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  • 2022 Crypto Recap: The Good, The Bad, and The Uglies

    2022 Crypto Recap: The Good, The Bad, and The Uglies

    The crypto industry had a tumultuous year in 2022, with coins tanking at the start of Q2 and never rallying, signalling the beginning of a crypto winter. To make matters worse, the collapse of Terra Luna and FTX led to a devastating contagion across the industry. Despite the challenges, we shouldn’t forget about the progress and achievements the industry has made. Here’s a brief recap of some of the biggest news in 2022.

    Crypto’s Role in the Russia-Ukraine War (February)

    During the Russia-Ukraine war, cryptocurrencies have been immensely valuable to Ukrainian refugees. Russian attacks have destroyed critical infrastructure, rendering many Ukrainians inaccessible to withdrawing money from ATM machines. Therefore, many Ukrainian refugees relied on digital currencies sent from relatives or donors abroad to purchase goods and services.

    All that is needed for them to access their cryptocurrency wallets is a mobile phone and internet access, which was being provided by the thousands of Starlink satellite internet dishes provided by Elon Musk’s SpaceX at the time.

    Feds Interest Rate Hike (March)

    Despite Bitcoin reaching an all-time high of $69000+ in November 2021, what follows is a series of market decline. This is in part due to the U.S. Federal Reserve announcing its first interest rate hike in March to fight increasing inflation. As a result, the macro backdrop began to worsen, not only affecting crypto assets but also every other investment asset class. This also called into question Bitcoin’s reputation as an inflation hedge as Bitcoin itself started to trade in tandem with Nasdaq tech stocks, according to the New York Times.

    Collapse of Terra Luna (May-July)

    The collapse of the Terra Luna ecosystem in May 2022 was one of the most devastating black swan events in crypto history, wiping at least $60 billion off the market which triggered a dangerous domino effect across the industry such as the fall of several high-profile crypto firms, namely Three Arrows Capital, Voyager Digital, and Celsius Network.

    Amid the crash, the UST algorithmic stablecoin, which was supposed to maintain a $1 peg via on-chain mechanisms with Terra’s native token LUNA, depegged, bottoming out at $0.006. This was caused by a massive continuous selloff on both UST and LUNA, resulting in a death spiral. Terraform Labs (TFL) developers and founder Do Kwon are facing multiple investigations as well as lawsuits into its collapse. (Canadian Pharmacy) As of now, South Korean authorities and Interpol have issued a warrant for the search and arrest of Do Kwon and his accomplices.

    Recovery Plan of Terra Luna Classic (August)

    As of now, the Luna Classic blockchain is managed and governed by the community after Terraform Labs (TFL) developers abandoned the chain in support of Luna 2.0. On August 26th 2022, governance was restored as citizens of Luna Classic could delegate, stake, and vote for the future of the ecosystem. Proposals and the associated implementations are being passed by the Terra Classic Decentralized Autonomous Organization (DAO).

    Feds Sanction Tornado Cash (August)

    On 8th August 2022, the U.S. Treasury Department imposed sanctions against Tornado Cash, a privacy-focused Ethereum mixing service that obscures the trail back to the fund’s original source. They claimed that Lazarus Group, a cybercrime group run by the North Korean government, has been using Tornado Cash to launder illicit funds.

    Moreover, one of the developers for Tornado Cash was arrested in the Netherlands. The crypto community and privacy advocates bashed Netherlands authorities as the developer was simply writing code and had nothing to do with illicit activities. Ethereum co-founder Vitalik Buterin also criticized the move as he himself used Tornado Cash to make donations to Ukraine’s cause.

    Ethereum Merge (September)

    On 15th September 2022 at 06:42:42 UTC at block 15537393, the Ethereum Merge was completed. This meant a merger of the Ethereum mainnet execution layer and the Beacon Chain’s consensus layer, transitioning from the proof-of-work consensus mechanism to proof-of-stake. This landmark update brings major changes to the network, including a 99.95% reduction in energy consumption and a 90% cut in ETH issuance.

    This is a significant achievement in the history of blockchain, allowing the Ethereum network to scale effectively as demand for Web3 and DeFi increase. Since Ethereum is the mother of all smart contract platforms, this could put Ethereum in a position to rival Bitcoin in adoption and even value.

    Downfall of FTX and Sam Bankman-Fried (November)

    On 11th November 2022, former FTX CEO Sam Bankman-Fried (SBF) filed FTX, FTX US, and Alameda Research for bankruptcy in the U.S. Once hailed as one of the top crypto exchanges, the sudden collapse of FTX came as a shocking blow to the entire crypto industry, setting off yet another contagion across the space. This affected 130 affiliated companies including several high-profile firms such as BlockFi, Genesis Trading, Grayscale, KuCoin, Gemini, Coinbase, Crypto.com, Sequoia Capital, and Galaxy Digital.

    Apparently, SBF was misappropriating customer funds for his own benefits without customers’ consent and knowledge, conducting unethical flywheel schemes with Alameda Research. As a result, SBF had been arrested in the Bahamas, facing many criminal charges including securities fraud, money laundering, and campaign finance law violations. However, on 22nd Decemeber 2022, the disgraced FTX founder was released on a $250 million bail.

  • Binance vs FTX Exchange Comparison Overview: Which is the Better Exchange?

    Binance vs FTX Exchange Comparison Overview: Which is the Better Exchange?

    Which Cryptocurrency Exchange is the “Best”?

    There is a lot to consider when it comes to cryptocurrency investment and trading, and crypto exchanges are a great way to start. It is a good platform for beginners to familiarize themselves with the market as well as for experienced traders to make use of the various products the exchanges offer.

    There are hundreds of crypto exchanges, and everyone is asking. “which crypto exchange is the best?” Everyone wants to get the best bang for their buck, whether it be low trading fees or lucrative products. We will be comparing two of the top and most talked about crypto exchanges in the world: Binance and FTX Exchange.

    FTX EXCHANGE (INCLUDING FTX INTERNATIONAL AND FTX.US) ARE NO LONGER IN OPERATION

    Both exchanges have filed for bankruptcy. Subsequently, the exchange was “hacked” and more than US$600 million worth of cryptocurrencies drained. The hacker is strongly rumoured to be a former FTX employee. For more about how this story unfolded and the latest news, check out these articles:

    What is FTX Exchange?

    Founded in 2019, FTX Exchange is a cryptocurrency trading platform that was built by Alameda Research, a quantitative trading firm that develops specialized algorithms for trading crypto. It has topped many trading charts by volume and is responsible for 30% of the market trading volume on major exchanges.

    The strong trading background of FTX shows that they live up to their claim of being an exchange “built by traders, for traders.”

    FTX is largely focused on the derivative and prediction market, offering a wide array of futures, options, and volatility products with competitive trading rates and discounts for specific users.

    FTX Exchange has been growing significantly over the past year, exploding past the likes of KuCoin and Kraken. They even managed to take market share away from Coinbase as well, which is the number one crypto exchange in the U.S. This is in part thanks to huge venture capital funding that is backing FTX.

    Check out FTX Exchange Guide for a full review and tutorial on how to use FTX Exchange. 

    What is Binance Exchange?

    Binance was founded in 2017 by Chengpeng Zhao (CZ), former Chief Technology Officer of OKCoin who has years of experience developing high-frequency trading software.

    Binance is, by a large margin, the world’s most popular cryptocurrency exchange. It has more than than $25 billion in organic trading volume per day and millions of users worldwide.

    Binance is largely focused on the spot market and has one of the most cryptocurrencies available to trade. It also has powerful trading tools such as leveraged trading, options trading and lending platform.

    For the longest time, the trading platform scene is dominated by Binance, and is held in high regard for being smart and proactive in their planning and actions, not only for themselves but also for developing the crypto industry as a whole.

    Binance has been highly active in collaborating with international regulators to support the development of a regulatory framework and policies for cryptocurrencies. In 2022, Binance as well as FTX has received regulatory approval to set up shop in Dubai and Bahrain.

    This is a significant step since it enables both exchanges to function in accordance with international standards, and meet the criteria of major regulators like the Financial Action Task Force.

    Binance vs FTX Exchange Overview

    In this section, we will take a closer look at what Binance and FTX have to offer and compare them based on these features:

    • Products
    • Supported cryptocurrencies
    • Fees
    • Security

    Products

    Binance and FTX have quite a lot of similarities based on their general offering. But the major difference is that Binance is more focused on the spot market and has more cryptocurrencies to offer, whereas FTX is more focused on the derivative and prediction market and has more volatility products. Therefore, FTX is usually seen as the preferred choice for experienced traders who want a wider (and potentially higher risk/reward) range of products.

    Both exchanges offer products that are exclusive to them. Binance offers Crypto Loans, a P2P market, and Binance Earn, while FTX offers volatility and prediction markets. The addition of FTX stocks makes it the first domestic crypto exchange to provide stocks on its platform, enabling trading of stocks and ETFs by U.S. users.

    FTX’s crypto card is exclusively accessible to US residents via the FTX US platform, whereas Binance’s crypto debit card has gained enormous popularity. While FTX places a greater emphasis on specialized trading products, Binance has more to offer in terms of their Binance Earn, allowing users to earn passive income.

    Both Binance and FTX offers a mobile app for iPhone and Android so users can trade cryptocurrencies on the go.

    Supported cryptocurrencies

    Binance has the highest number of cryptocurrencies that any exchange offers to its users. It currently has 1,300 cryptocurrencies including its own native crypto, Binance Coin (BNB).

    Learn more about Binance Coin (BNB).

    Nevertheless, FTX offers a lot of cryptocurrencies for users to trade, though not as large as Binance’s. FTX supports over 460 cryptocurrencies including its own native crypto, FTX Token (FTT).

    Both exchanges however, are consistently adding to their lists of supported cryptocurrencies, including newly launched tokens.

    Fees

    The rates on both exchanges’ spot trade markets are extremely low, and they continue to decline as volume rises. However, FTX wins out since it assesses 0.02% as a maker fee and 0.07% as a taker fee for tier one accounts.

    This is significantly lower than Binance fees, i.e. 0.1% maker and taker fee. Even after using BNB for trading fees, the user will have to pay a 0.075% fee, which is higher than FTX.

    We can see that FTX is better for trading, and is clearly a winner in this category.

    Security

    One of the most important considerations when choosing an exchange is security. It’s safe to say that Binance and FTX are two of the most secure exchanges in the world.

    Both exchanges use two factor authentication, and they store account funds and data away from online platforms so that they cannot be hacked. They also insure their funds by putting a certain amount of fee away as an insurance fraud.

    Both platforms also employ round-the-clock monitoring and analysis, and in the case of a theft, user funds are protected by the reserves that both firms have in their treasuries.

    FTX is one of the few exchanges that have never been hacked, and while Binance has seen some hacking incidents in the past, both exchanges adhere to the strictest industry security guidelines, with the majority of funds being kept in cold storage. FTX also does third party transaction audits via Chainalysis, giving them a slight edge over Binance.

    However, we must also consider the fact that Binance has been around longer and has a much larger trading volume than FTX, making them a more attractive target to hackers. But Binance has managed to hold their ground and plan for the worst, and is still one of the top performing exchanges despite the bear market.

    Conclusion

    Binance and FTX have quite a lot of similarities based on their general offering. But the major difference is that Binance is more focused on the spot market and has more cryptocurrencies to offer, whereas FTX is more focused on the derivative and prediction market and has more volatility products.

    Binance offers the most cryptocurrencies to trade including new projects such as DeFi, NFT or metaverse gaming. If you are a beginner or looking for new tokens to trade, or even an experienced investor who prefers passive earnings, Binance would be a better option for you.

    If you are an experienced trader who strictly does day trading or skilled at volatility products, FTX would be the go-to for you as it offers all the products traders need, with significantly low fees.

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • Proof-of-Reserves Explained: Essential for Crypto Exchanges

    Proof-of-Reserves Explained: Essential for Crypto Exchanges

    In light of the FTX collapse, cryptocurrency exchanges are implementing proof-of-reserves (PoR) as a form of on-chain accounting that shows their entire holdings and customers’ assets. As centralized entities, this is a big step towards a more transparent crypto ecosystem, but some argue it might not be enough to regain investor trust. In this article, we will explain how PoR works and why it matters.

    What is Proof-of-Reserves (PoR)?

    Proof-of-reserves (PoR) is a cryptographic method to verify that an exchange has enough assets to cover all customers’ deposits. In doing so, the exchange ensures customers they have sufficient liquidity on hand to process all withdrawals, should a bank run occur.

    This came to light after FTX secretly used $10 billion of customer funds to prop up its sister company Alameda Research, which ultimately led to a liquidity crunch amidst mass withdrawals.

    This has left the crypto community wondering what other crypto exchanges might be doing with customer assets. As a result, Binance CEO Chengpeng Zhao (CZ) urged all crypto exchanges to do PoR, albeit Kraken was one of the first exchanges to prove their reserves in February 2022.

    How Does Proof-of-Reserves Work?

    Proof-of-reserves essentially involves taking a snapshot of all balances held on the exchange which are aggregated into a Merkle tree — a data structure designed to encapsulate and encrypt data. These Merkle trees, also known as hash trees, function as a map of the exchanges’ assets and liabilities (customers’ tokens).

    From there, a Merkle root is obtained, which is a cryptographic fingerprint that uniquely identifies the combination of these balances at the time when the snapshot was taken. Afterwards, digital signatures produced by the exchange are collected, which prove ownership over the on-chain addresses with publicly verifiable balances. To put it simply, the exchange discloses these addresses and provides proof that they have access to the associated private key.

    Because Merkle trees are part of blockchain technology, anyone can compare and verify if these balances exceed or match the customers’ balances represented in the Merkle tree. In the case of crypto exchanges, this process is either self-attested by the exchange or carried out by an independent third-party audit. As of now, most crypto exchanges have been working with Nansen, a blockchain analytics platform, for their PoR audit.

    Downsides of Proof-of-Reserves

    Although proof-of-reserves is certainly a step in the right direction, there are still several improvements that could be made to enhance transparency and trust.

    Proof-of-Reserves are Pointless without Proof of Liabilities

    A proof-of-reserve audit without disclosure of total liabilities, not just customers’ tokens, does not paint a full picture of an exchange’s solvency. This would include anything the exchange owes such as debts and taxes. Kraken CEO Jesse Powell expressed that Binance’s PoR is pointless without liabilities. This is also in reference to other platforms publishing their PoR without mentioning any liabilities. He also added that accounts with negative balances must also be included in the sum of total liabilities.

    However, the problem is that these liabilities are NOT on-chain, which means an independent auditor has to step in. At that point, crypto exchanges will have to provide the same proof as all public and regulated companies provide — audited financial statements. (Clonazepam) Coinbase is one of the few exchanges to do this. Since they are a public company subject to U.S. regulations, they have already been proving their reserves using balance sheets audited by the SEC.

    Therefore, the most reliable way to prove an exchange’s assets are more than its liabilities is via third-party auditors. In fact, CZ responded to Powell’s comments that Binance would involve third-party auditors to audit their PoR results.

    Proof-of-Reserves Audits Can be Falsified

    Although the cryptographic proof do not lie, it can be manipulated and framed to look healthy. There is the issue of crypto exchanges moving their funds right after the snapshot for the audit was taken. Recently, Crypto.com mistakenly transferred 280,000 ETH to a Gate.io address after it released its proof-of-reserves audit. Many speculated that exchanges were borrowing assets to show a healthy balance sheet, only to return them after the snapshot.

    Moreover, a PoR audit is only as good as its verifier. There is also the issue of exchanges colluding with third-party audits to produce false results. Unless the exchange is audited by a reputable source such as the Big Four accounting firms, we will just have to take their word for it.

    Proof-of-Reserves Do Not Prevent Customer Fund Misappropriation

    Even then, audits and attestations may not suffice. At its core, crypto exchanges are not the same as banks — crypto is not insured by government depositary schemes. Even if all the steps are done correctly, customers can still lose their crypto if mishandled.

    Merkle tree-based PoR would not prevent the misappropriation of customer funds completely. It only tracks the money, providing information. It does not provide customers with greater control over their funds. If the exchange is caught in the act, you would not be able to get your crypto back as it is likely to be tied up in litigation.

    Not your keys, not your crypto. We strongly suggest keeping your crypto on hardware wallets such as Ledger Nano X, Ledger Nano S Plus, Ledger Nano S, Trezor One or Trezor Model T.

    Why Proof-of-Reserves is Crucial

    At the end of the day, proof-of-reserves is the first step towards a more transparent crypto ecosystem. In effect, it functions as a verification tool to filter out fraudulent crypto exchanges, albeit not completely.

    By leveraging blockchain technology, PoR brings crypto exchanges closer to the treasuries of DeFi protocols, allowing anyone to trace funds on-chain at any time. However, there is much to improve in this aspect. But with on-demand, real-time tracking of exchange reserves, the industry is working towards a decentralized and trustless system, where customers do not need to trust the institution, only the math.

  • Key Similarities and Differences Between FTX.com and FTX.us

    Key Similarities and Differences Between FTX.com and FTX.us

    FTX operates two exchange domains, including “FTX.com” for users outside of the US, and the US-regulated “FTX.us” for traders in the US. Although both domains are quite similar, there are a few notable differences in their features and functionalities.

    FTX cryptocurrency exchange first came onto the scene in 2019 as FTX.com. Since then, FTX cryptocurrency and derivatives exchange experienced tremendous growth in trading volumes and the number of registered users. FTX has increasingly hit several milestones on these metrics by providing innovative financial products for all types of crypto traders. The exchange offers leveraged tokens, futures trading, and many more features, including reduced trading fees and multiple ways to earn passive income. In 2020, FTX.us was launched specifically to be US Regulation compliant and to cater to US customers. 

    FTX EXCHANGE (INCLUDING FTX INTERNATIONAL AND FTX.US) ARE NO LONGER IN OPERATION

    Both exchanges have filed for bankruptcy. Subsequently, the exchange was “hacked” and more than US$600 million worth of cryptocurrencies drained. The hacker is strongly rumoured to be a former FTX employee. For more about how this story unfolded and the latest news, check out these articles:

    FTX.com and FTX.us: Who Are They For?

    Although both domains belong to the same platform, they cater to different groups of users. FTX.com is not available for traders in the US due to securities and crypto asset trading regulations imposed by the US government. US customers can only use the FTX.us exchange, as it complies with regulatory requirements. All features users enjoy on FTX.us are also available on FTX.com.

    FTX.com is more suitable for experienced traders since it is strictly a crypto derivatives trading platform with a higher risk of fund loss. Most of the financial products offered by FTX require substantial knowledge of the market and the crypto assets up for trading.

    Similarities Between FTX.com and FTX.us

    FTX.com and FTX.us offers similar features, including user-friendliness and an easy trading experience. Like many exchange platforms, they both feature a trading chart that provides various trading features, charting tools, and in-built indicators.

    Many traders opt for the FTX exchanges because both platforms offer convenient ways to control and track open trading positions. FTX also provides more order types than most crypto exchanges. Available order types include:

    • Market order
    • Limit order
    • Stop limit
    • Stop market
    • Trailing stop
    • Take profit
    • Take profit limit

    Another interesting feature is that they both allow the integration of API keys to automate trading using crypto trading bots. Both domains require users to complete a KYC verification process to start trading and withdrawing funds.

    Differences Between FTX.com and FTX.us?

    FTX and FTX.us are run by different companies, hence previous negotiations to buy out FTX international did not include FTX.us as part of the deal.

    The major difference between the .us and .com FTX exchanges is that FTX.com is a crypto derivatives platform where users can’t trade any real crypto. Users can only trade derivatives, which are secondary products that derive their value from these assets. On the other hand, FTX.us allows users to trade the actual underlying cryptocurrency. Furthermore, the two domains have a few differences regarding the following:

    • Trading pairs and contracts
    • Leverage and margin trading
    • Deposits and withdrawals
    • Trading fees

    Trading Pairs and Contracts

    FTX.com supports futures contracts trading for over 80 cryptocurrencies. Unlike many of its competitors, FTX.com allows futures trading for coins with low market caps. It also supports many fiat currencies, including USD, EUR, AUD, SGD, GBP, TRY, HKD, TRY, CHF, BRL, and CAD.

    One unique feature of the FTX.com platform is its MOVE contract, which allows users to trade market volatility. MOVE contracts represent the absolute value of the amount a crypto asset moves over a period. Additionally, the platform allows its users to trade leveraged ERC-20 tokens, which give traders leveraged exposure to the cryptocurrency market.

    On the other hand, FTX.us does not support as many currencies and contracts as its .com counterpart. The US version only supports about 24 cryptocurrencies and has fewer financial products than FTX.com.

    Leverage and Margin Trading

    FTX.com currently offers its users up to 101x leverage, with an initial maximum leverage of 10x by default. Traders may expand this leverage if their user accounts meet the platform’s requirements. With FTX.us, crypto traders can only get up to 10x leverage subject to specific terms and conditions.

    Deposits and Withdrawals

    FTX.com supports deposits in many cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and various stablecoins. The exchange promptly processes all deposits and withdrawals and does not charge deposit or withdrawal fees for Ether and ERC-20 tokens. For Bitcoin, all withdrawals of more than 0.01 BTC are free. Smaller withdrawals incur withdrawal fees only after the first free one for the day.

    FTX.com also allows users to deposit and withdraw in their local fiat currencies using bank wire transfers. USD transactions take one business day, while other currencies may take longer. Although there are no charges on deposits with FTX.com, fiat withdrawals below $10,000 incur a $75 fee.

    Deposits and withdrawals on FTX.us are also very fast. However, depositing and withdrawing USD can take up to two weekdays. Like FTX.com, FTX.us also charges a fee for USD deposits completed via wire transfer. Users can make one free withdrawal of less than $5,000 per rolling week period. Additional withdrawals cost $25, but all withdrawals above $5,000 are free.

    Trading Fees

    FTX.com uses a 6-tier structure for trading fees. Like many other crypto exchanges, FTX.com gradually decreases the trading fees for its users based on their daily trading volume to encourage higher trading volumes. Tier 1 traders pay a taker fee of 0.07% and a maker fee of 0.02%, while traders in tier 6 only pay 0.04% in taker fees.

    As for FTX.us, the platform generally charges its users higher fees. Although it operates a similar fee structure, FTX.us has 9 tiers. Tier 1 traders pay a maker fee of 0.1% and a taker fee of 0.2%, while traders in tier 9 pay only 0.05% in taker fees and no maker fee.

    Is FTX.us affected by the collapse of FTX International?

    As of 10th November 2022, when users go to FTX international, there will be a banner warning: “FTX is currently unable to process withdrawals. We strongly advise against depositing.”

    Now, when accessing the FTX.us website, there is now an announcement banner warning that, “…trading may be halted on FTX US in a few days. Please close down any positions you want to close down. Withdrawals are and will remain open. We will give updates as we have them.”

    Banner on FTX US website
    Banner on FTX US website

    However, Sam Bankman-Fried, Founder of FTX has tweeted that FTX US is unaffected by the crisis surrounding FTX International and that it is “100% liquid”.

    Nevertheless, many members of the crypto Twitter (CT) community are warning users to withdraw their funds from FTX.us as soon as possible. Given the current situation with FTX International, users of FTX.us are indeed urged to exercise caution and keep updated on any news from the team.