Definition

On-chain reserves are visible via blockchain data, while off-chain reserves rely on traditional custody and attestations.

Key Trade-Off

Visibility does not eliminate legal or custodial risk.

Practical Implications

Off-chain reserves require trust in institutions. On-chain reserves require trust in market mechanisms.

Related Concepts

• What Is Proof of Reserves (and What It Isn’t)?
• Custodianship Models for Stablecoins

Written by Ronnie Huss.