Comments on Dogecoin Incident

This incident intensively reflects some essential contradictions in the current crypto world: Although the crypto world has repeatedly touted itself as “decentralized”, CEX stored most of users’ assets in a centralized way. Users have no real control over their own assets. Therefore, when something unexpected happens to an exchange, users are often implicated.

In this case, because of Binance’s own mistakes, Dogecoin transactions waiting to be sent due to insufficient handling fees were repackaged and broadcast, and hundreds of millions of dollars worth of Dogecoin were lost. To make up for the loss, the exchange froze users’ accounts and asked them to refunds. But the problem is that many users’ drawing account are not their own accounts. What’s interesting is that Binance announced 10 basic rights of cryptocurrency users short term ago, which mentioned to ensure the safety of users’ funds and secure custody. In this case, freezing user accounts arbitrarily damaged the trust of users to a certain extent.

Of course, this incident has also triggered a lot of thinking. Some professionals believe that users should abandon CEX and choose DEX where user assets can be controlled by themselves. However, if encrypted assets want to be integrated into the mainstream financial market, they must implement regulations in terms of risk control, rating, and compliance, and these tasks must be completed by CEX. Therefore, the focus of the future should be further standardize and improve the supervision of cryptocurrency exchanges.

Blockchain industry top think tank, affiliated to Huobi Group.