The main problem with centralized exchanges, which more and more individuals are now realizing, is that the exchange is in complete control. Beyond just setting up the trades, they also log everything themselves. This system means that you never actually own your cryptocurrency, as your digital wallet isn’t on the blockchain, but within the exchange.

The recent FTX news has shed further light onto a potential danger of centralized exchanges. FTX was misusing user assets, with the CEO sending his own company a sum of cryptocurrency that belonged to the platform’s users. Once people started to realize this fact, with Binance pulling out of acquiring the exchange due to nefarious conclusions of internal research they did, the platform went into a tailspin.

As people tried to withdraw their capital, they realized that FTX just didn’t have that amount, rendering the exchange unable to give people their own funds. In response to this, many of the other leading centralized exchanges, like Binance, have promised to release Proof of Reserve documents.

These documents will bring a level of transparency to centralized exchanges, providing more accountability to where user funds are being stored. Yet, for many