Changpeng Zhao (CZ), CEO of Binance, the world’s largest cryptocurrency exchange, is learning lessons from the FTX crash. In this context, CZ wrote a blog post on the essentials of a secure cryptocurrency exchange.
Changpeng Zhao wrote the principles of safe exchanges
cryptocoin.comAs we reported, Binance CEO Changpeng Zhao (CZ) announced today that he has written a blog post on his Twitter account in which he outlines the features crypto exchanges must have to be secure:
In light of what happened last week, I felt compelled to identify the six most important requirements that Binance and all other centralized exchanges must adopt to ensure the trust of our users.
In light of what happened last week, I felt compelled to define the six most important requirements that #Binance and every other centralized exchange should adopt in order to ensure trust with our users.https://t.co/BmZsNraNs5
— CZ 🔶 Binance (@cz_binance) November 15, 2022
After identifying 6 principles in the related blog post, CZ made the following call to the industry:
We urge all other centralized exchanges to adopt these recommendations. Because we all have a responsibility to people who decide to invest their hard-earned money with us. It’s our responsibility to prove to the regulators and the community that a few bad actors aren’t emblematic of this industry.
6 principles set by Binance CEO CZ for a secure exchange
Don’t risk with user funds
User funds should never be traded or invested. We must proactively provide risk alerts to users so they understand crypto-wide volatility.
Never use native tokens as collateral
Native tokens are exchange tokens created by the company that handles the exchange transactions. These tokens play an integral role in running Blockchains. It also provides strong foundations for Blockchain. In addition, it must have widespread use.
Share living proofs of assets
As part of Binance’s ongoing commitment to transparency and to increase trust in the ecosystem, we have begun to share details of key hot and cold wallet addresses. This is a starting point as we work towards building a Merkle tree proof of fund that we will share with the community over the next few weeks. Our goal is to enable users of our platform to make informed decisions that are aligned with their financial goals. Other industry players already provide this transparency. We commend them for their efforts. We are also now calling on the entire industry to do the same so that we can show that a few bad apples do not represent this industry.
Keep reserves strong
We set up the SAFU fund to meet the extreme conditions. There is about $1 billion in the fund today. Others in the industry need to commit to doing something similar.
Avoid excessive leverage
It is not wise to borrow money to finance growth. There is a lot of volatility in crypto. That’s why Binance capital structure is debt-free. We urge our industry partners to be equally conservative financially.
Strengthen security protocols
Due to the rapidly evolving nature of industry and project protocols, a better coalition of industry is needed to agree on standards for the quality of security measures for change and projects. Also, a strong partnership with law enforcement is required to support the investigation and recovery of stolen funds.
We need a better incubation program to equip new projects with appropriate security measures. To make the complex asset flow in the blockchain clearer, we must be prepared to invest in on-chain analysis to address weaknesses in existing models. We must address these to ensure transparency. All exchanges are required to have strict KYC and AML measures.
