CeFi failures show need for true DeFi
This is the time to re-evaluate the need for decentralization of exchanges in the cryptocurrency market as the devastating collapse of FTX, a centralized exchange, has demonstrated that more bridges will be hacked, more custodial institutions will fail, and more CEX will be at risk. but in the meantime Portal will continue to build what is really needed.
Now stop, close your eyes, and think about what the only truly decentralized chain could be to provide that kind of security.
Its big and yellow and starts with the letter ₿.
Yes, we are talking about Bitcoin.
Then imagine that on this chain there is a project that allows you to own the custody of your tokens and have the ability to exchange them for coins from other chains as well, without going through wrapped tokens; this is Portal.
Bitcoin -> Fabric -> Portal
In the most recent crypto catastrophe involving a CEX, the now infamous FTX had only $900 million in liquid assets against $8.9 billion in liabilities on the eve of bankruptcy. Some think that reserves are the basis for an exchange’s security… but they are incorrect.
In fact as you are seeing in these hours, they can be borrowed against and leveraged, and you only have to follow transactions on Blockchain to understand how exchanges move.
Fractional reserve banking exists in the crypto space, it is only more publicly documented on the blockchain than was in the past for legacy financial instructions. Audits are based on trust; Deloitte and many other reputable external auditing firms were involved in auditing the Lebanese central bank and other major banks, but this did not prevent their collapse.
Audits are just a piece of paper!
A benefit yes, but they never detail the entire picture. With proof of reserves you can see how many reserves an exchange has but you cannot assess whether it makes fractional reserve. Fractional reserve is the percentage of bank deposits that a bank is required by law to hold in the form of cash or easily liquidated assets.
This reserve is the set of book entries that, as a percentage of deposits a bank cannot disburse. Simply put, an exchange, like a bank, does not hold entirely what it claims to hold, but only a portion are liquid funds.
This practice was used precisely by the exchange in our story earlier, in its business of lending to outside companies and repaying its debt in tokens from the exchange itself.
Tokens that are illiquid & uniquely dumpable on the shoulders of HODLers.
Crypto will not fail if a few exchanges go bankrupt. Many exchanges came and dissolved. Portal will give you the power to outlast every exchange.
The Portal project is a peer-to-peer, trust-minimized application running on top of Bitcoin. It allows users to access a decentralized network right from their wallets. In addition, users can now manage multiple blockchain assets and financial services from within their wallets. With Portal, DeFi becomes a service that anyone can provide, maintaining anonymity for a competitive fee within open, transparent markets, with a security model as robust as Bitcoin mining. And because it is built on Fabric, it comes with privacy, speed, and security.
A Financial Internet Built on Bitcoin ✈️
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