Crypto Derivatives DEXs Reposition for Life After FTX

Decentralized exchanges are retooling their public-facing approach.

AccessTimeIconDec 2, 2022 at 7:26 p.m. UTC
Updated May 9, 2023 at 4:03 a.m. UTC

The collapse of crypto derivatives exchange FTX is driving more attention to its on-chain competitors and prompting these decentralized exchanges (DEX) to double down as an alternative.

Whether they can win the trust of the trading public is yet to be seen. But on a DEX it is virtually impossible to inconspicuously commingle funds (as the FTX centralized exchange appears to have done) when everything’s traceable on the blockchain.

  • How NEAR Enables Multichain Access From One Account
    How NEAR Enables Multichain Access From One Account
  • Three Crypto Predictions in 2024
    Three Crypto Predictions in 2024
  • Crypto Market Leaders and Laggards in 2023
    Crypto Market Leaders and Laggards in 2023
  • Could the Bank Secrecy Act Harm Crypto? Coin Center Thinks So
    Could the Bank Secrecy Act Harm Crypto? Coin Center Thinks So
  • That’s driven lots of new interest to some of the earliest decentralized players. Dan Gunsberg, creator of Solana-based derivatives exchange Hxro, said that in recent weeks he’s seen a boom in interest for his trading platform, which he claims cannot fall prey to the same pain points that felled FTX and its sister company, Alameda.

    “This was not a [decentralized finance] problem,” Gunsberg said of the latest market collapse. “FTX and Alameda, as far as we know, were incredibly centralized, controlled by a single person. These things metastasize because of human error.”

    DeFi is hardly a magic salve for crypto’s multi-billion-dollar woes. Protocols can get hacked, duped, drained and worse, costing their users massive aggregate losses. In contrast with the “black boxes” of centralized exchanges, though, DEXs operate according to their open-source code. Gunsberg noted DEXs have on-chain assets that are open for all to see – so long as one knows where to look.

    That’s easier said than done, however, and lay traders can’t always navigate the block explorers and datasets that – though public – speak to the state of an on-chain exchange’s status. Some DEXs are now working to make this data more accessible.

    Drift Protocol, GMX and Perpetual Protocol have commissioned asset dashboards on data site Nansen that showcase the health of their respective exchanges. Among the information included in the dashboards are token allocations and debts owed by the protocols.

    Their efforts are the on-chain equivalent of the “proof of reserves” movement sweeping across centralized exchanges now jostling to prove their words are good with hard data. Even that has its limits, however. Whatever one wants to call it – proof of reserve, proof of liability, proof of deposit or something else – that report only speaks to a moment in time.

    At the same time, many decentralized protocols are readying their defenses against an expected regulatory onslaught. Their fear is that financial regulators, already spooked by FTX's apparent misdeeds, will want to regulate DeFi, too.

    “A lot of us raised concerns about how DeFi derivatives platforms do not have a strong voice,” said David Lu, co-founder of Drift Protocol. He said GMX, Drift, Perpetual Protocol as well as dYdX are pooling their efforts to have a larger collective clout.


    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Danny Nelson

    Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.