The Digital Asset Market has Plunged. What is the Status Quo of Cryptocurrency Exchanges?

TL;DR

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- In the third quarter, the market value of cryptocurrency increased by 8.4% month on month, but the overall market sentiment remained sluggish.

- In the third quarter, the trading volume of the NFT market dropped to $2 billion, down 75% month on month.

- Gate.io has cooperated with Armanino LLP, a well-known American audit company, for three consecutive years, and has completed the second 100% margin audit.

- The platform can indeed provide 100% margin in the relevant coin, the main reason is that the total amount of hot and cold wallets is greater than or equal to all user snapshot assets.



The Freezing Point of Digital Assets

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As the winter approaches, the digital asset market has experienced a "freezing point period". In terms of cryptocurrencies, the market value of cryptocurrencies increased 8.4% month on month in the third quarter, but the overall market sentiment remained sluggish. Recently, the price of BTC has slowly seen its break through the $20,000 mark. When the situation seemed to get better, a "fluctuation" made it struggle at $17,000. The price of Ethereum also fell below $1300. Meanwhile, according to the data on the official website of Ethereum, the staked ARP of Ethereum beacon chain ETH has fallen below 4%. Although currently in a bullish trend, when BTC's dominant position falls, the bear market of Altcoins will also follow.

In terms of NFT, according to the data of DappRadar, the transaction volume of the NFT market in the third quarter dropped to $2 billion, down 75% month on month. The sales of OpenSea, the largest NFT market, fell for the sixth consecutive month in October, and the number of NFT buyers per week has decreased by more than half from its peak at the end of January.

Meanwhile, the frequent on-chain "hacker attacks" not only have a serious impact on cryptocurrency exchanges, but also threaten the security of users' assets.

As the winter approaches, will the digital asset market rebound at the end of 2022?


Chaotic Situation of Cryptocurrency Exchange

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When BTC rose slowly in a good trend, it recently fell sharply due to the recent FTX crash. The story began on November 2, when a Coindesk article directly exposed the abnormal relationship between Alameda Research and FTX. Later, CZ, Caroline Ellison and SBF staged public opinion debates on Twitter in turn. Meanwhile, the price of FTT also fell sharply, affecting the crypto market, including BTC.

Story review:

FTT Plummeted by More than 80% and BTC Dropped Below the $20,000 Threshold, Indicating a Gloomy Day in Crypto Winter
The FTX Saga Continues | Where Does the Domino Go?

If you want to ask the crypto market, is it because of this storm that it began to plummet? The answer may lead you back to the collapse of LUNA. Whether it is the bankruptcy of Celsius, the liquidation of Three Arrows, or the FTX crash today, it indicates that not all cryptocurrency exchanges are safe and prudent.


Binance

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In September, Binance.US had a "Binance accounting system vulnerability" event, which gave users the opportunity to update the HNT token balance by mistake. Presently, users have received HNT worth approximately $20 million by mistake. The Binance blockchain was attacked by hackers on October 6, which may lead to the theft of $100 million worth of tokens.


Crypto.com

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Since August 2022, there have been two false transfers on the Crypto.com platform. Although Kris Marszalek, the CEO of Crypto.com, made a statement, many users began to worry about whether Crypto.com would suffer the same fate as FTX and other companies in distress. Therefore, many users are quitting the platform.


Gate.io Exchange and Its 100% Margin

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As a 9-year-old digital currency exchange, Gate.io knows the importance of blockchain asset security, always puts user asset security first and ensures user asset security by means of centralization and decentralization (Gatechain security solution) by investing much capital.

In terms of security and stability, Gate.io makes comprehensive defense in terms of assets, accounts and platforms, constantly monitors threats, and adopts the lowest permissions and role-based access methods for all connections.

In terms of transaction currencies, Gate.io supports more than 1,400 transactions in different currencies, including mainstream stablecoins. The audit of each currency involves completing the transfer verification of blockchain assets and the audit of each user's assets with the audit company. Because the asset transfer operations involving cold wallets and hot wallets with a large number of addresses need to be carefully audited under the condition of ensuring absolute security.

In order to make users understand that their assets are safe on Gate.io and the platform does not need to misappropriate user's petty cash privately, Gate.io has cooperated with Armanino LLP, a well-known American auditing company, a third-party platform, to conduct 100% margin audit since 2020, providing users with professional and reliable asset verification services in the form of open source, open, transparent, blockchain signature and Merkel tree.

For more details, please refer to: What Is the Significance of Introducing Third-party Audits to the Exchange? Understand What Proof of Margin Is

How Can a Cryptocurrency Platform Prove that 100% Margin has been Provided?

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The platform proves that it can provide 100% margin in the relevant coin. The main reason is that the total amount of hot and cold wallets is greater than or equal to all user snapshot assets.

1. Cold and Hot Wallet Confirmation
Use hot and cold wallets to transfer specific random quantities to the address designated by the audit company to prove the ownership of the wallet. The audit company adds up the balance of its address to obtain all amounts (including user funds and self-owned funds) controlled by the exchange.

2. User Balance Snapshot
A snapshot of the platform user's balance is taken at a certain point in time, and the actual account equity is calculated through information such as pending receipt, borrowed, interest payable, and unrealized profits and losses. Provide the encrypted UIDs and balances of all users to the audit company for calculating the cumulative assets of users and publishing the Merkel number.

3. Generate Merkel Tree
The underlying data block is formed by linking the user UID and balance after each hash, and finally, the Merkel tree is generated from all user data. Any account ID or balance change in the leaf node will cause the Merkel root to change. Each user can verify whether their assets are included in the leaf node.

Gate.io has cooperated with Armanino LLP, a well-known American audit company, for three consecutive years. Presently, it has completed the second 100% margin audit. Users can view the results of the Gate.io asset audit on Armanino's official website.


Conclusion

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The current crypto market is chaotic and volatile. When an event occurs in a token or exchange, it brings an unpredictable butterfly effect. When all cryptocurrency exchanges compete for public debate, it’s time for users to keep an eye on the security of their own assets. We cannot predict which institution will crash next, but we can choose a safe and stable cryptocurrency exchange and wait for changes in the cold winter.



Author: Gate.io Researcher Rena W. Translator: Joy Z.
This article represents only the researcher's views and does not constitute any investment advice.
Gate.io reserves all rights to this article. Reposting the article will be permitted provided Gate.io is referenced.
In all other cases, legal action will be taken due to copyright infringement.