against any kind of attacks.

Instead of increasing an internal account balance of a user, new shares of an EBA can be issued to the user on deposits. Since EBAs are blockchain tokens, they can be traded on the decentralized exchange similar to any other exchange.

In order to reclaim his crypto tokens on their native blockchain, the users sends back the EBAs to the institute who then destroy the EBAs and transfer the corresponding asset back to its rightful owner.

Frequently Asked Questions

Since EBAs are implemented as UIA, you can read more about the underlying technology on the corresponding page.