Warm reminder: Cryptocurrencies are extremely risky, so you must be cautious when investing! This article only provides objective descriptions and does not provide investment advice.
The biggest news in the cryptocurrency circle recently was that the US FTX exchange filed for bankruptcy.
Since the US FTX exchange burst on the 9th of this month, the global cryptocurrency market has ushered in a panic plunge. As of press time, the total market value is 5.99 trillion yuan, which is evaporated directly from the 8th to nearly 1 trillion yuan!
is the second largest cryptocurrency exchange in the world with the second largest trading volume. Before the crash, the average daily trading volume reached US$14 billion and the peak reached US$60 billion. It was once selected as the most trustworthy exchange.
Its founder "explosion head" SBF's personal value has also risen, reaching about 17 billion US dollars. He is only 30 years old at this moment.
But just last week, SBF publicly stated that it had misappropriated more than $10 billion that the client had existed on the FTX exchange to lend him to another company, Alemada, and that it almost became a bad debt. The news of
immediately caused market panic, and the FTX platform token FTT immediately plummeted by more than 90%. What’s more serious is that the exchange has a panic “bill run”, which eventually led to FTX filing for bankruptcy protection.
is actually very ironic. The cryptocurrency known as " decentralized " is traded on a centralized exchange
cryptocurrency is a token born in blockchain application technology. Its decentralization is a major feature and a major selling point of it. In layman's terms, your tokens will always belong to you and no one has the right to take them away.
But ironically, such a decentralized cryptocurrency is traded in a centralized exchange.
I also want to popularize it here to avoid misunderstandings from anyone. Because many people who don’t quite understand the root cause will use this to criticize the decentralized attributes of cryptocurrencies as fake.
In fact, as long as the cryptocurrency born in blockchain applications is really decentralized, there is no need to question this. And it is anonymous and cannot be tampered with.
. The fundamental reason for this FTX exchange embezzlement of customer assets is that this exchange is centralized.
For example: In fact, our cash is essentially similar to decentralized cryptocurrencies, but the issuer is the country. As long as the cash is in your hands, no one can take it away. But if you deposit cash in the bank, when the bank goes bankrupt or breaks down, your money will naturally be gone. Your mistake is to put decentralized cash in a centralized bank.
Therefore, as a decentralized cryptocurrency, its storage and circulation should also be carried out in decentralized channels.
In essence, centralized exchanges are the biggest thunder in the currency circle. The single currency lightning only affects itself, and the exchange lightning directly affects the entire cryptocurrency market. Will the decentralized exchange be the general trend? Because centralized exchanges are now privately established, and there is a lack of strong supervision and no national credit endorsement, the financial security risks of centralized exchanges are fully exposed. Investors are willing to trade on centralized exchanges, which is entirely based on their moral character to the exchange boss. At the same time, various hacker attacks and other risks are also very high, and it is actually not safe to place assets on exchanges. Don’t look at the world’s largest Binance, which is now stable and stable, just thinks it is 100% safe. Who can guarantee that it will burst one day? In view of this, it gave birth to decentralized exchanges. For example, the leading players, sushi, dYdX, etc. are famous DEXs. The biggest difference between decentralized exchange (denoted by DEX below) and centralized exchange (denoted by CEX below) is that the private key is still in your own hands and the asset control has not been handed over, which is also the safest way. is essentially a smart contract, and it can only continue to operate according to the established program from the moment it is born.All the above transaction operations are automatically executed by the program and confirmed on the link, so no one can control it, so the risk problem is perfectly solved. (Unless someone invests a lot of resources to attack the chain, but it will not be worth the loss, and basically no one will do this) Therefore, from a security perspective, it is the general trend to replace CEX. At present, it doesn't work. Although DEX is safe, it also has great disadvantages. Before talking, let’s first popularize blockchain common sense. Blockchain has been having a problem for a century, and there is no effective solution to it yet - cannot triangle . impossible triangle, that is, blockchain technology three advantages cannot be both, and can only have two of them at the same time. These three advantages are: decentralization, high security, and high performance (scalability). DEX has two advantages: high security and decentralization, but its performance is very low. means that the transaction speed is very slow. The transaction speed of CEX is 1.5ms, while DEX takes more than 2 seconds at the fastest, and Ethereum even takes 12 seconds to confirm the block. The speed of the snail determines the inability to perform high-frequency and timely operation requirements. It is even more impossible to meet huge transaction requests at the same time, otherwise there will be great congestion at any time with the current chain network performance. Compared with the high-speed CEX, the speed of DEX is too slow. Therefore, it is impossible for DEX to replace CEX without a good solution to the blockchain impossible triangle problem. The bear market is the "touchstone" of the exchange. Exchanges frequently storm In fact, many centralized exchanges have burst in history, among which small but unknown counterfeit exchanges are even more severely affected. is too much to be named. Here are some more well-known exchange burst incidents during 2022: 1. On July 17, Anyin AEX issued an announcement stating that due to cooperation with the police investigation, the platform suspended platform-related services on July 17, 2022 and waited for the police announcement in the future. 2. On August 1, Hufu HOO stopped all transaction services and canceled all business status. The most ridiculous thing is that they actually launched a bond-coin conversion plan and a partner investment plan at the same time, blatantly embezzling customer assets and buying their worthless platform bonds. 3. On August 2, China Coin DEX issued an announcement stating that due to sudden failures in some core applications, it still takes time to troubleshoot problems. Now we have stopped charging and withdrawing coins, and we will undoubtedly run away. 4. On September 5, the world's fourth largest mining pool, and the exchange, revealed that it was impossible to withdraw coins. In fact, the early small amounts can be increased, but the large amounts cannot be increased, and all the later ones cannot be increased. The exchange is the biggest "mine"? It is really common for exchange to run away with money. It is easy to understand if you put yourself in your shoes. People are not sages. Who can not be moved when facing huge assets of tens of billions of dollars? The moral bottom line is worthless, and the money runs away and goes abroad with freedom, leaving only the wailing of customers. The most terrifying thing about is that the impact of the exchange burst is huge. It can cause a lot of speculation, and the entire market will be implicated. Just like this FTX bankruptcy incident, the total market value of the entire cryptocurrency directly shrank by more than $1 trillion. In addition to human factors, the exchange goes bankrupt or run away, there are many reasons. One of them is hacking. The most famous thing is the "Mentougou" incident in 2014. At that time, they were stolen by hackers, with a total value of more than US$400 million. Finally, the capital was insolvent and it was unsustainable, so it was announced to close. Later I heard that the stolen assets were recovered, but I didn’t know if they were returned to the customer. Encrypted assets must be secure. The only way is to master the asset wallet private key , which is not safe anywhere else. Speaking of this, do you know how to do it? But does it mean that DEX can completely replace centralized exchanges?
