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Centralized Exchanges: Strategies for Gaining Customer Confidence

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In cryptocurrency trading, traders can use decentralized or centralized exchanges. While decentralized exchanges (DEXs) are popular to allow the preservation of funds, centralized exchanges (CEXs) are dominant and preferred by many.

Despite their use, these platforms must use measures to establish and retain customer trust.

A cautionary tale

The collapse of FTX, a cryptocurrency exchange, is a stark reminder of the importance of transparency and security on centralized cryptocurrency exchanges.

The lack of scrutiny, open communication, and publication of key metrics can have dire consequences for traders who entrust their assets to these platforms.

To avoid such mishaps, traders should seriously determine their selection slopes by prioritizing transparency and security.

BitMEX: Transparency and Security

BitMEX, a crypto derivatives trading exchange, may provide a model of transparency and security in the industry. Since 2021, long before the FTX crash, BitMEX has demonstrated its commitment to these values ​​with its on-chain Proof of Reserves and Proof of Liabilities statements.

It allows users to verify that BitMEX holds funds that exceed total customer balances.

By publishing this information twice a week, the trading platform guarantees users updated and accurate data to monitor the level of solvency of the platform.

This level of transparency instills confidence in the platform and sets a benchmark for other centralized exchanges.

StormGain: Introducing a hybrid approach

StormGain is committed to transparency and security in the space. As a hybrid of a decentralized and decentralized exchange, StormGain offers cryptocurrency derivatives through DEX while leveraging its own CEX liquidity.

Users can connect their non-custodial wallets such as MetaMask to StormGain DEX and choose which crypto derivative they wish to trade.

When a blockchain transaction is confirmed for the amount of the trade, crypto is sent over the blockchain to the StormGain DEX smart contract, and the transaction is opened.

When the user closes the trade, the crypto returns to the user’s wallet from the StormGain DEX smart contract.

All trades use StormGain CEX liquidity.

This approach allows StormGain to offer DEX traders exceptional trading conditions while maintaining the security and transparency of the centralized exchange.

The main takeaway for traders

In light of the collapse of FTX and the importance of transparency and security on centralized exchanges, traders should consider the following when choosing a platform:

  1. Audit: Ensure that the central exchange is subject to regular third party audits of solvency and security measures.
  2. open communication: The platforms should maintain open communication channels with users, providing updates on system maintenance, security incidents, and any other relevant information.
  3. Deployment of key metrics: Exchanges must publish key metrics such as Proof of Reserves and Proof of Liability data to allow users to check the solvency of the platform in real time.
  4. Security measures: Evaluate the exchange’s security measures, including how it uses multi-factor authentication, secure storage of user funds, and regular penetration testing.
  5. History and reputation: Check the exchange’s history and reputation within the industry to gauge its commitment to transparency and security.

Conclusion

Decentralized exchanges offer a higher level of decentralization than centralized options. This was further demonstrated by the series of incidents involving centralized trading platforms.

Any mishap involving one company casts a dark shadow on others. Therefore, maintaining a healthy balance of trust requires all industry participants to form a united front regarding transparency and accountability.

Disclosure: This content is provided by a third party. crypto.news does not endorse any product mentioned on this page. Users should do their own research before taking any actions regarding the Company.

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