Exchange is list of offers from different accounts, aka enlisted holders offers for buy/sell. There is digital signed agreement where your funds will be sold from your account for the price you've been asking.

In simple terms all Bitshares are held/issued by the blockchain who has only one entry point and that is through credentials given single time to user while first time creating his account.

Thanks for the reply @murda-ra.

I was referring more to the hacking...if the bitshares are kept on the exchange as opposed to the downloaded wallet, are they are risk or not since the key is not held by the exchange?

Nothing is at risk, because at simple words,

only entry point to the bitshares is key issued to the user at creation of the wallet. No recovery, no emails, no database storage, so ONLY user and user itself is risk to his funds and nobody's else except him.

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