Reliability: What to Look For in a Crypto Exchange

@maria-lobanova

Journalist, crypto investor

In November of 2022, the stunning collapse of the world’s 3rd largest crypto exchange, FTX, sent shockwaves through the volatile cryptocurrency industry, leaving investors with jitters over the safety of their digital assets.

According to blockchain analytics firm Nansen, customers of Binance, the world’s largest crypto exchange, withdrew almost 2 billion dollars worth of crypto in a single day and $8.7 billion within a week in the wake of FTX’s downfall.

Indeed, 2022 proved to be an extremely tough year for the crypto sector, and crypto exchanges in particular.

In June of that year, many crypto investors panicked when Binance temporarily paused Bitcoin withdrawals, allegedly due to a “stuck transaction” that was causing a backlog, according to chief executive Changpeng Zhao.

Shortly after FTX went belly up, another cryptocurrency exchange, BlockFi, filed for Chapter 11 bankruptcy, leaving over 100,000 creditors on the hook.

Meanwhile, the price of Bitcoin, the world’s most popular cryptocurrency, plunged to a record low of $16,000 in November of 2022, more than 400% off the high of $69,000 it had reached just a year before.

Given last year’s crypto calamities, it’s completely understandable that both existing and potential crypto investors have been left a little spooked.

The paramount concern when investing in any type of financial instrument, regardless of whether they’re traditional or digital, is that your assets will be secure and readily accessible.

So, in view of today’s shaky environment, where is an investor wanting to trade in digital currencies to turn, and what should they look for in choosing a reliable exchange?

After all, it’s not like the market is dead –there are still huge opportunities for profits. Bitcoin’s price has already doubled since bottoming out last year.

Key Reliability Factors

Some of the essential things to look at when considering a crypto exchange are verifiable reserves, high liquidity, and maximum transparency.

One example of a platform that excels in these areas is Bitget, a top 10 spot trading and top 5 futures trading platform, according to Coingecko, and the third biggest crypto derivatives exchange in the world, according to a report published by the Boston Consulting Group.

High Liquidity

The main factor that provides liquidity is the number of users on the platform and the volume of trade on the exchange.

Bitget enjoys a high degree of liquidity thanks to its 8 million registered users in more than 100 countries and regions around the world, as well as large institutional investors.

Coinmarketcap reports that Bitget’s liquidity score is higher than other major exchanges like KUCOIN and Gate.io. 

There are currently 478 coins and 540 trading pairs available on the exchange, with 24-hour volume reported to be nearly $700 million, according to Coingecko.

Verifiable Reserves

Another important consideration when choosing an exchange is its commitment to maintaining sufficient reserves.

In this respect, Bitget currently boasts a total reserve ratio (BTC, ETH, USDT, USDC) of 246% and guarantees it will hold 100% of users' assets as reserves.

And it doesn’t expect its customers to take their word for it. In December of 2022, Bitget launched a Proof of Reserves page, where it publishes its platform reserves and platform reserve ratio on a monthly basis.

The exchange also uses the cryptographic-audited Merkle Tree method to prove that it is truly a full-reserve exchange and has developed an open-source tool available on GitHub called 'Merklevalidator' that investors can use to verify their assets on the platform.

Operational Transparency

Crypto investors also need to know that the transactions the exchange carries out on their behalf are valid and accurate.

To provide proof of accounting and assure its users that all exchange operations are both valid and verifiable, Bitget has teamed up with Space and Time (SxT), a decentralized data warehouse, to create a verifiably tamperproof audit trail of data and computation.

SxT has developed a novel cryptography called Proof of SQL that cryptographically proves that query computations have been executed accurately and that both the query and the data are tamperproof.

The partnership will allow Bitget to leverage the SxT data warehouse to run verifiable computations against verifiable on-chain and off-chain data.

Bitget’s managing director, Gracy Chen, said: “Bitget strives to be the all-in-one global trading platform, and our partnership with Space and Time highlights our commitment to that. More than ever, users want to see transparency from exchanges.

Bitget is the first to work toward transparency of proof of accounting and operations through Space and Time. We aim to inspire people to embrace crypto with more protection, transparency, and security, which serve as pillars for building a robust platform.”

Rainy Day Fund

As demonstrated by the fallout from FTX’s collapse, sometimes unexpected failures can cause a lot of collateral damage in the crypto markets.

To ensure that its users’ assets are safeguarded in the event of unforeseen incidents, the platform created the Bitget Protection Fund in 2022.

It is now the second largest user protection fund among CEXs, with 6,500 BTC, 160 million USDT, and 40 million USDC, currently valued at USD 300 million. 

The assets are stored in seven wallet addresses that are public for users to track in real-time, and Bitget has pledged to maintain the fund’s value without any withdrawal for the next three years.

Data Security

Hacking is also a major concern for crypto investors.

As demonstrated in 2020, when a North Korean hacker group allegedly managed to pilfer $275 million after obtaining the keys to KuCoin exchange’s hottest wallets, encryption alone is no guarantee that investor funds will be secure.

Therefore, it’s not surprising that Bitget takes security very seriously.

To protect the exchange from potential attacks, its users’ funds are protected via a hybrid hot and cold wallet system, multi-signature technologies, a powerful risk control system, bank-level SS data encryption, and a built-in DPI active defense system.

Bitget received an A+ ranking for 12 SSL indicators and earned a place in the top 10 Exchanges for Cybersecurity from Crypto Exchange Ranks (CER).

Consequently, it is considered one of the best-secured crypto exchanges out there and has suffered no breaches of any kind since its inception in 2018.

Regulatory Compliance

Falling foul of regulatory authorities can also pose a risk to the stability of a crypto exchange. In terms of compliance, Bitget has completed its crypto registration in Lithuania.

This registration will allow the company to offer crypto-related services in or from Lithuania in compliance with regional laws and regulations.

It also strictly observes local regulations to conduct uninterrupted operations worldwide. 

Public Outreach

To drive crypto adoption and change the public's negative perception of digital currencies, Bitget has also established partnerships with credible names like Messi, Juventus, and others.

In 2021, Bitget announced its sponsorship of Europe’s most successful football club, Juventus.

In the same year, it became the exclusive cryptocurrency partner of the Professional Gamer’s League (PGL) in order to educate the esports audience about the potential of crypto.

More recently, Bitget entered into a 2-year partnership with legendary Argentinean football star Leo Messi, giving his fans a unique opportunity to explore opportunities for trading crypto on the exchange.

Conclusion

As has been seen, while failing to pay proper attention to solvency and security can have disastrous consequences, having all the bases covered in this respect can prove to be a great advantage for a crypto exchange.

For example, Bitget saw a total increase in derivatives transaction volume of 300% during the otherwise disastrous crypto year of 2022 and has witnessed tremendous growth in trading volume and market share since the FTX collapse.

In fact, a report released by Tokeninsight shows that Bitget was the biggest beneficiary of FTX’s downfall, with its share of the crypto derivatives market skyrocketing from 3% to 11% in its aftermath.

For those still leery about putting their money into the crypto markets but who fear missing out on its explosive growth potential, the kind of verifiable reserve policies and state-of-the-art security that exchanges like Bitget boast should provide some peace of mind.

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