Fake Volume on Exchanges Giving Crypto a Bad Name

After almost a decade, most people have come to understand that cryptocurrencies have uses beyond money laundering and buying drugs on the internet.

Views on cryptocurrencies have generally become more positive after they went mainstream in 2017. However, there are still some practices in the ecosystem that would give skeptics reason to avoid participation in the cryptocurrency community.

It turns out that some up and coming cryptocurrency exchanges that report trading volumes worth billions of dollars are churning out false figures.

Crypto Exchange Ranks Investigates BitForex

There have been a number of reports exposing the falsification of figures and other bad business practices of some recently established exchanges.

One of these reports concerns CryptoExchangeRanks (CER), a site which provides real-time data on cryptocurrencies. Cyber security, arbitrage view and public opinion on the various exchanges are also among the areas covered by CER.

A month ago, CER investigated BitForex exchange for exaggeration of trading volume figures. This was after coinmarketcap listed BitForex as the 7th ranked cryptocurrency exchange by daily traded volume on 15th July 2018.

This drew some suspicion since the list placed BitForex, a relatively new exchange, far ahead of older and well-known exchanges in the ecosystem. Bitforex was reported to have traded $200 million while the better-known Kraken exchange, which has been in existence for years, recorded $27 million.

This was not enough to draw conclusions since Binance, a 1-year old exchange, has demonstrated that a lot of progress can be made in the cryptocurrency space within a short period.

The investigation involved a comparison of the traffic received by BitForex’ website and more popular exchanges like Kraken and Kucoin.

Analysis of the traffic statistics of Bitforex on Similar Web showed that the exchange’s website had about 60,000 unique users. This number was found to be much less than that of Kucoin and Kraken, which were ranked far lower in terms of volume.

Kucoin and Kraken registered 889,000 and 666,000 unique visitors respectively. It was highly improbable that Kraken, with 666,000 unique users, traded $27 million while at the same time BitForex traded $200 million with just 60,000 unique users.

For this to be possible, the users on BitForex would have to trade at least tens of thousands of dollars each on a daily basis.

Additionally, CER took a look at the social media platforms of BitForex and other exchanges.

Once again, when it came to level of activity and community engagement, BitForex fell short in comparison with other exchanges that reported lower volumes.

Now, while Binance did indeed progress from a new exchange to one of the world’s top exchanges in a short period, unlike BitForex, Binance has a large following as well as social media presence to go with their reported figures.

The Binance subreddit, for instance, is swelling with mostly content customers. Similarly, Coinbase, another top exchange, is run by high profile figures and also boasts a large twitter following.

Based on the findings, it seemed evident to the authors of the report that BitForex was reporting false figures to the general public - something the authors attribute to a desire for the new exchange to quickly gain legitimacy and expand its user base.

Wash Trading and Similar Malpractices

This is not the first time cryptocurrency exchanges have been called out for bad practices.

Coinbase was heavily criticized for launching support for Bitcoin Cash with little warning and prior to the announced date.

At the height of the previous cryptocurrency bull market, coinmarketcap.com had to exclude Korean exchanges from their calculation of prices as a result of suspicions of wash trading.

Since some of the major South Korean exchanges operated without charging transaction fees, there was no disincentive to users trading with themselves to manipulate prices of tokens and coins. This was also the case with Chinese exchanges prior to the September 2017 ban.

Policing the Crypto Space

What we can take from this is that the cryptocurrency space is still in its infancy and thus figures put out by any centralized entity must be taken with a pinch of salt.

In addition to the activism of cryptocurrency community members, we need more entities like CryptoExchangeRanks to act as a check on such practices and help the crypto-economy gain legitimacy in the eyes of both traditional finance and the broader world.

 

Ethereum's Top DEX Announces Update Powered by ‘Unbounded’ Scaling Solution

IDEX, the top decentralized cryptocurrency exchange for trading ERC-20 tokens on the Ethereum blockchain, has announced a new update powered by an ‘unbounded’ scaling solution called Optimized Optimistic Rollup (O2R).

The scaling solution is made possible by the upcoming Istanbul hard fork, which is expected to take place over the weekend, and brings six Ethereum Improvement Proposals (EIPs). One of these is EIP 2028, which reduces the gas fee for requesting call data from 68 gas per byte to 16 gas per byte. Calldata, CoinDesk reports, is information broadcast on the ETH state necessary for creating specific smart contracts.

These include smart contracts to bundle on-chain transaction off-chain. Aurora Labs, the company behind IDEX, sees Istanbul as a potential way to lower operating costs while processing more transactions. Alex Wearn, IDEX’s co-founder and CEO, said in a press release:

We designed O2R as a way to solve for Ethereum’s scaling challenges today by offering an alternative system that gives businesses a platform to scale to their needs. For IDEX, this 2.0 release gives traders what they want most—the performance and scalability of a centralized platform combined with the security of a DEX

The release notes each settlement transaction processed using the Optimized Optimistic Rollup solution will consume less gas than a single transaction on the IDEX 1.0 exchange, allowing for significant savings on gas fees. A demo version of the IDEX 2.0 trading platform is now available for traders, and comes with a trading competition that the exchange claims will be distributing over $200,000 in prizes.

It’s worth noting that according to Etherscan data, IDEX was responsible for nearly 28% of all transactions conducted on decentralized exchanges on the Ethereum blockchain over the last 30-day period. Uniswap came in first place with 28.9% of transactions, with Kyber Network coming in third with 17%

Decentralized Exchanges

Decentralized trading platforms are a growing trend in the cryptocurrency space. While the first prominent decentralized exchanges were on the Ethereum blockchain, there are now some available on various blockchains, allowing users to trade directly from their wallets.

Allowing users to trade directly from their wallets means there won’t be a risk of losing funds if a centralized platform gets hacked. This has long attracted users, so much so even decentralized exchanges have launched decentralized trading platforms.

These include controversial South Korean trading platform Bithumb, and its Bithumb DEX, popular exchange Binance and its DEX, Poloniex and its TRON-focused DEX launched shortly after it spun out of Circle, and platforms like Waves, which is partly known for its DEX.

As CryptoGlobe reported, OKEx has also announced that the development of its own blockchain, OKChain, is in its final testing phase. OKChain is going to be used to support the unbanked by “providing them basic financial services.” The first decentralized application on the network will be a decentralized trading platform, OKDEX.

OKB, OKEx’s native token, is set to be equipped with more use cases in different fields, including cybersecurity, finance, lifestyle services, and more.

Featured image via Pixabay.