What Are the Key Takeaways to Take in from Ftx’s Downfall?
1. FTX halted all non-fiat customer withdrawals.
Customer withdrawals that were previously processed but backlogged have been halted altogether.
2. FTX, a Centralized Exchange, has reportedly mishandled customer funds.
This leads to Binance not proceeding with the potential acquisition of FTX
3. FTX allegedly extended loans to Alameda, FTX CEO Sam Bankman-Fried’s other major business, using money that customers had deposited on the exchange for trading purposes.
4. Alameda invested heavily into FTX’s tokens and several of their own projects and used them as collateral.
This means that they were using their own tokens as collateral which is analogous to a bank lending a lot of money against its own stock.
All this just shows the problem with Centralized Finance. Your private keys and assets are in the control of the exchanges. There were questionable practices and elements within this event that leads to the question “Can these major exchanges still be trusted?”
Every time a major player in an industry fails, the retail consumers suffer.
Thus, how do you protect yourself and your hard-earned assets? Let’s break it down.
1. Take Online Financial Gurus’ Advice with a Grain of Salt
It’s amazing how so much content is out there teaching people how to invest money in shady projects/institutions and how alarmingly easy to convince people. Anytime someone promises a huge deal of money for an upfront fee should immediately raise alarm bells in your head.
2. Avoid Phishing Attacks
Phishing scams are one of the most common crypto scams and are even older than crypto itself. Never click on a random link you receive in a text message or e-mail. Never give sensitive information like passwords and seed phrases.
3. Avoid Putting Large Amounts of Money on Centralized Exchanges.
People always say “Not Your Keys, Not Your Coins” and it’s with good reason. In cases of liquidity crunches (especially when bank runs happen), centralized exchanges can halt withdrawals similar to what happened with FTX. Use Decentralized Exchanges over CEXs as much as possible.
Unlike centralized exchanges (CEX), decentralized exchanges (DEX) are non-custodial, meaning that the user remains in control of their private keys when transacting on a DEX platform.
As an example, SokuSwap is a DEX that emphasizes user security and control. SokuSwap is the first Cross-Chain Aggregator DEX that allows you to trade over 10,000 tokens between 8 different networks in just a few clicks.
In the decentralized space, absolute ownership entails absolute accountability. Take notes to prevent scams and frauds, back up your private keys and stay well-informed about the changing trends and news in the crypto industry.
The FTX disaster has caught almost everyone by surprise and the sooner FTX’s customers are made whole the better.