Centralization Played a Big Part in FTX’s Meltdown. It’s Time for DeFi to Shine

FinanceFeeds Editorial Team

There’s no denying the fact that the whole of 2022, particularly November, has been highly debilitating for the digital asset industry as a whole. In this regard, just a few weeks ago, FTX —  widely considered to be one of the largest cryptocurrency exchanges in the world up until last month — was hit with a major scandal that caused the project to implode seemingly overnight.

As a quick refresher, on Nov. 2, it came to light that Alameda Research, a hedge fund operated by FTX head Sam Bankman-Fried, possessed huge amounts of FTT (FTXs native cryptocurrency) even though the two businesses were meant to be separate entities. 

Following the revelation, Binance announced that it would be liquidating its FTT positions, which prompted the token’s value to plummet and traders/investors to rush and pull out their assets held by FTX. 

Due to the enormity of the liquidations, FTX could not process its withdrawal requests — estimated to be worth $6B over a span of just 72 hours — thereby being faced with a massive liquidity crunch. 

CeFi’s weaknesses continue to come to the forefront… 

Since the start of the year, the crypto community has continued to keep learning the lesson of why decentralized finance (DeFi) is needed in this day and age the hard way, with major entities like Celsius, BlockFi, Voyager Digital, and now FTX having bitten the dust within the span of a few months.

All of the aforementioned projects were either centralized exchanges (CEXs) or centralized financed platforms (CeFi), with their business models essentially being the same, i.e. their day-to-day operations were overseen by a single governing body. To elaborate, while these platforms offered users exposure to crypto assets, they do not provide them with root ownership of their coins by holding on to their associated private keys.

On the other hand, during all of the recent market turmoil, decentralized finance (DeFi) platforms such as Uniswap, Balancer, Curv, among others, continued to function seamlessly, allowing their clients to exit their crypto positions if they chose to do so. Basically, not a single user lost access to their assets at any point during the meltdown.

To this point, DeFi projects are designed to maintain/preserve the benefits introduced by crypto-enabled technologies such as permissionlessness, a high degree of operational and functional transparency, resistance against any form of censorship, and self-sovereign custody of assets.

DeFi FTW… Here’s Why

As the frailties of today’s centralized crypto platforms continue to be exposed as a result of one crash after another, a growing forum of crypto users have continued to advocate for the use of DeFi. In this regard, Radix is one of the better, more reliable decentralized finance offerings in the market today. 

In essence, it is an asset-oriented smart contract platform purpose-built for DeFi. To elaborate, Radix is the only vertically integrated purpose-built full stack for DeFi across the entire burgeoning Web3 ecosystem. It helps solve many of the pressing industry-wide issues plaguing the sector — including poor security, low scalability, and a lack of strong developmental capabilities — while also providing a Layer-1 (L1) solution that provides users with a rock-solid foundation for the growth of DeFi projects and dApps.  

Lastly, it is worth mentioning that Radix utilizes a full stack approach to making the DeFi industry more scalable using a number of different routes, including the re-engineering of how consensus mechanisms work, deployment of distributed virtual machines, utilization of executable on-network code, creation of a simplified/intuitive DeFi application building framework and providing developers with lucrative incentives.

Looking ahead

While people across the globe have continued to call for more regulation of the crypto sector, it should be noted that the collapse of FTX was a failure of the CeFi industry (and its existing operation schemes) rather than a lack of legislation. In fact, the whole fiasco has served as an essential reminder of why decentralization is kind. Therefore, as we head into a future driven by digital assets, it stands to reason that more and more people will continue to gravitate towards DeFi since it presents a technological, financial paradigm shift that its centralized counterparts cannot compete with on any level.

Read this next

Market News

Stock Market Analysis: Is NVDA Losing Its Leadership?

Since the beginning of the week, the S&P 500 Index (US500) has seen a modest increase of about 0.58%, whereas NVDA’s share price has experienced a decline of approximately 3.8%. This recent divergence raises concerns among Nvidia stock investors — could it signify a loss of NVDA’s market leadership?

Industry News

ESG: Australian regulator wins first greenwashing court case against Vanguard

Vanguard admitted that a notable portion of the securities within both the Index and the Fund did not undergo the promised ESG scrutiny.

Fintech, Uncategorized

BitMEX integrates HALO from Solidus Labs for cross-market surveillance

““The recent approval of the Spot Bitcoin ETF has piqued the market’s interest. As a result of price volatility, the trading volumes for crypto derivatives have gone up substantially. HALO, with its advanced technology and crypto-native detection architecture, will enable BitMEX to smoothly and safely scale trade surveillance across its increased trading volumes and provide the necessary safeguards for new product launches.”

Reviews

IUX Broker Review

IUX, recently rebranded from IUX Markets, stands as a multi-asset Forex broker recognized for its regulatory compliance across various jurisdictions.

Industry News

Horizon Software rebrands to Horizon Trading Solutions

“Horizon Trading Solutions has seen accelerated global growth over the past year to meet the rising demand for our trading solutions and built-for-purpose technology offering. The choice to rebrand represents a key part of this development, while maintaining our heritage and history in the industry.”

Market News

USDJPY has surged to levels last witnessed in 2022. Should we consider opening a short position?

The recent resurgence of the US dollar has propelled USD/JPY to new heights, touching levels not seen since 2022. This surge comes against the backdrop of stable short-term yields and ongoing economic data that fails to signal a significant slowdown, prompting questions about the extent of current monetary easing measures.

Digital Assets

DED Trends on Twitter After Memecoin Snapshot Announcement

Polkadot-backed community coin #DED, made it to the trending charts on X, demonstrating community’s engagement and interest behind the memecoin. 

Digital Assets

BlockDAG Presale Nears $10 Million Amid Toncoin’s Momentum, Green Bitcoin’s Presale, and the Rise of Other Top Cryptos

This article will examine three top trending topics: Toncoin’s potential, Green Bitcoin’s innovative presale, and BlockDAG’s sustainable mining approach. These cryptocurrencies take centre stage for their uniqueness and innovation.

Digital Assets

Coinbase scores minor victory vs SEC, but lawsuit to proceed

A federal judge in Manhattan, U.S. District Judge Katherine Polk Failla, ruled on Wednesday that the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Coinbase can largely proceed.

<