Your CEX — MAX/tUSDC

This is the custody boundary. MAX and tUSDC are your own on-chain tokens. Deposit = the token leaves your wallet into the exchange; only the exchange's key can send it back (withdraw).

The exchange's own desk. No wallet of its own; paper inventory backed by custody reserves. Quotes wide (±3) just to keep the book alive / draw the line. If it loses, that loss is the exchange's — the FTX / solvency exposure.

A separate firm, a client of the exchange. It deposited real MAX + tUSDC (so its balance is fully backed — no solvency hole). Quotes tight (±1) to win the flow and earn the spread. Finite capital: if it runs out of one side, it can't quote there. This is the market-making business.

Is the exchange actually good for the money? Reserves = real tokens sitting in the custody hot wallet (on-chain). Liabilities = what the ledger owes all users. Solvent only if reserves ≥ liabilities — the Proof-of-Reserves check FTX failed. Win paper tokens off the house and the gap opens up.

custody wallet: —

A whale wins MAX off the house until the house hits its inventory cap — user liabilities blow past on-chain reserves and the light goes red.

A CEX's real identity is an account, not a wallet. You log in with email + password; your balances and orders live in the exchange's DB, decoupled from any wallet. From here you mint API keys for bots — trade-only, no withdrawal, revocable. That scoped key is the whole reason you can safely let an agent trade: API key ≠ private key.