The recent collapse of FTX is again raising the question of ‘who actually controls our crypto assets?”. This whole debacle has significantly damaged the crypto industry, as almost every major crypto is experiencing historical downtrends. What’s worse is that thousands of users have lost full control of their crypto assets on the exchange.
These exchanges act like banks, investing users' capital in other businesses, often high-risk ventures. This is a disastrous practice, as asset withdrawals in the crypto industry are much more frequent than traditional finance. It’s highly unethical, as user funds are being locked up and internally invested without any acknowledgment or concern.
FTX’s collapse only solidified what we already feared about centralized exchanges. It’s the fact that such platforms lack control and accountability. When you’re putting you crypto assets in such platforms, you’re not really in control and the private keys are with the CEOs and operators of these platforms.
The crypto community has seen these exchanges suspend all user withdrawal activity and file for bankruptcy. Also, these platforms don’t have any significant insurance for users. So, if your funds are lost due to insolvency or a cyber-attack, it’s more or less lost forever. All of these incidents in 2022 has taught us that there is no transparency in how centralized exchanges operate.
It might be a good time for users to re-think their crypto storage practice. DEXs offer a lot of solutions that are plaguing the industry today. They offer more control over user funds through peer-to-peer systems, where only the users are in control of their accounts, funds, and their private keys.
DEXs offer users full-custory of their wallets. In current circumstance, such platforms are a much safer alternative, because there is no middleman so you’re mostly safe from hacking and scams. DEXs don’t have transaction fees.
However, that doesn’t mean that decentralized exchanges are without its cons. While some centralized platforms do offer a certain level of insurance, DEXs dont. There’s also the fact that DEXs often have a complex interface, and are not always the most user friendly platform for beginner or intermediate traders.