If you’ve been keeping up with the latest events in the cryptocurrency industry, then you are probably aware of the issues plaguing popular exchange, OXEx.
According to reports, the exchange’s founder, Mingxing Xu, also known as, Star Xu, has been questioned by the police in the last week.
While the exchange has distanced themselves from the scandal, stating that they are no longer affiliated with the OK Group where Xu works.
Despite this, the exchange is still facing challenges as of now. It was stated this week that withdrawals on the exchange have been halted. This is because one of the holders of the exchange’s private keys is under investigation.
The exchange has thus been out of touch with the custodian and as such, cannot authorize any token withdrawals, though they have assured the public that withdrawals will resume once the issue is resolved.
The exchange assured customers that their funds would be safe despite the issue but that did not stop the BTC price from crashing 3% and their native OKB token crashing 15% once the news broke.
Reports also show that hours before announcing the cessation of withdrawals, several large transfers took place between OKEx and whale accounts.
Needless to say, the entire situation has been very inconvenient for customers of the exchange.
OKEx and the Flaws of the Centralized System
While it is likely that the OKEx issue will be eventually resolved, it is a testament to the issues commonly experienced when dealing with centralized exchanges.
Cryptocurrency, at its core, is designed to enable its users to operate without being beholden to a single entity that can hold the funds of millions hostage.
This issue already exists with traditional financial systems such as banks and there is no reason for this to exist within the cryptocurrency sector as well.
This draws parallels to the IDAX case in which the CEO of the exchange ran off with the keys to the cold wallet, effectively running off with the funds of millions of customers and has not been seen to this day.
Then there is the QuadriageCX saga of 2019 in which the CEO of the now-defunct exchange died unexpectedly and was the only one with the keys to the exchange’s cold wallet.
While assets were liquidated and an investigation launched, the full funds are unlikely to ever be recovered.
At the same time, an exchange having issues reaching its custodian is not the only flaw of centralized exchanges.
Some crypto purists would even argue that a centralized exchange goes against the very principle behind cryptocurrency as a whole.
Take Bitcoin, the world’s most popular cryptocurrency, for instance. In the Coinbase of cryptocurrency, Satoshi Nakamoto, the creator of Bitcoin, cited an article that criticized the global financial system.
Its centralized nature, as well as corruption and greed, had led to the 2008 global financial meltdown, the Coinbase alleges.
The irony of cryptocurrency users losing their funds due to the inherent flaws of a centralized system cannot be lost.
Customers within the crypto space cannot continually have their money at the mercy of a single institution, hoping internal conflict, criminal activity, or the death of an executive does not take it away.
The Role of Decentralised Exchanges
If the cryptocurrency industry does anything consistently, it is innovation. The issues with centralized exchanges have been apparent for a while and this gave rise to decentralized exchanges, with more and more crypto users opting for them, such as Uniswap for crypto only and PlutusDEX for crypto to fiat.
Decentralized exchanges allow for the trading of tokens without holding them in a central wallet. Instead, customers are connected on a peer-to-peer basis and the trades are carried with the use of smart contracts.
The need for decentralized exchanges is more apparent than ever, especially crypto/fiat exchanges given that many consumers purchase crypto using funds from traditional bank accounts and often withdraw their earnings into similar accounts.
A quick look at the numbers recorded by popular DEX platforms like Uniswap and MetaMask shows that such a market is very viable and is only bound to get more popular.
Take Plutus, a FinTech plaftorm that has been able to resolve both matters by not only creating a rare crypto to fiat decentralized exchange, but has also created the Plutus debit card that can be connected to it.
This addresses issues of withdrawals and the seamless use of a decentralized platform.
By doing this, they have successfully created potentially the only truly peer-to-peer crypto-fiat exchange. Furthermore, their platform is available on mobile devices, making it even more accessible to everyone.
The exchange’s goal, according to its management, is maintaining the culture and value proposition of crypto by staying non-custodial and offering a bridge to the traditional fiat world.
In line with this, Plutus also invented the world’s first decentralised loyalty token (PLU) back in 2016, something that many crypto companies have since mimicked.
This was the first concept of a rewards token that was transferable between accounts; exchangeable to spendable fiat; and earnable anywhere in the world rather than a specific retail chain – an incredibly innovative concept at the time.
Since then, the company has added several additional use-cases such as the ability to stake the coin for over 15% rewards at highly popular brands such as Amazon, Nike, Sky and more, something that has greatly increased its demand in recent months.
In fact, the exchange recently concluded a token sale of their native PLU token and due to the incredible demand that they had to extend the sale due to oversubscription.
Should decentralized exchanges maintain this momentum and continue to address issues seen in centralized exchanges, they are likely to be the next big thing in crypto.
Disclaimer: This is a contributed article and should not be taken as investment advice