What a tokenized deposit actually is

Two instruments in CentDNA's illustrative catalogue can both reference the euro, both settle in seconds, and both display the same figure on screen. One is fiat-backed. One is a tokenized deposit. They are structurally different in a way that only becomes visible under stress, which is the worst possible time to discover it.

A fiat-backed instrument represents a claim on a pool of segregated assets held for the benefit of holders. The assets are meant to sit outside the issuer's own balance sheet, so that the issuer failing and the backing disappearing are two separate events.

A tokenized deposit is a claim on the issuer's balance sheet. It is a deposit, recorded differently. There is no segregated pool standing behind it, because a deposit has never worked that way — what stands behind it is the institution. That is not automatically worse, and a well-capitalised institution may be a stronger counterparty than a thinly-documented reserve pool. But it is a different question, and it deserves to be asked as one.

This is why CentDNA carries counterparty risk as its own axis rather than folding it into a single risk figure. In the illustrative catalogue, the tokenized-deposit instruments consistently score higher on transparency and custody strength and higher on counterparty exposure at the same time. Both of those are true simultaneously and neither cancels the other.

The distinction the whitepaper insists on stating everywhere applies with particular force here: a digital representation is not legal ownership of an underlying asset. Whatever the instrument represents, holding the representation is not the same as holding the thing. Fiat-backed or deposit-based, that sentence does not change — only what sits on the other side of it does.