FTX's Customer Fund Transfers to Alameda Led to Rapid Downfall

FTX's Transfer of Customer Funds to Alameda Research Amid Liquidity Cr

The past few weeks have been extremely eventful for the crypto sector 

FTX, the market's second-largest exchange, filed bankruptcy on November 11, after concerns of a liquidity crunch surfaced.

As we earlier reported, FTX transferred customer funds to Alameda Research, a statistical trading firm founded by FTX CEO Sam Bankman-Fried. And in no time the company fell apart due to the liquidity crisis.

These financial irregularities have raised a debate regarding centralized exchanges and the fact that they appear to store a large amount of user funds and can access them at any time.

As a result, trust in centralized exchanges appears to have reached a new low. Trading volumes on all centralized exchanges fell dramatically over the weekend as customers rushed to withdraw their tokens from custodial wallets provided by the platforms.

In keeping with this, the decade-old adage "not your keys, not your coins" appears to have taken full effect following the FTX meltdown.

Uniswap, a decentralized exchange, is climbing into the top range of the world's CEXes. Uniswap DEX has surpassed $1.07 billion in trade volume in the last 24 hours, totaling $2.85 billion since November 13th.

So the question that now arises is: What makes DEX superior to CEX following the FTX Drama?

DEX Vs CEX

Decentralized exchanges are far superior to centralized exchanges in terms of safety, prevalence, control, charges, and many more. Let’s discuss everything in brief:

The first and foremost thing which attracts a user is the safety of that platform. Decentralized exchanges have shown to be more secure as they eliminate the need to transfer funds into intermediary accounts, which are more vulnerable to hacking while centralized exchange systems adhere to strict security protocols. 

As a result, experts are suggesting investors to transfer their holdings from custodial wallets to non-custodial wallets. Because a crypto trader has complete control over his funds and every transaction while using a non-custodial wallet.

The next factor is control:  Decentralized exchanges provide more control than centralized exchanges since they use peer-to-peer networks that provide users with complete control over their accounts. The reason DEXs are so popular now is that centralized exchanges give their platforms more control over their users. Most cryptocurrency traders prefer exchange platforms that allow them to operate independently.

In our opinion, these two factor makes decentralized exchanges preferable to centralized exchanges after the FTX fallout. 

Future of DEX

After considering these factors, we may conclude that the development and enhancement of Decentralized Exchanges (DEXes) are crucial for the true survival of digital assets. Centralized exchanges, which formerly ruled the global trading market as one of the major mechanisms to exchange decentralized digital assets, are becoming a thing of the past due to frequent hacks and security breaches, fostering a sense of skepticism in the ecosystem as we recently witness during the FTX fallout.

However, one thing is sure, these recent meltdowns have helped the decentralized exchanges to grow in popularity. It will be interesting to observe how this technology develops and how current circumstances and technological barriers will be overcome… or not.

What do you think about the growing popularity of decentralized exchanges after the FTX meltdown? Share your views in the comment section below.

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