The collapse of FTX and other crypto cataclysms of 2022 exposed the vulnerabilities of centralized crypto exchanges (CEXs), leading to an erosion of trust. Many users saw decentralized exchanges (DEXs) as one of the most reliable alternatives, although they lack efficiency and cannot boast the same level of liquidity as CEXs.
Regardless of the underlying infrastructure of exchanges, the main focus should be on trust and transparency. This is crucial, as it determines how a platform gets perceived and succeeds in the overall market. By prioritizing user asset protection, transparency, open communication and a user-friendly experience, a crypto exchange can build trust and establish itself as a reputable and reliable platform in the rapidly growing crypto market.
This exchange prioritizes trust to empower stakeholders and users
Some exchanges manage to combine the benefits of CEXs and DEXs to deliver better experiences and increase user loyalty. One such example is Phemex, a semi-centralized crypto exchange and Web3 ecosystem that focuses on transparency.
The exchange platform is part of a wider Web3 world that takes the customer experience to a whole new level. One of the decentralized elements of this Web3 ecosystem is Phemex DAO, which brings decentralized governance to transfer decision-making power to a growing community of developers, partners and stakeholders.
Phemex believes that the evolution of Web3 goes beyond finance to embrace other fundamental elements of society, such as digital identity, trust-building and permissionless collaboration. The ecosystem has found inspiration in Vitalik Buterin’s concept of non-transferable “soulbound tokens” and applies it to the Phemex DAO to achieve a new milestone in decentralized governance.
Source: Phemex DAO
Phemex allows users to mint their own soulbond token (SBT), called the Phemex Soul Pass, which acts as a permissionless passport to access certain privileges within the ecosystem. One such privilege is the Phemex Token, the platform’s native token that will go live soon. The token represents ownership of the exchange and can be staked for governance and treasury management rights in the DAO. It will feature versatile usability because the Phemex Token can be used to pay for transaction and network fees, as well as provide holders with potential staking yields, trading reward boosts, fee discounts, and exclusive campaign access.
Thanks to the soul-bound mechanism to facilitate a new ownership structure, Phemex increases its credibility and builds cooperation through a bottom-up approach.
At the end of 2022, Phemex introduced a self-verifying Merkle-Tree-based proof-of-reserves feature. This approach allows users directly, without any third-party auditors, to verify Phemex’s holdings, along with their personal assets deposited into the exchange.
The exchange has taken transparency to the next level by making its assets and liabilities accessible for public viewing at any time, thereby achieving proof-of-solvency. While many larger exchanges have yet to follow suit, Phemex has already earned certifications from both CoinGecko and CoinMarketCap regarding its proof-of-reserve mechanism.
What’s more, Phemex implemented a hierarchical deterministic cold wallet system that assigns separate cold wallet deposit addresses to each user. All deposits are periodically gathered in the platform’s multisignature cold wallet via offline signature.
Despite spending so much effort on security across all layers, Phemex is an efficient and user-friendly platform that enables users to trade about 300 cryptocurrencies. Earlier this year, it launched margin trading, which allows users to take up to 5x leverage on spot trading by borrowing on margin without having to sell their assets.
Phemex is one of the few major crypto exchanges that hasn’t been breached by hackers, which shows its commitment to building a secure trading experience. The platform uses a RAFT algorithm for cross trading and to power its trading engine, while ensuring security through a random kill process that occurs every 5 minutes without affecting accuracy or stability. What’s more, Phemex supports a high transaction processing speed of over 300,000 transactions per second.
Trust and security are the cornerstones of a successful crypto exchange. By combining innovative technologies, transparent practices and user empowerment, Phemex exemplifies how an exchange can foster a comprehensive trading environment for its users.
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