FTX had more than 3.1 million users at its pean in November 2021 and over. A year later on November 11, 2022, FTX filed for bankruptcy. Though there was a hold on withdrawals, users still managed to find a loophole. Some might get their funds back, some may not. But all of them would need a reliable crypto exchange. We have curated a list of top crypto exchanges that can be better alternatives for FTX.
Our Criteria
We have chosen a few criteria which helped us select the best alternatives for FTX. Keeping in mind the collapses of previous exchanges like Vault and FTX, we have chosen the criteria of proof of reserves. Further, exchange volume also plays a significant role because an exchange on which people trade rarely, is more likely to capitulate.
1. Proof of Reserves
The criteria is very simple, we have chosen those crypto exchanges which have proof of reserves. The concept is simple, reserves can be shown to the general public. These reserves would mean that the company can support all withdrawals even if most users decide to withdraw at once. This is similar to conventional banks who have partial reserves to prepare for a bank-run, in case it happens.
Simply, Proof of Reserves are a way of saying that, âwe can give your crypto back to you whenever you want it backâ.
2. Exchange Volume
Exchange volume is very essential when you trade cryptocurrencies. It helps you get better buying and selling prices due to competitive bidding. Further, exchange volume also shows that people have trust on that exchange. But using just Volume as a counter would be fatal like in the case of FTX.
Therefore, we have combined both of them together to find a good exchange that has some tangible proof of its crypto reserves and has high transaction traffic.
FTX Alternatives with Audited Proof of Reserves
We have ordered exchanges according to the reliability of their proof of reserves data. Kraken has audited reserves while BitMex has self attested data. Crypto.com and Binance have promised to release data in near future.
1. Kraken
Kraken has an auditor assisted Merkle Tree based proof of reserve. It was last updated in November 2022. A Merkle Tree is a data structure which confirm the existence of previous values through cryptography. Change in any root value would change the final Merkle calculations. It is also the best FTX alternative currently according to our view.
Kraken further secures individual accounts through Proof of Reserves. This means that each user can verify whether their funds are included in proof of reserves. They can do so through the following steps.
Login and navigate to settings.
Choose Accounts.
Selects Audits Tab and then choose Audit type.
For a detailed Kraken Review, see our guide on Kraken Exchange.
2. BitMex
BitMex has provided a self attested proof of reserves and liabilities on November 9, 2022. Unlike Kraken, it does not involve complexities like Merkle Tree data structures. It just simply has a downloadable 200 MB YAML file. The last verification date had 75,914.7 Bitcoins as assets and 75,758.3 Bitcoins as liabilities. Overall the exchange appears to be able to honor all commitments at least on paper. However, it is notable that it is a self-attested declaration and is not verified by any third-party.
The exchange ranks 42 in terms of exchange volume.
3. Crypto.com
The exchange had announced that they had sufficient reserves well above their user deposits. Further, they have sufficient US Dollar and other stablecoins to honor commitments. As of now, it appears that their stablecoin reserves are above $500 Million. The exchange is among the top 20 crypto exchanges with respect to volumes.
Below is a screenshot posted by their CEO Kris.
As mentioned in my CNBC interview yesterday, https://t.co/pFc4Pz9nFR is sitting on plenty of our own capital held in USD and stablecoins above the 1:1 reserves we keep for client funds. https://t.co/8ipDou3JxK
â Kris | Crypto.com (@kris) November 16, 2022
Crypto.com has successfully recovered around $990 Million worth of cryptocurrencies from FTX. They have further announced that they will soon release a proof of their reserves.
4. Binance
Binance is the largest exchange and has more than 15 Million active visitors per week on the exchange. The exchange CEO Changpeng Zhao is one of the most vocal supporters of proof of reserves to verify exchange liquidity and reserves. He has tweeted in favor of proof of reserved and announced that Binance will also publish the reports soon.
When Binance publishes those proof of reserved data, it would become the best FTX alternative.
All crypto exchanges should do merkle-tree proof-of-reserves.
Banks run on fractional reserves. Crypto exchanges should not.@Binance will start to do proof-of-reserves soon. Full transparency.
â CZ đ¶ Binance (@cz_binance) November 8, 2022
Binance was also supposed to be the FTX rescuer but the deal supposedly failed because of FTXâs unhealthy balance sheet.
Conclusion
âNot your keys, not your cryptoâ is one of the most popular sayings in Web3. However, for everyday users keeping funds in exchanges not only lets us HODL but also helps us trade with our crypto as collateral. Margin trading would be lot difficult if everyone decided to take their crypto off-exchanges. Therefore, we need exchanges that can keep our crypto safe. Proof of Reserves is definitely a bold step towards greater transparency and greater adoption.
