exchange failures

The world of crypto is volatile and uncertain at the best of times, and this week has been no different. The collapse of FTX marked a moment in crypto history, as it was one of the largest failures that the industry has ever had to contend with.

As one of the largest centralised exchanges, the collapse of the project has undoubtedly left a strong taint on the industry, and many are now wondering if there are to be further high profile collapses on the horizon.

Inevitably, there will be more centralised exchanges that go defunct and fail, and there are many reasons for this.

The contagion will lead to more failures

FTX was one of the largest market makers in the entirety of the crypto space.

There were many companies who had lent money to them, and many projects that they provided liquidity for.

There were also a lot of companies that had funds deposited into FTX, thinking it was a safer option than self custody.

There are a range of companies that have already announced that they have been affected by the collapse of FTX. Sequoia Capital had to write off their $210m investment into FTX, Ikigai Capital had most of their funds deposited to FTX for trading, Genesis Lending has now also halted withdrawals, BlockFi is completely bankrupt, and millions of retail investors have lost all of their money.

Proof of reserve audits aren’t reliable

Despite many exchanges deciding that they are going to now publish proof of reserves, this has also drawn criticism as proof of reserves still leave many questions unanswered.

Proof of reserves only show the assets that are held by the exchange, and these can quite easily be made to be misleading.

For example, in the case of FTX they had full audits from Prager Metis, who didn’t find any discrepancies.

Moreover, proof of reserves only show assets that are held by an exchange – they don’t show liabilities. Many exchanges will have taken out loans and leverage, and thus won’t be reflected in proof of reserves. If someone wants to be certain they have assets, they must take self custody, which can often cause bank runs on exchanges. There is no way to stop future failures if one still has to trust counter parties.

Fractional reserves on exchanges will lead to more failures

There are currently very loose laws over what exchanges are able to do once someone deposits with them.

The moment, depositors are usually legally recognised as unsecured creditors, which means that they have a very weak negotiating position – it would be unlikely for many of the

D2T

The aforementioned disaster is a huge problem for centralised custodians, but traders hoping to capitalise on the downfall of the FTT token could have done so by making good use of the tools and signals available on the Dash 2 Trade platform.

The Dash 2 Trade team have been making further business progress throughout their presale, and have now signed a deal with the BitMart exchange to arrange a listing once the presale has completed.

RIA

Calvaria’s RIA token is currently midway through its presale, having now sold $1.7m worth of their tokens since their presale went live a couple of weeks ago.

The RIA token operates as the lifeblood of the Calvaria play to earn gaming ecosystem, which is built around a world of PVP gaming and battles, with NFTs being used for people to curate their own decks.

The RIA token is entirely Web3 native, meaning that one must take self-custody of their assets in order to compete in the gaming ecosystem – this means all participants in Calvaria will be protected in the event of future exchange meltdowns, especially if they trade the tokens on decentralised exchanges once trading has gone live.

TARO

TARO is the native token of the RobotEra metaverse, and is currently on sale at their presale on the RobotEra website. RobotEra aims to be the premier metaverse with a focus on the world of robots.

TARO operates not just as a token to be used for play to earn gaming rewards, but also as a governance token that can be used to shape the future of the project.

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