Project Description

“Technology is useful servant but a dangerous master.”Christian Lous

Published By: Shinji.K
Date: 25th of July 2018
Kraken is one of the biggest centralized exchanges (CEX) for Bitcoin. In January, they told users a maintenance work is being scheduled for 2 to 3 hours which in reality became 40 hours instead. The prolonged lull left a bitter taste in the trader’s mouth as trading came to a complete standstill.
A 40-hour downtime means major losses and missed opportunities for users, the unexpected delay could have been detrimental to investors. Much of the insecurity stemmed from fears that Kraken had been hacked
The two major platforms for cryptocurrency trading are CEXs and DEXs, where users can trade digital tokens for fiat money or other crypto coins. But what sets them apart is how organizations that run CEXs require users to pay a fee to use their service and store digital assets in a centralized purse (hence the name) that they control. Hence DEX is more preferable because it democratizes the power that a CEX holds.
The unexpected 40-hour delay by Kraken shows the amount of control that CEX providers have over users’ funds. Similar to banks, these companies have vast amounts of investments sitting in a central vault, making them targets for hackers.
On June 11, Coinrail fell victim to such an attack, resulting in a reported loss of US$40 million. The South Korean CEX suspended its services afterward. Weeks later, Bithumb, a CEX in the same country with a larger user base was also hacked and claimed a loss of US$30 million.
With CFX receiving cyberattacks, it’s widely reported to take into consideration along with the fact that CEX holds all user’s funds in their wallets. When these are compromised, funds will be lost. For example, the hacking incident at Binifex which made CEX decided to distribute its 36.067 percent loss across all users.
Since DEXs doesn’t have a centralized/single point of failure, they’re more secure and have more power in the hands and digital wallets of investors. They also do away with the exorbitant fees that CEXs usually charge.
As cryptocurrency is but a coin toss, the system of blockchain (a.k.a. technology behind cryptocurrency) has the potential to change the world. This is because it helps cover everything from fraud prevention to payments. If a global uptake of blockchain were to take place the world will have a surge in blockchain usage for complex processes or functions, such as holding elections, facilitating currency exchanges, or purchasing electricity.
Until then we are still not ready for what is yet to come but one thing is for sure the future sure looks much better.