Remarks: cut, verb, generally refers to the damage to the interests of others to meet their own interests, and more directly related to money. It is often used with leeks, which means close to the IQ tax, but more often than the latter.

For a long time, the exchange has been misunderstood as (or interpreted as) the main place for cutting leeks, and the project party is the main executor of cutting leeks. One provides the site, one does it. Many times, the exchanges that provide the site also do it: for example, to get involved, to inflate assets, and so on. We will talk about that later.

The first point is not folk behavior (which will be mentioned at the end of the article). Let’s first look at the latter two points to see how an exchange is cut off.

1. Project party

At present, it is also common in the industry that the exchange is cut, mainly by the project side. However, those who are cut by the project side are less, and those who are attacked by hackers will lose more money.

Share the event of two exchanges being cut by the project party:

The first one happened on the fire coin platform. In December 2017, a coin wax was put on the hot coin, which was suddenly increased to 10 times on the day of launch, causing a panic crash and a direct drop of 99% (it may also be caused by the project side’s selling). Then fire coin announced to take out 100 million to the user full compensation. This event makes the reputation of hot money better, because the loss of platform money is sometimes inevitable under the current technical environment and system. Compensation is what all retail traders want the exchange to do.

The second is from an exchange. An exchange has launched a currency, temporarily called a currency. Later, because of some problems, the exchange did not negotiate with the project party, and the project party locked the currency a in the exchange’s wallet, resulting in the user unable to withdraw the currency. Users began to make trouble, and finally the exchange had to compensate users with other currencies.

Both of these events were caused by the fact that the token contract of the project party was not reviewed when the coin was loaded. The first is that the token contract of the project side supports the issuance of additional shares, and the second is that the token contract of the project side supports the coins of a certain address.

However, this kind of situation is less and less. It has become a standard process to review contracts in currency.

In fact, the review of contracts and related qualifications should have been a necessary process. It was only the early stage of the industry (especially three years ago) that the bubble was so serious that it was too late to audit. Therefore, the exchange should compensate ordinary investors for the corresponding (due to the audit error of the trading platform) losses. As for the exchange’s own losses, it should find the corresponding “evil” project party to communicate, compensate or punish. This is the most common business logic.

2. Hackers cut the stock exchange

Let me talk about the currency theft in the exchange.

There have been many incidents of currency stolen from exchanges in history, the most famous of which is the Mentougou incident.

Mentougou, a bitcoin exchange in Japan, stolen 850000 bitcoins in February 2014, worth about $500 million at that time. The official claim that the reason for the theft is that there is a loophole in the system. Without bitcoin transfer, the system shows that the user has transferred bitcoin into the E-wallet.

In fact, Mentougou has been stolen since 2011 before it was closed. First, 2000 bitcoins were stolen, and soon 80000 bitcoins were stolen. The method of attack is that hackers invade the computers of internal employees, artificially adjust the price of bitcoin to 1 cent, then buy a lot of bitcoin and transfer it away.

The most recent theft of bitcoin was in May 2019, when coin an stolen 7000 bitcoins, worth about $40 million. The reason for the theft is that the hacker obtained the user’s API key and transferred the bitcoin in the user’s account. Coin an then made compensation.

Here is a simple summary of the coin theft incidents. You can have a look at it.

The way of exchange being cut and the basic logic of Taiwan dollar

This chart does not include the situation in 2019. If you are interested, you can search online for more than one year’s stolen currency data.

Now the exchange will regularly find a third-party security company to do audit, security has been greatly improved. Of course, attack and defense is an eternal problem, and they are constantly improving. Security is always the most important issue of the exchange, and it can not be overemphasized.

Finally, I would like to mention policy and legal issues.

We are very concerned about this issue. No matter what kind of business activities, if there is no formal supervision or supportive policies, the final safety is a big problem, such as the “94” incident in 2017. In terms of relevant legislation, I would like to recommend the book and comments of Yang Dong, a law professor at Renmin University of China.

As a matter of fact, the domestic legal research on the grey behaviors of the exchange and the project party, such as the fund offer, illegal fund raising, CX coin, etc., started a few years ago. It only adheres to the spirit of crossing the river by feeling the stone, and tolerates failure and mistakes within a certain limit, rather than seeing mistakes. Today, in 2020, the mainstream organizations will increase their layout in the blockchain industry, and the previous behavior of fishing in troubled waters will be restrained to a certain extent.

Responsible editor; zl

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