Last month, the popular crypto exchange Bithumb was hacked and they have reported a $180 million loss on the matter. Following the hack, the exchange asked users to always be careful about deposits but Bithumb is now suffering from reduced actual volume and a bear market in cryptocurrencies according to a local news source.
The crypto space hasn’t been kind over this past year. Things haven’t gone well with Bitcoin crashing below $3,500 in November last year and when it comes to Bithumb, things are no different. Nine months ago, twice as much went missing and a report later surfaced which found that the firm has more than likely reported fake volume metrics. At this point though, longtime users may be considering other exchanges with a stronger security track record. The exchange laid off dozens of staff workers in January during one of the worst bear markets in crypto history.
With all the chaos of decentralised exchanges like Bithumb, Quadriga CX and Cryptopia getting hacked every five minutes, it seems that Decentralised exchanges (DEXs) are the way forward.
Non-custodial solutions are popping up too with their solutions presenting their own challenges. In general, though a user must be more educated. These kinds of exchanges might be more difficult to ensure - if a company can’t provide full control of the funds being traded, it could lead to some legalities. The first and biggest decentralised token exchange on the Ethereum blockchain is Etherdelta and was hit with regulation by the US federal government last year.
The Bithumb exchange told the Korea Times that despite the hack, the future seems bright saying, “In terms of sales, we saw a 17 percent increase, and we continue to increase overseas investments.”
As reported by CCN, “Decentralized versions are one existential threat to the dominance of traditional exchanges, but ultimately users prefer convenience, volume, and ability to conduct high-frequency trades.” The cost of transactions on a blockchain like Ethereum or Bitcoin will at times be much higher than the cost of trading on a centralised exchange. For traders who conduct thousands of trades per day, these fees would be very restrictive, to say the least. This essentially sustains the market for the old exchange model.