Exchanges That Faded Away — What Are Their Stories?
By ROKKEX on Altcoin Academy
We keep hearing about all these dying or failing crypto exchanges almost every month now. We cannot even imagine how many more close down without any announcement. What happened to them? What were their mistakes? Are all exchanges heading towards the demise?
Currently, you could find well over three hundred cryptocurrency exchanges on CoinMarketCap. However, people estimate that there should be over 500 crypto exchanges, but as this number is always changing to either side, the exact number is unknown.
Pulling the Plug
The news about HBUS (Huobi’s US partner) closure reached the front pages of several websites just a few days ago. While the update on Nasdaq-powered DX.Exchange shut down went public in late November. This list could go on and on.
What are the most common reasons? You may ask. There are quite a few. Some exchanges suffer from too big of a loss during a hack that just cannot let them continue the job, such as South Korea-based YouBit exchange that got hacked twice in 2017 and had to file for bankruptcy. The owners of some other exchanges decide to sell the product and struggle to find someone who would be ready to compete with what is already there. Some new and small exchanges fail due to weak technologies, cheap security solutions, ignored community, and goal vs. work imbalance.
Yes, some of the exchanges close down due to understandable reasons, but in quite a few cases seems like the failure could have been avoided. So why do the exchange owners keep making these seemingly stupid mistakes? The fact is that many of these dying platforms were built during the crypto boom in 2017 and 2018. People were rushing to catch the “big money” promise without investing enough time and work into building something that will be able to survive the long haul, the crazy ups and downs of the market, and advanced hacking tricks.
As the saying goes, haste makes waste. That is why the newest exchanges might find it hard to compete with the whales of the industry, but they have a better chance than some of the older ones if they put in enough work and resources.
Conspiracy, Scams, and Tragic Misfortunes
How about these exchanges that do not die, but their owners do? Well alright, not all of them die, but they do disappear without a trace. This is a so-called exit scam. It was a very popular scam choice of fake ICOs when the business owners collected all the invested money and disappeared without delivering what has been promised.
The best-known case is probably one of Gerald Cotten’s death, who was the only one that knew the passwords to all of the main QuadrigaCX exchange accounts that were holding user funds. So many stories, conspiracy theories, and investigative articles were created around this case. All social media was buzzing expecting this to be some intense and multi-layered scam involving fake identities, falsified documents, wasted money and even a person faking death. And still, to this day nobody is sure about what exactly happened to Gerald and all the money.
Of course, there were some real scams such as Polish exchange Coinroom shut down, missing owner of IDAX Global exchange, or even the quite recent case of Ruja Ignatova “Cryptoqueen” who disappeared even before the launch of the promised OneCoin platform. These events are less common than failing exchanges, but they do happen.
Nobody can guarantee that such big fishes as Binance, Coinbase, Bittrex or others will not fail. These things happen to companies of various sizes, ages, and industries. This is why you have to take your time to know that you can trust the company as in the end, they will be handling your data and your money. If you are curious about how you could make the right choice while picking the exchange, please check our article — What Crypto Exchange Should I Use?
At ROKKEX, we take security extremely seriously, and our crypto exchange is built on ‘Security First’ principle. We want to share our expertise with the broader public for the world to become happy, safe, and wise :)
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