TL;DR: In this Opinion-Editorial, guest author Jon Buck discusses cryptocurrency exchange scandals attributed to the likes of more established names in the ecosystem such as Canada’s QuadrigaCX and Coinbase in the US, and how they’ve lessened trust among traders. It just might be the perfect time for platforms with more decentralized options and unconventional approaches to offer viable alternatives.
QuadrigaCX and Coinbase Scandals Might be an Opening for Decentralized Exchanges
There has been a glut of news regarding trust issues in the cryptocurrency sphere. For example, the recent death of QuadrigaCX CEO Gerry Cotten revealed that he personally held the keys for all reserves for the company, and they were lost. Platform users scrambled to find their coins, but now must wait for Canada’s wheels of justice to provide a solution.
However, for many in the crypto world, there’s been one company that remained trustworthy – Coinbase. The massive cryptocurrency exchange has done a lot for the blockchain community. Notably, it has made the acquisition, depositing, and trading of cryptocurrency as simple as fiat currencies. Because of Coinbase, anyone can easily enter the crypto space.
The Hacking Team would be considered the opposite of that image – untrustworthy. The firm is really good at acquiring Bitcoin and Ethereum wallet files, transaction histories, contacts, and other account information, but they also provide services that can inspire nightmares. Infiltrating phone/computer cameras, email accounts, password extraction, and keystroke logging are just a few of their offerings. They have been directly connected to human rights violations in Sudan, Venezuela, and other nations with repressive governments.
Despite this controversy, last month Coinbase errantly aligned themselves with Hacking Team by purchasing Neutrino, a newer firm that provides cryptocurrency transaction tracing services. Neutrino’s founders were previously employed by Hacking Team.
The now-famous #deletecoinbase movement started on social media channels in response to this blatant disregard for the well-known human rights violations of the Neutrino founders. Participants in the #deletecoinbase movement argue that no amount of money or technology is worth supporting anyone associated with Hacker Team and its disregard for basic human rights.
Coinbase claims, for its part, that because the Neutrino products are the best on the market, they are justified in acquiring the business and gradually phasing out the employees in question.
Mismanagement of User Data
The viral movement uncovered many other issues with Coinbase. Some of these issues were related to mismanagement of user data. For example, one executive revealed that the Neutrino purchase took place in response to a previous vendor’s disreputable decision to sell user data to third parties.
It is unclear exactly how many Coinbase users have joined the viral #deletecoinbase movement. It is also unclear where they will now store their crypto. However, the far bigger question relates to cryptocurrency adoption.
For those just beginning to enter the cryptocurrency market, Coinbase’s easy entry level has always been the most obvious choice. Because the interface was user friendly, Coinbase attracted the newest members of the cryptocurrency community.
CoinCasso and OpenLedger DEX
But now, with trust broken and a push against the erstwhile exchange, adoption may slow dramatically. As trust issues continue to mount in the cryptocurrency world, the reasons to enter for the first time may drop to zero, eventually driving the industry into obsolescence.
Concerned with the trends facing centralized exchanges, several platforms have already developed solutions. One such solution is Estonia-based CoinCasso. The exchange hopes to combine the best of both worlds, offering advantages from both centralized and decentralized platforms. It could be an answer mostly because the platform is specifically designed to serve its community, rather than make a killing on transaction fees, by giving its users the authority to add or list tokens on the exchange. There’s also a profit sharing program.
Other decentralized exchanges are also seeking to make the barrier of entry smaller for cryptocurrency users. For example, OpenLedger DEX is simplifying onboarding with just minor KYC requirements. Other companies are moving in a similar direction, seeking to take the place more established exchanges are leaving open. With decentralization comes flexibility, protection, and user control.
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