Exchanges were once unicorns in the world of digital currency, and cash cows that made people rich overnight. However, have you ever heard that this seemingly glamorous industry only lasted 18 months? Today, let us uncover the behind-the-scenes stories of the exchange industry and explore the mystery.

 Industry status and challenges

In the craze of digital currency, exchanges have sprung up like mushrooms after rain, but they are also as short-lived as fireworks. According to data, 80% of new exchanges will go bankrupt within 18 months of their establishment. This figure is shocking, but it is not without reason. With the continuous escalation of regulatory policies, exchanges are facing unprecedented challenges. Security, compliance, liquidity and other issues are intertwined, forming the core contradiction of the industry.

 Security risks and regulatory pressure

Security has always been the lifeblood of exchanges. A series of black swan events such as the Mt.Gox incident have made people begin to doubt the security of exchanges. The lack of supervision has made things worse, causing exchanges to fall into the whirlpool of public opinion. Under the tightening of supervision, many exchanges have been forced to close, and even worse, they are suspected of illegal operations, resulting in capital loss and users have no way to protect their rights.

 User experience and brand building

In addition to security issues, user experience is also the weak point of exchanges. While pursuing short-term profits, many exchanges have neglected the importance of user experience. Frequent problems such as transaction jams, poor customer service, and difficulty in withdrawing funds have caused users to lose confidence in exchanges. Brand building is the key to the long-term development of exchanges. A good brand image can make exchanges stand out in the fierce market competition.

 Innovation and future development

However, even in the face of many difficulties, some exchanges continue to move forward with their innovative spirit. New businesses such as Bitcoin futures, leveraged trading, and cross-chain trading are emerging in an endless stream, injecting new vitality into exchanges. In the future, with the continuous development of blockchain technology, exchanges will also usher in new opportunities and challenges. Only by continuous innovation can we be invincible in the fierce market competition.

 Conclusion

In the exchange industry, 18 months may be just a number, but there are endless hardships and challenges behind it. Security, supervision, user experience, and innovation are not simple concepts, but the key to the survival of exchanges. Only by constantly summarizing experience and lessons and constantly improving mechanisms can the exchange industry go further. I hope that every exchange can thrive in the wind and rain and embrace a better future.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

As digital currencies grow, the number of exchanges also grows, but the life span of exchanges does not grow, and is even decreasing. What is the reason behind this?

Bitcoin has spawned a series of peripheral industries. Exchanges closely connect projects with investors and become an irreplaceable important platform in the currency circle. According to media statistics, as of June 2017, there were more than 4,000 exchanges in the world, but as of December 2017, there were nearly 7,700 digital currency exchanges in the world; and statistics from July 2018 showed that the number of global digital currency transactions has exceeded 11,000, basically growing at a rate of more than 3,000 every six months.

As digital currencies grow, the number of exchanges also grows, but the life span of exchanges does not grow, and is even decreasing. Many data agencies have analyzed this index and obtained unexpected results.

Exchange life span is only 18 months?

Recently, ARKinvest's crypto analyst Yassine
Elmandjra released a statistical data showing that the average life span of exchanges is only 18 months, and most of the closed exchanges are victims of crypto hackers and poor management.

According to AMBCrypto, about 50 exchanges have closed so far, the most notable of which are Cryptopia and Mt. Gox. Since the beginning of 2019, eight exchanges in the industry have closed.

The major factor leading to the closure of these exchanges is the hacker attacks, which threaten the overall security of the exchanges, the theft of coins has occurred repeatedly, and the exchanges are heavily in debt and cannot escape the fate of bankruptcy. Among them, the Mt. Gox exchange, which was attacked by two large-scale hackers, is also repeating the same fate.

Mt. Got Exchange Bankruptcy

Mt. Gox, once the largest cryptocurrency exchange, filed for bankruptcy in February 2014 due to two large-scale hacker attacks. Faced with user complaints, the platform had no choice but to go bankrupt.

In this incident, hackers stole nearly 750,000 bitcoins from users and 100,000 bitcoins from exchanges. The number of stolen bitcoins accounts for about 7% of the total global bitcoins, which was worth about $473 million at the time.

Hacking incidents have occurred frequently in recent years, and exchanges are also unable to escape hacker attacks. After the Mentougou incident, not only did it cause serious losses to the exchange, but it also had a serious impact on the Bitcoin market. The market situation has been at a low point for several years since then.

To this day, there are still incidents of exchanges being hacked. However, while the exchange avoids external attacks, internal security protection must also be prepared.

Coinbin Exchange files for bankruptcy due to internal embezzlement

In February 2018, the South Korean cryptocurrency exchange Coinbin declared bankruptcy, which means a loss of 29.3 billion won, equivalent to 26 million US dollars.

Coinbin's CEO said that the Coinbin executive in charge of the exchange's cryptocurrency deposits, the former CEO of Youbit,

embezzled Coinbin's funds, resulting in increased debt and had to file for bankruptcy.

The executive stole the private key of a wallet with more than 100 ETH, but lied that the private key was lost. Security issues within the exchange are also occurring frequently, and private key loss incidents continue, which makes the security of the trading platform thought-provoking.

Even in January this year, the Canadian QuadrigaCX exchange platform released a statement on Facebook saying that the founder had passed away, resulting in the loss of private keys, and the cryptocurrency worth $150 million was locked in a hard wallet and could not be used. Many investors questioned whether this was a fake death to create a "golden cicada escape" scam?

With the sudden death of the founder, this huge sum of money also seemed to inevitably become a secret buried deep underground. The QuadrigaCX exchange said that it would make every effort to mobilize funds and solve customer problems, but many exchanges did not compensate users for their losses.

Exchange runaway

E-De Exchange is the world's largest decentralized digital exchange. When trading, users do not need to register with real names. They only need to have a MetaMask account to easily trade. However, due to its poor user experience and existing security vulnerabilities, it has always been criticized and questioned. In September 2017, the user currency was stolen due to security issues on the platform, which caused a sensation.

In early January 2018, E-De could no longer operate normally, the application programming interface failed, the website was frequently down, and no customer service responded to any questions. As a result, the value of the currency plummeted, and investors began to defend their rights. Due to unclear equity distribution, the farce of the currency running away finally occurred.

In addition, some exchanges have closed down due to withdrawal of funds, poor management, high operating costs, lack of funds and other problems.

The exchange went bankrupt less than ten days after it went online.

On June 14, the Cattleex exchange officially declared bankruptcy, and the user's assets will be temporarily locked and cannot be withdrawn, and all transactions will be suspended. Later, Cattleex stated that due to the withdrawal of investors and the platform's inability to meet the requirements of most miners to pull the market, they all smashed the market and withdrew cash, resulting in the platform being unable to operate normally. After the team is reorganized, the exchange service of CTL (Cattleex platform token) will be carried out after the new version comes out.

According to the announcement on the Cattleex website, the platform was officially launched on June 9. From this point of view, the platform has been officially in operation for less than a week.

The above analysis of the reasons for the closure of the exchange shows that the exchange is facing various threats, hacker attacks, theft, running away, withdrawal of funds and other incidents occur frequently. There is no absolute security in the world of cryptocurrency, only relative temporary stability.

Summary

In the entire trading market, the 80/20 rule is fully reflected. The top 20 exchanges account for nearly 90% of the market's profits, while the remaining small and medium-sized exchanges can only account for 10% of the profits. In a bear market, large exchanges may be safer, and small and medium-sized exchanges face funding problems, and the possibility of running away or closing down will increase.

Although it is a bull market, exchanges have formulated strict review systems and the scope of transactions has become wider. However, it is recommended that investors improve their safety awareness and safety measures to avoid unnecessary economic losses. After all, you don't know whether the exchange will face life and death in the next moment?