(Photo : NASA on Unsplash)

The crypto market tensions triggered by the FTX-Binance turmoil demonstrate once again that even the "too big to fail" entities are not to be trusted, and investors now learn the hard way that centralized custody is not the best option. Decentralized exchanges (DEXes) and other decentralized finance (DeFi) protocols, such as Palmswap, enable true peer-to-peer (P2P) interactions, and they will likely be the big winners from the collapse of FTX.

Trusting Centralized Exchanges Makes You Vulnerable

Centralized exchanges have had a tremendous role in accelerating the adoption of digital assets thanks to their convenience and link to fiat currencies. However, once in a while, investors are reminded that they cannot trust web-based wallets provided by third parties.

From Mt. Gox in 2014 to KuCoin in 2020, centralized spot exchanges have been the subject of countless hacking attracts that have deprived investors of billions. Besides social engineering attacks, the collapse of FTX shows that greed and Ponzi schemes right under our noses are also major risks.

What does it take to bring down a $32 billion crypto empire? First, remember that FTX was the second-largest crypto exchange, only after Binance. Also, consider that FTX boasted of multiple high-profile sponsorships, including Mercedes AMG Petronas F1 Team, Softbank, the International Cricket Council, and the Golden State Warriors, among others. Finally, to add to the drama, FTX founder Sam Bankman-Fried was the second-biggest Democratic Party donor for the US midterm elections. So what does it take to take down such a behemoth? Well, a 500+ word Coindesk piece discussing a balance sheet report.

Binance CEO Changpeng Zhao (CZ) smelt blood, adding to the pain. But, strategic move or not, he had the right given that FTX's sister company Alameda Research, with over $14.5 billion in assets, was sitting on a pile of illiquid and irrelevant tokens: FTX's proprietary coin FTT. That's a fact.

Binance even offered to buy FTX and save the crypto market from bearish clouds but eventually backed out on Wednesday, November 9, stressing that its due diligence showed there is nothing there. CZ's crypto platform tweeted:

"In the beginning, our hope was to be able to support FTX's customers to provide liquidity. But the issues are beyond our control or ability to help."

Unfortunately, millions of FTX's retail customers have lost money, which doesn't bode well for the crypto industry.

Crypto Market Under Bearish Pressure

CZ's refusal to back FTX in an acquisition deal has added to the bearish pressure, with Bitcoin dropping over 10% during the five days to Thursday, November 10, to break below $16,000 for the first time in 2 years. Ethereum nosedived over 15% during the same period to trade near $1,300, while Solana crashed 44% due to the ties with Sam. FTT itself is trading near $3, down almost 90% during the last few days.

On Wednesday alone, over $5.2 billion in stablecoins left centralized exchanges, the most since mid-June, on-chain data tracked by CryptoQuant reportedly showed.

The panic of investors is not unfounded. Otherwise, how could the crypto community tolerate such a bubble?

DEXes to the Rescue

It's time for DEXes and other DeFi protocols to demonstrate their potential. Finally, after less than three years of operating as an independent sector, DeFi can address the vulnerabilities and problems of CeFi.

After the sudden crash of Alameda and FTX, Celsius Network, Terraform Labs, and Three Arrows Capital, people start to lose trust in CeFi. DeFi alternatives like Palmswap are the answer.

Palmswap operates a decentralized platform for trading perpetual contracts with up to 10x leverage. The platform leverages Binance Smart Chain (BSC) and lets users get exposure to a wide range of cryptocurrencies. One of the main benefits for users is that they can earn PALM tokens while trading.

Perpetual contracts are futures-like derivatives that allow traders to speculate on the price of underlying assets, such as cryptocurrencies, without actually owning them. However, perpetuals are more convenient and efficient because, unlike futures, they have no expiration date or settlement.

Palmswap and other DEXes will attract more users as retail investors realize the drawbacks of entrusting their funds to centralized exchanges. In addition, DEXes have several game-changing advantages:

• They are non-custodial, which means users have complete control over their funds and are not afraid of hacks, Ponzi schemes, crypto bubbles, and so on.

• The P2P nature prevents users from engaging in fake trading and market manipulations on DEXes.

• DEXes don't require users to pass through KYC verification, which reduces the risk of censorship.

DEXes build on the promise of decentralization, which has been fading with the growth of CeFi, and they can win a big chunk of CeFi's current market share soon.