Shulou(Shulou.com)11/24 Report--

The FTX thunderstorm continues to ferment, and the crisis of trust in the currency circle has not been lifted.

As of November 27, Bitcoin was quoted at $16571.19 a piece, up slightly from a few days earlier, but still a long way from the $21472 price on the eve of the FTX crash that led to the collapse of the market trust system.

On the other hand, as the crisis of trust in the currency circle caused by the thunderstorm continues to ferment, a new currency circle self-rescue movement is also under way-- top exchanges, represented by Yuan an and Ouyi OKX, have successively claimed that they will use Merkle Tree as reserve proof to maintain transparency.

In the view of Wu Liang, a person in the encrypted currency industry, "users' money can not be touched. For all encrypted asset exchanges, a new industry standard is accelerating."

The field of cryptocurrency, which grew savagely, is recovering from the crisis and moving towards standardization.

Encryption magnate, died of a report? For people in cryptocurrency, the anecdote that the thunderstorm on the world's leading exchange FTX triggered a "crisis of trust" in the currency circle, which led to a collapse in the price of mainstream cryptocurrencies such as Bitcoin, will probably be the most memorable thing in 2022.

In the currency circle, the name FTX is no stranger.

During the great bull market in 2020, FTX, which had only been established for about a year, quickly became the third largest exchange in the world, with more than 1 million users at its peak and a valuation of US $32 billion, which attracted many well-known investment institutions, including paradigm, Softbank Corp. Group and Sequoia Capital.

However, it is such a legendary company that, after entering November, a private financial document disclosed by CoinDesk, a well-known media in the field of encryption, pointed out that FTX and its sister company Alameda Research may have debt problems. It instantly triggered a crisis of user trust, triggered a run on funds and eventually encountered thunderstorms, and declared bankruptcy in just a few days.

According to private financial documents disclosed by CoinDesk earlier this month, most of the assets on Alameda's balance sheet are tokens issued by the FTX platform, with the largest single asset being $3.66 billion worth of FTT and $3.37 billion of public chain tokens SOL and Solana ecological Token, in addition to loans of up to $7.4 billion.

According to the document, most of Alameda's assets are closely related FTX and Solana tokens, which not only have poor market liquidity and high volatility risk, but the company's liabilities are real dollar liabilities. Combined with the fact that some researchers have found that FTX's reserves are losing, this has begun to raise concerns among some cryptocurrency investors about the FTX exchange.

It is reported that in May this year, the stable currency project LUNA suddenly collapsed and led to the bankruptcy of a number of cryptocurrency institutions. At that time, Voyager due to loans to Sanjian Capital and Alameda two major institutions can not be redeemed, leading to bankruptcy and restructuring. Among them, the first borrower is Sanjian Capital, which has gone bankrupt, while the second is Alameda, a sister company of FTX. Analysts pointed out that at that time, Alameda was able to temporarily extricate itself from the storm because it obtained 172 million FTT mortgages worth about $4.19 billion from FTX.

However, it is due to the mortgage of too much FTT, which leads to the illiquidity of FTX FTT tokens. On the other hand, the borrowed US dollars were used to fill the hole in Alameda, resulting in a shortage of the company's reserves. As a result, at the beginning of this month, when the media exposed that FTX and Alameda may have debt problems, the panic in the market will cause a large number of users to start hoping to sell their FTT, while the lack of liquidity and FTX's own potential debt crisis also lead to other buyers' reluctance to participate in the acquisition, and FTX, which lacks reserves, cannot maintain the price stability of FTT tokens through acquisitions, which directly leads to the collapse and collapse of FTT tokens. In turn, it triggered more and more FTT holders to sell at low prices, which eventually led FTX to bankruptcy.

It is reported that when it was revealed that FTX might have debt problems with Alameda, Alameda's CEO CarolineEllison said on social media, "the online version of the balance sheet is not true, and Alameda has more than $10 billion of funds not listed on the balance sheet. But this attempt to reassure the market has not worked."

Shortly after the response, the currency security, the largest exchange in the cryptocurrency industry, joined the skepticism, and then a growing number of user withdrawals also intensified the outflow of FTX funds, eventually leading to the bankruptcy of FTX.

In just 10 days from the revelation of a debt crisis on November 2 to the declaration of bankruptcy, the cryptocurrency company, which was valued at $32 billion only three years ago, collapsed, and the $10 billion fortune of its founder, SBF, disappeared in a matter of days.

The collapse of the encryption trust system, 100% reserve is inevitable? The thrilling story of FTX, once the world's third-largest exchange, evolved from thunderstorm to bankruptcy in just a few days, triggering a crisis of confidence in cryptocurrencies and causing the prices of mainstream cryptocurrencies such as Bitcoin and ethernet to plummet.

Bitcoin, for example, was quoted at $16522.9 a piece as of November 27, up slightly from a few days earlier, but down nearly $5000, or more than 23%, from the $21301.2 price on November 2 when FTX was exposed by the media to have debt problems.

Before that, the price of bitcoin fell by more than 25 per cent in five days, falling as low as $15741 per piece, the lowest since November 2020.

In addition, the price of the second most valuable cryptocurrency, Ethernet Square, is also affected by FTX thunderstorms. Since the revelation of FTX's debt problems on November 2, the price of ethernet has fallen from a peak of $1645.6 on November 4 to $1214.9 today. Among them, FTX thunderstorm 7 later dropped as low as $1091.6 per piece.

"the collective plunge of encrypted assets reflects the crisis of confidence of investors in centralised institutions behind the FTX incident." Wu Liang analyzed Sina Science and Technology. In this case, the collective self-rescue of cryptocurrency also began to be put on the agenda. Among them, the industry's leading exchanges took the lead in reacting.

Shortly after adding FTX thunderstorm, Ouyi's official Twitter tweeted: "it is important for all major cryptocurrency exchanges to publicly share their auditable merkle tree reserve certificate or POF. It is planned to release this certificate in the coming weeks (30 days). This is an important step in building basic trust in the industry." Earlier, Yuan an also tweeted that it would soon start to prove its reserves and maintain full transparency.

In the traditional financial world based on banks, the existence of "deposit reserve system" requires banks to prepare sufficient deposits and principal to deal with unexpected situations, such as the risk of user runs under force majeure. In other words, banks should always ensure that they have enough money on their books to repay depositors' deposits.

In the cryptographic currency industry, due to the barbaric growth of the early development of the encryption industry and the lack of industry supervision, which led to a lot of non-standard behavior, which further accelerated the occurrence of incidents such as FTX thunder. In the future, as the "deposit reserve system" is gradually introduced into the encrypted currency industry, this measure is expected to standardize the user fund management methods on the trading platform of the encrypted currency industry. Take Ouyi as an example, to ensure that the data has been securely encrypted through the Merkle tree data structure, and to verify all user assets held by the exchange; at the same time, to verify the ownership of the wallet address on the chain and the total assets of the wallet on the chain; finally, by comparing the total assets of the exchange users and the total assets in the published wallet address on the chain, you can verify the asset reserve ratio of the platform and let the outside world know the proportion and amount of reserves on its trading platform. Sina Finance has learned that Ouyi's reserve proof function has been launched recently, further promising that "the assets of all users on the platform will hold reserves at 1:1, and the reserves and users' financial status will also remain completely transparent."

After the two top exchanges, Yuan an and Ouyi, claimed that they would use Merkle Tree as reserve proof, Sun Yuchen also tweeted that Firecoin had completed the reserve certificate about a month ago, while he said that the Merkle-tree 100 per cent reserve proved to be very important to the encryption industry and transparency. In addition, Kucoin, Bitget and other exchanges have also expressed their intention to disclose their Merkle Tree reserves.

"the concept of Merkle Tree is being discussed by more and more industry people and institutional practitioners." Wu Liang said. In his view, for the encryption circle that is still in its early stage and full of chaos, the head exchanges such as Ouyi and Yuan'an have taken the initiative to issue more stringent reserve certificates, taking the lead in adopting a standardized stock fund information disclosure system, which is not only conducive to their own steady development and long-term operation, but also can bring positive changes to the industry.

"this will force the industry to constantly standardize its path, avoid a series of vicious events such as thunderstorms, and put the industry on the right track. The head players have already made bets, and the players who do not follow the bets can only say that they have something in mind." Wu Liang said.

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.