Cold Reflection After 10.11: How do exchanges balance "relative fairness" and "absolute transparency"?

Original: Odaily Odaily Planet Daily

Author: Golem

Although the epic drop on “10.11” has come to an end and the market is gradually recovering, the record high daily liquidation created by this drop (19.3 billion USD) still casts a shadow over the market. Many investors believe that the blunt remarks from Trump should take the blame, while others point fingers at Binance, insisting that the decoupling of USDE, BNSOL, and WBETH prices is the main reason for further market decline.

Binance officials explained the decoupling issue as a temporary technical failure of certain platform modules due to the overall market downturn. As for the extreme low price situations in individual spot trading pairs, they were primarily caused by historical limit orders being triggered under one-sided liquidity, as well as UI display precision issues.

Binance has taken on platform responsibility and compensated users for collateral liquidation losses caused by the de-pegging of USDE, BNSOL, and WBETH, with a total amount reaching $283 million. Despite this, some investors are still not satisfied, believing that Binance should also be responsible for the collapse of the altcoins, and have raised issues regarding centralized exchanges such as “market manipulation,” “data black box,” and “intentional disconnection.”

On October 13, Jeff.hl, co-founder of Hyperliquid, also had a back-and-forth online with Binance founder CZ on social media. Jeff.hl was the first to post, stating that all orders, trades, and settlements of Hyperliquid are executed on-chain, ensuring transparency and verifiability. However, some centralized exchanges (CEX) have serious underreporting issues regarding settlement data, specifically naming Binance.

In response, Binance founder CZ quickly addressed all the doubts, stating, “While others choose to ignore, hide, evade responsibility, or attack competitors, key participants in the BSC ecosystem (including Binance, Venus, etc.) have spent hundreds of millions of dollars out of their own pockets to protect users,” and believes this reflects a different value system.

The market is full of differing opinions, and no single solution can satisfy all participants. During this sensitive period, Jeff.hl publicly questioned Binance, which essentially reflects the different trade-offs made between CEX and DEX regarding “relative fairness” and “absolute transparency.”

Performance is no longer the main difference between DEX and CEX.

In the past, although DEX was considered the ultimate form of cryptocurrency exchanges, the market share was still dominated by CEX, mainly due to the significant performance gap between DEX and CEX. Issues such as high latency in trading, shallow market depth, low capital efficiency, and poor execution accuracy have always affected traders' experience in DEX. Therefore, even though CEX has been criticized for centralization risks and has even faced incidents (like the FTX event), traders ultimately prefer to trade on CEX due to its low latency and high usability.

By 2025, these performance issues will no longer be the main obstacle to the expansion of DEX into the market. Taking the DEX Hyperliquid, which features CEX-level performance, as an example, it adopts an on-chain Central Limit Order Book (CLOB) model, resulting in a qualitative leap in performance compared to traditional AMM DEXs, with an average transaction confirmation time of just 0.07 seconds, comparable to CEX. At the same time, although some “niche tokens” on Hyperliquid still face issues like insufficient liquidity and high slippage, the trading slippage for mainstream tokens such as BTC and ETH on Hyperliquid has dropped below 0.1%, comparable to CEX.

As the performance gap gradually narrows, there has indeed been a trend of funds and traders migrating to DEX since 2025.

According to data from The Block, in the spot market, the market share of DEX is overall on the rise compared to CEX, reaching 19% by the third quarter of 2025.

In the perpetual contract market, the market share of DEX is growing more rapidly, with the DEX contract market accounting for only 4.9% of the CEX by the end of 2024, and this figure rising to 14.33% by October 2025.

In extreme market conditions, today's DEX has also withstood the test. After the significant drop on “10.11”, Hyperliquid's official statement said, “Although the platform's traffic and trading volume reached an all-time high during extreme market conditions, there were no downtime or delay issues on the Hyperliquid blockchain.”

On the same day, the world's largest exchange Binance encountered partial system failures due to technical issues, but this does not actually indicate that Hyperliquid currently has higher performance than Binance, as the system pressures faced by both sides are different. On October 11, Hyperliquid's perpetual contract trading volume exceeded $10 billion, while Binance's trading volume was more than ten times that. According to data from The Block, in September, Hyperliquid's contract trading volume was $28.247 billion, while Binance's contract trading volume was $2.34 trillion, making Hyperliquid's contract trading volume only 12% of Binance's.

The market is always only “relatively fair”.

When performance is no longer the main gap between CEX and DEX, will all investors really choose DEX proactively? After the major drop on “10.11”, although Binance was attacked by some public opinion, the post-00s trader Vida still publicly stated that large funds should use Binance, reasoning that Binance will be responsible for its users at all times.

Some investors complain that Vida's comments are due to his being part of the favored side by Binance. During extreme market conditions, exchanges compensate and soothe the emotions of major players and “Binance users” while ignoring the retail investors and other market participants affected by it. Binance's growth is built on the countless silent “corpses” of retail investors; the money of the wealthy is returned in full, while the money of the common people is divided into a ratio of three to seven.

**However, apart from the part about the CEX “conspiracy theories”, fairness in this market is always relative. Even the DEX, which holds high ideals of decentralization and fairness, can “waver” in the face of a crisis of interest. On March 26 this year, Hyperliquid faced its biggest crisis since its establishment, as a certain whale manipulated the price of the Meme coin JELLY, causing HLP to take on large short positions and face a risk of going to zero amounting to 240 million dollars. However, Hyperliquid chose to handle it in a “pull the plug” manner by delisting the JELLY contract, allowing HLP, which was originally set to incur losses, to instead profit 700,000 dollars.

Hyperliquid's actions have also caused an uproar in public opinion, making decentralization and fairness a joke. This is not the first time traders have exploited Hyperliquid's vulnerabilities for profit; there have also been events such as “whales actively liquidating leading to a loss of 4 million USD in HLP” and “XPL chain liquidations harvesting 46 million USD,” yet Hyperliquid has not compensated users who suffered losses in these events.

This makes it clear to investors that Hyperliquid does not adhere to decentralization and fairness, but rather chose to “do nothing” before the crisis spread to itself. It can be said that every upgrade and improvement of Hyperliquid is also stepping on countless “corpses”.

The market needs “absolute transparency”

The trading market has never been truly fair. To be honest, if one party makes money, there will always be a party that loses money, regardless of whether it's a DEX or a CEX, and it's impossible to be responsible for everyone. But even if fairness is relative, transparency can be absolute.

In extreme market conditions, CEXs are always caught up in conspiracy theories, primarily because CEXs are essentially human-intervenable “black boxes”. Even though regulatory and compliance measures have been upgraded, the lack of transparency perpetuates public distrust towards CEXs. Investors' understanding of the so-called truth entirely comes from the announcements of the exchanges, which, while authoritative, can easily be questioned to the point of being defenseless. For example, Hyperliquid co-founder Jeff.hl questioned Binance's data manipulation regarding liquidation, and for Binance to prove itself, it would have to “cut open its belly to show how many bowls of noodles it has actually eaten.”

Although Hyperliquid differs from Binance in terms of values, its on-chain transaction data is transparently verifiable. The transparent settlement mechanism not only significantly reduces the possibility of market manipulation by the platform but also reassures investors, thereby reducing the emergence of conspiracy theories. For instance, during several crises that occurred on Hyperliquid, people observed the operations of whales on-chain, while the investors who suffered losses lamented, but very few believed this was a conspiracy by the platform.

Mechanisms cannot be perfect, but a transaction mechanism that is transparent, public, and automatically executed within the rules will always reduce more controversies compared to the black box and chaos of centralized exchanges. Even DEXs, if lacking transparency, will face suspicion. For example, the previously popular Prep DEX Aster was questioned for trading volume manipulation and data falsification due to its privacy order feature, and DeFiLlama even temporarily delisted Aster.

The cryptocurrency market has developed to the point where CEX and DEX are no longer completely separate entities; the boundaries between CEX and DEX are also shrinking. The experience of DEX is aligning more closely with that of CEX, and CEX is expanding its on-chain business through user wallets. Both CEX and DEX have their own risk quadrants: CEX can provide a safety net for users when real issues arise, but investors criticize its significant power; DEX adheres to “code is law” and does not impose excessive constraints on user behavior, yet when problems occur, investors yearn for centralized compensation.

However, from a trend perspective, “transparency and openness” is one of the fundamental principles and development trends of Crypto. Even though the value systems of CEX and DEX differ, both should move towards this direction: higher verifiability, clearer boundaries of responsibility, and a more robust crisis response mechanism.