Steemit Crypto Academy Contest / S6W2- Centralized Cryptocurrency Exchange Platforms and Its Risks

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I must commend that it has been an interesting journey with the Steemit Crypto Academy, as I have gained more knowledge and experience on the technological innovations and concepts of blockchain and cryptocurrencies.

This week's task is very interesting, as it is centered on Centralized Cryptocurrency Exchange Platforms and Its Risks by @crypto-academy.

Over the years, centralized exchanges have proven to be more security cautious, and federalized in their operation, because people can buy and sell cryptocurrency without having to worry about the security of their investments. The exchange only grows as more people invest, but what would be the fate of these users, if this system experiences a bankrupt scenario?
Follow me, as I discuss the risk and challenges associated with centralized exchanges in this article.

As funny as it may sound, it's true that in a bankruptcy scenario, the funds deposited by users into their accounts, are not considered their own, but rather as property belonging to the estate of the bankrupt individual or company. This is because the exchange holds the cryptocurrency on behalf of the user and is not legally obligated to return the funds during bankruptcy. In some cases, the exchange may require a court order before releasing funds.

This can only be possible in a centralized exchange, depending on the platform's legal structure. If a centralized exchange happens to file for bankruptcy, it will be very difficult for users to access or take out their assets at that time. It is also important to note that if the exchange is located in another country, users may not be able to rely on their local laws for protection. This means that users should be aware of any foreign legal framework before depositing funds on a foreign exchange.

As many cryptocurrency exchanges are centralized, this means that the user does not control the private keys to their wallet, but instead the exchange does. This may result in a user being unable to access funds stored on a centralized exchange if they file for bankruptcy.

Many people are not aware of the potential risk involved in storing assets in a centralized exchange. No wonder centralized exchanges have gotten even more popular over the years regardless of this issue.

It is worth noting that many exchanges may only accept certain types of cryptocurrencies and may reject others, so my advice, be sure to check with the exchange before filing for bankruptcy if you have digital assets that may be subject to such restrictions.

Although decentralized exchanges have been in the spotlight lately, more and more people are turning to centralized exchanges as they become more convenient and accessible. Unfortunately, even though centralized exchanges have been around longer, they have had problems of their own, including hacks and bankruptcies like what happened with FTX, one of the biggest cryptocurrency exchange platforms in the world.

Futures Exchange (FTX) shocked investors and traders alike, after its announcement that it had been hacked, and lost about $2 billion worth of cryptocurrencies to fraudsters who managed to gain access to their network. How could a platform that has been operating since 2016 failed so miserably? The straightforward answer to this is that the centralization of this exchange was responsible for its downfall.

Saw this tweet regarding FXT bankruptcy with interesting engagements

FTX exchange was a centralized exchange, meaning it had centralized control over user funds and transactions, leaving users at risk of having their funds lost or stolen in the event of a hack. The lack of decentralization on the FTX exchange ultimately led to its bankruptcy.

Centralized exchanges are subject to fraud and other malicious activities. They are run by humans, and as such are prone to human error and mistakes. In the case of FTX, it was later rumored that an employee was responsible for stealing funds from the exchange, which ultimately caused its bankruptcy.

By relying on a centralized exchange model, FTX was unable to adequately manage the volatile nature of cryptocurrencies and maintain liquidity in the market. As a result, most users were left with no option but to completely withdraw their available funds, leading to the exchange’s ultimate demise. Other consequences include

• Lack of Trust Among New And Aspiring Investors: One of the major consequences of this incident is that new investors and traders would begin to have this fear of putting their assets in other exchanges, as they are no trust in the system. In most cases, centralized exchanges are operated by private companies that have no obligation to disclose their internal processes. This means that customers may never know what happened to their funds or why the exchange went bankrupt.

• It Might Further Hinder The Regulation Of Cryptocurrencies In Various Parts Of The World: This incident can equally hinder the adoption of cryptocurrency in many organizations and countries across the globe, as it would seem as if the innovation of cryptocurrency is causing more harm than good.

Now that the dust has settled, we are still wondering what might be next for cryptocurrencies and how they could impact the future. The FTX incident is just one example of the risks that come with cryptocurrency trading and investing.

For me, I think this is just another phase of cryptocurrency that would pass as usual. The worst thing I can pessimistically say is that a lot of Investors would become poor and frustrated, which would take several months or years to recover, and the regulation of cryptocurrency would become even stronger in some areas of the world.

Bitcoin and the cryptocurrency market are still incredibly young and volatile (barely 15 years old), and this incident might affect the widespread it has so desired for a long. Although it might take a little more time, I believe cryptocurrency is the future of the global economy.

We just need to be more cautious about the safety of our assets. Anytime you invest in a digital asset, there is the risk of significant price movements that could wipe out your portfolio overnight. As such, it's crucial to diversify your investments and not put all your eggs in one basket.

It's important to be aware of the platforms you are trading on. Make sure to review and do your careful research when choosing an exchange.

And finally, keep a close eye on regulatory developments, as the FTX incident has already sparked discussions about the need for stronger regulations in the cryptocurrency market.

When it comes to cryptocurrencies, they are always two different parties which include the crypto supporters, and the crypto opposers. The crypto supporters are made up of big names like Elon Musk, Richard Branson, Bill Gates and many others, who believe and prove that cryptocurrencies are the future of the global economy. But we equally have some big names like Robert Shiller, Warren Buffet and many more who refer to cryptocurrencies as Ponzi Schemes designed to illegally extort money from citizens.

The battle is basically about anonymity and regulations but cryptocurrencies will certainly prevail because as technology continues to evolve, the world would eventually realize that having full control over your money is the best. Cryptocurrencies are the future of global trading because lately, it has been lots of collaboration with various firms and establishments.

Nevertheless, the recent incident involving FTX has left many in the crypto space concerned and uncertain about the future of the industry. The incident is a stark reminder that crypto markets can still be volatile and unpredictable, and it has raised serious questions about security protocols and risk management.

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As the crypto space continues to grow and mature, it is essential to have stronger regulations and safeguards in place to protect investors from future mishaps. Some regulators are calling for stronger and stricter regulations with respect to cryptocurrency exchanges, while others are advocating for more education and awareness of the potential risks involved.

Meanwhile, the crypto community is hard at work finding solutions that will allow investors to take advantage of the unpredictable market without worrying about security and regulatory concerns. Innovations such as decentralized exchanges, tokenized assets, and non-custodial wallets have the potential to drastically reduce the risk for those who choose to invest in cryptocurrencies.

It remains to be seen what the future holds for cryptocurrency, as this incident has illustrated the importance of understanding the market dynamics of any given asset and its underlying technology.

The incident raised questions about the safety of investing in cryptocurrencies and the potential risks associated with them. While cryptocurrency has tremendous potential, it is important to be aware of the risks involved. Only by doing your research and staying informed can you protect yourself from any potential bankruptcy.

Binance’s decision to buy FTX cryptocurrency should reassure previous investors in FTX of the future success of this platform. FTX is not just used as an investment currency on this platform, but also as an exchange unit with which to trade cryptocurrencies. This will increase the value and stability of the currency, which will benefit both the current and future investors in this cryptocurrency.

The purchase price was equal to 1 BNB per FTX share, as Binance obtained the 10 million FTX shares that were set aside for new investors in the private presale, which means it now owns about 130 million FTX shares outstanding, or about 92 percent of the total amount of tokens that were originally issued during the ICO.

Of truth, this deal will reassure the previous investors of this platform, many of which have expressed doubt over the platform’s future due to their lack of development plans. it was decided that this reliable and stable project would be better as part of the Binance ecosystem than operating on its own since it shares many similarities with Binance Chain and has active developers who will continue to work on improving both platforms.

Binance's involvement with FTX will help bring additional confidence and liquidity to the market. With Binance's backing, investors can be sure that they are investing in a secure and trustworthy platform.

FTT currency is an ERC-20 token that serves as a governance and utility token for the FTX platform. It provides a range of features such as discounted trading fees, access to certain products and services, staking rewards, and voting rights.

As the FTT cryptocurrency is a multi-chain asset, it can be used across different networks such as Ethereum, Binance Chain, and Tron. Investors now have more options to diversify their portfolios and can use the FTT cryptocurrency to gain exposure to the broader crypto market.

Binance decision to buy the FTX token and to list this token on its platform will positively influence the price of the FTT cryptocurrency.

FTT token on coin market cap

As of the time of writing this, FTT was trading at $1.34, with a circulating supply of 328,895,112.30 FTT according to Coin Market Cap. It ranks #209 and has a Market Cap of $439,321,286.

Not only will FTT become more widely available to the public, but Binance can also use its extensive resources to help FTX grow and expand its business. For previous investors of FTX, this news is especially welcome, as it assures that their investments are in safe hands.

The lesson learned from FTX’s bankruptcy is clear decentralized exchanges are the way forward if we want to ensure efficient and secure markets for cryptocurrencies.

Decentralized exchanges offer investors more control over their funds and enable them to take advantage of more efficient markets without fear of manipulation. This is another reason why I prefer staking my asset on decentralized platforms than keeping it on a centralized exchange.

The Steemit Crypto Academy has continued to deliver interesting and engaging contests for us, and I love doing its task. Am inviting @solperez, @ruthsany, @gabylazarde to checkout this contest.

Thanks for your time here.