The tables of the law by CZ – Recent events related to the bankruptcy of FTX reminded everyone how young and fragile the crypto ecosystem was. Thus, in this universe more than elsewhere, the behavior of the players in this market must be irreproachable. Otherwise, as we all see now, the consequences can be dramatic for its development. It is in this context that the binance boss, CZ, appeals to all exchanges in the form of 6 commandments. All the details.
Exchanges must lead by example
As he prepares to set up a business support fund impacted by the FTX cataclysm, CZ publishes a message, a reminder of the fundamentals. A set of rules that have the good taste to put at the center of the concerns an essential point for any self-respecting exchange. User trust. Because the latter will be difficult to rebuild.
As CZ reminds, crypto platforms must 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, it should not be allowed to fault a market player who wants to be serious and respected. . Transparency as mistress of ceremonies, Binance wants to lead by example in this messy cacophony that follows the FTX drama.
Point number 1. An exchange must be allergic to risk. Indeed, user funds should never, ever be traded or invested. Let’s leave this behavior to traditional banks and try to do better. It’s necessary remove fractional reserve 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 one, theinterdependence resulting between the exchange and its token is dangerous for its survival.
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Transparency first for Binance
Item number 3. Transparency, transparency and more transparency. We can not emphasize this enough. This is what users need now to continue to believe in the good faith of market players. Binance typically has already unveiled the list of wallet addresses on which the exchange would hold its funds. Although this does not represent proof of ownership, it is a first step by Binance. This pending the publication of a real Reserve Evidence structured around the technology of Merkle trees (Merkle Trees). A process that will allow to verify without any doubt and at any time the funds of the exchange.
Item number 4. Have large cash reserves. A key point for any exchange as soon as the Proof of Reserve is applied via the Merkle Trees. Binance, through its reserve fund, the SAFU fund, holds $1 billion ready to be drawn in the event of the unexpected.
Item number 5. Avoid leverage effects. Operating on debt, in a world as volatile as crypto, is not wise according to Binance. CZ, of which we sketched this year the crypto portraitalso ensures that the operation of its exchange is debt-free.
Item number 6. Strengthen safety and collaboration with regulatory bodies. 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 must therefore be privileged with these entities so as not to create generalities on the basis of the excesses of a minority driven by madness.
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