So, if decentralized exchanges have the ability to roll back transactions basically going back to an earlier state to fix mistakes after something goes wrong doesn't that kind of mess with their whole decentralization vibe? And could this be taken advantage of down the line?
Sincerely what I want to know is, if all those that where forced into liquidations and traders that their trades triggers take lose (SL) have their balance been restored back and all exiting trades reopened and activated accurately with current datas.
The answer to the question above is no, that means we have a lot to worry about as to freedom and right in decentralized exchange, since the news says the price of their coin haven't recovered since the incident that means alot is to be worried about.
Yeah, this is coming from the geniuses who nearly got wiped in the FTX crash! SAFU! lol!
Remember, it's a decentralized exchange that can do things like this:
that sound like what only a somewhat centralized platform would be able to do
Claim, just like North Korea is calling itself the Democratic People's Republic of Korea
By doing so, they essentially undermine the "decentralization" they advocate on their platform and make them no different from centralized exchanges, where they can directly control their systems. this is a clear red flag, and users should be wary of it, as worse things could happen to this exchange.
What about traders that opened a short position for Bitcoin and did not add a stop lose, does it means that the trader would have been trailing down in profit until they decide to stop the trade? Is not all traders that likes using stop lose and take profit, so people that didn't use stop lose in a short position are not supposed to be liquidated, if that's correct, would the exchange allow those traders to withdraw their profits? Another thing I was wondering, since this is a technical problem, would the exchange also repay those that were liquidated?
This is exactly why not your keys, not your coins still matters. A rollback might fix a glitch today but it also proves that someone is in control when things go wrong. Decentralization that disappears under pressure isnt real decentralization, its just convenience dressed up as ideology.
In fact, using such a little-known exchange is very risky. Will they be able to compensate the losses that users have suffered as a result of this exchange? Since it has been said that users who opened short positions have been liquidation. However, those who have been liquidation those who have made profits should decide not to withdraw their profits because this is due to an error here.
It's now clear to many that they are not decentralized but just operate in the shadow of it. Everyone should be mindful of the exchanges they use especially those that claim to be decentralize and if they notice any slight possible centralize patterns they should start thinking otherwise.
First clarity is I have actually read lots about incidence like this and most of the time the thing that the exchange does is they force close that trade for you. For example if some opens a position and no stop loss you, if the market is actually going in favour of the trader in an awkward market conditions the exchange will force close the trade at certain profit margin for the trader instead of allowing the trade to run, I have experienced exchanges like MEXC doing this during all this high liquidation periods. Will they compensate losers is another aspect although if they are really going to continue operations they will actually accept the mistake but payment of loses like this usually takes time
In as much I will actually say do not trust any exchange no matter what they say, its best to stick to high reputable exchanges with huge liquidity because of situations like
People dont necessarily expect blockchain applications to be as decentralized and permissionless as Bitcoin. Having some mechanism to revert damage from a system failure, at the application level, is better than allowing users to lose millions of dollars which they shouldnt have.
I wouldnt agree with rolling back a fully fledged blockchain because it would break too many things, but in cases where a chain exists for the purpose of hosting a single app, not doing a rollback might effectively kill the thing it was designed for.
Paradex in my understanding was fairly centralized, but because it uses smart contracts and is built on public blockchain infrstructure, it is referred to as a DEX. In reality, it is not quite a CEX but it also cannot be considered truly decentralized.
You're right about stop-losses vs. liquidation mechanics. Normally, not using a stop-loss *could* let profits run-*if* everything works smoothly. But Paradex's rollback throws a wrench in that. Exchanges, even smaller ones like Paradex, often have hidden kill switches to avoid blowing up. If Bitcoin somehow hit $0, their systems might've auto-liquidated everyone's positions-no matter your settings-to save their own skin. The rollback didn't just erase history; it probably overrode real-time liquidations that already happened.
This is where decentralization becomes critical. A truly decentralized system can't just rewind trades. Paradex's move proves they're acting more like a central bank than a trustless platform. Traders without stop-losses *might* have dodged liquidation... *if* the glitch never occurred. But the rollback itself is the bigger issue-it shows who's really in control
Firstly, it's DeFi, and there are risks of hacking, failures, and smart contract errors.
Secondly, the concept of "decentralized" is purely formal, because all protocols have kill switches. On the one hand, this is bad, but on the other, if the protocol is hacked, everyone will have to watch their coins leak to the hackers' addresses.
First of all this was not real decentralized exchange, and I honestly doubt they had real Bitcoin mainnet listed.
This was probably some of their token XYZ-biTc0iN on some random blockchain, and not the real bitcoin.
Proof for that is that rollback happened on some random chain, not on bitcoin blockchain.
Exactly right.
No rollback has EVER occurred on the BTC mainet since the overflow bug incident in 2010.
NO single BTC exchange (or pool) can initiate a rollback as it requires an immediate consensus action between all large pools to agree on the rollback target block they will build new work on for it to happen. Without that majority using the new target block all that can happen would be the exchange or pool doing it on their own making an unsupported fork & they start following the wrong chain.
As dk said, it was mostly likely a token that paradex alone controls. It may be recorded on the BTC mainet like Odrinals or Runes or other ERC-xxx tokens are but has nothing to do BTC proper. Only the data sets associated with the token will be affected.
This why one should never trader perpetual contracts on lesser know exchanges. Not that bigger exchanges are perfect but chances of getting your account drained/REKT are higher with lesser know exchanges.
Imagine the people who had shorted and made some massive profits and now all of a sudden a roll back has happened and the profits have disappeared just like that. I wonder how they are feeling about this.
Trading is basically dangerous and people if want trading, must choose top exchanges as their trading places. Knowing that even top exchanges with Tier-1 are still able to collpase and bankrup with a latest famous example is FTX exchange with SBF bad management and the bankruptcy in November 2022.
Centralized exchanges and even exchanges generally are very dangerous to use, store your fund there for trading. Even Decentralized exchanges that can be use with non-custodial web3 wallets are not actually secure for users. Make sure by using these DEX and web3 wallets with smart contract interactions, they must know about risk of smart contract exploitation which can steal cryptocurrencies in their wallets.
How to revoke smart contract allowances or token approvals.
This faulty database is more of the fault on the exchange, don't they have security measure to prevent this? This is a prime example why lesser known exchange is not a good. They don't have enough resource for redundancy and security therefore this kind of thing can happen.
For decentralized exchange, they use their own formulated mechanism and there is no such thing as database migration since everything is written in the blockchain. The blockchain is their database. For perpetual decentralized exchange, they can easily use multiple oracles and create fallback mechanism.
I don't believe in anything in this crypto space anymore, those who claimed that they are running decentralisation don't even know what it takes to do so, their ways is not something similar to decentralisation it just seems like they are using the titles to attract people because people want it.
Bitcoin is the only thing that preaches decentralisation, and every time it practices what it preaches, many DEXs are not truly decentralised anyways.
If a decentralized exchange can't rollback the loss due to error, it would be like hyperliquid. The positions got liquidated and some got deleveraged. The loss is irreversible because they got no control over the blockchain.
Truly put into a new perspective that everything could go wrong like that. This roll back mechanism can only happen in a blockchain where sequencer and governance aren't really decentralized. Everytime I see a chain rolled back, some people say decentralization is a lie .
I have had my fair share of exchanges getting messed up when I am trading including even the top tier exchanges. However, the damage has usually been minimal because I learnt to use only funds I can afford to lose plus putting proper risk management in practice.
Maybe people need to be well aware that the higher the potential reward, the higher the potential risk as well.