When you send coins to Ferrum, from the Bitcoin network, for example, Ferrum creates a unique Bitcoin address for you called the “lock address”. No one in the world ever sees the private key for the lock address. Instead, the private key is created in distributed nodes within and around the Ferrum Network. When Bitcoin arrives to your locked address, the same amount of Bitcoin is generated in the Ferrum Network.
You can then spend, exchange, and use the Bitcoin in the Ferrum network, enjoying its high speed and low fees. Holders of Bitcoins in the Ferrum Network can at any time destroy their proxy Bitcoins and get an identical amount of Bitcoins in the main Bitcoin network. A user only has to request that the network unlock the same amount of Bitcoins from the originally locked account, and present the proof of destroyed Ferrum Bitcoins. In practice, this happens with the click of a button in the Fe Wallet.
You can think of this process as taking your cash to the bank and receiving a traveller’s check that is identical in value. The bank has a locked safe in which they put your money, when you receive your traveller’s cheque. You can then spend the traveller’s check as if it is cash. Holders of such checks can go to the bank at anytime and exchange it for cash. The primary difference is that Ferrum does not hold users “cash” (i.e. Bitcoin), rather it is distributed across the network in a secure and decentralized manner.