The law tables of CZ – Recent events related to FTX bankruptcy it reminded everyone how young and fragile the cryptocurrency ecosystem was. Therefore, in this universe more than anywhere else, the behavior of the players in this market must be beyond reproach. Otherwise, as we are all seeing now, the consequences can be dramatic for its development. It is in this context that the binance boss, cz extension, appeals to all exchanges in the form of 6 commandments. All the details.
Exchanges must lead by example
While preparing to create a business support fund affected by the FTX cataclysm, CZ publishes a message, a reminder of the fundamentals. A set of rules that have the good taste of placing an essential point at the center of concerns for any self-respecting exchange. User trust. Because the latter will be difficult to rebuild.
As CZ reminds us, crypto platforms need to protect their users’ funds by all means. This is priority number 1. In a world where exchanges are the gateway to the adoption of cryptocurrencies by the general public, one should not blame a market player who wants to be serious and respected. . Transparency as master of ceremonies, Binance wants to lead by example in this messy cacophony following the FTX drama.
Point number 1. An exchange must be allergic to risk. In fact, user funds should never, ever be traded or invested. Let’s leave this behavior to traditional banks and try to do better. Need eliminate fractional reserve banking of our vocabulary.
Point number 2. CZ repeats it. An exchange should never use its native token as collateral. In addition to the fluctuation of the course of this, theinterdependence resulting between the exchange and its token is dangerous for its survival.
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Transparency first for Binance
Article number 3. Transparency, transparency and more transparency. We cannot stress this enough. This is what users need now to continue believing in the good faith of market players. Binance has generally already unveiled the wallet address list on which the exchange would keep its funds. While this does not represent proof of ownership, it is a first step on the part of Binance. This pending the publication of a real one Backup tests structured around the technology of Merkle trees (Merkle trees). A process that will allow you to verify without any doubts and at any time the funds of the exchange.
Article number 4. Have large cash reserves. A key point to any trade as Proof of Reserve is enforced via the Merkle Trees. Binance, through its reserve fund, the SAFU fund, holds $1 billion ready to be withdrawn in the event of the unexpected.
Article number 5. Avoid leverage effects. Trading on debt, in a volatile world like cryptocurrencies, is not wise according to Binance. CZ, of which we have sketched this year the cryptographic portraitit also ensures that the operation of its exchange is debt-free.
Article number 6. Strengthen safety and collaboration with regulatory agencies. Because in light of recent events, the latter will have the perfect excuse to apply abusive regulations to the entire ecosystem. And this would risk stifling innovation in such a promising ecosystem. Dialogue with these entities should therefore be privileged so as not to create generalities on the basis of the excesses of a minority driven by madness.
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