Given the Unprecedented Crypto Excitement, Poloniex Warns “Especially New Entrants”

Posted by on May 16, 2017 11:00 am
Tags: , ,
Categories: exchange

Source: Poloniex
Published: May 16, 2017

As blockchains enter the mainstream, global cryptocurrency exchange leader Poloniex in an open letter to its community talks of the explosive industry growth and its effect on Poloniex itself. But hell, they put all the potential blame on users.

Poloniex states they have never seen such enthusiasm for trading blockchain tokens as they have in the past few months. Since January, they’ve seen an increase of more than 600% active traders online and regularly process 640% more transactions than they did merely four months ago.

Given this unprecedented level of excitement, Poloniex would like to take the opportunity to remind users, especially new entrants, of some key considerations related to trading blockchain tokens, including the psychological and financial pressure with high level of risk on margin trading:

Blockchain token exchanges in general face operational threats that can disrupt the user (trader) experience. These intrusions come in the form of distributed denial of service (DDoS) attacks that target exchange servers with varying levels of sophistication, attempted laundering of funds or funding of terrorist activity, attempted theft of user funds, and other cybersecurity threats that get more creative with every iteration. Moreover, malicious threats to an online global exchange, like Poloniex, can occur at any time of the day, on any day of the year, and from anywhere on the planet. In the case of Poloniex, these threats are present every day, often with multiple, unrelenting DDoS attacks directed at several endpoints simultaneously.

Unlike many other markets, blockchain token exchanges strive to operate on a 24/7 basis with no weekends or holidays, all while under perpetual assault.

As exchanges like ours experience a surge of mainstream awareness about blockchain networks and tokens, new traders entering the ecosystem at exponential rates can strain exchange resources. In a short period of time, exchanges can see sudden and tremendous swells of new users seeking to create accounts, yet to meet compliance obligations, only so much of this onboarding process can be automated. Additionally, seasoned traders intensify buy and sell activity, and margin positions are rapidly being opened and closed. As trading activity multiplies with an expanding userbase, exchange staff and support grow only as fast as human resources can hire.

Trading blockchain tokens on an exchange, especially on margin, comes with a high level of risk. Traders new and old alike must be ever-mindful of price volatility, illiquidity risk, market manipulation, regulator activity, and various other items that make up the unique and unpredictable mosaic of factors affecting the value of any given blockchain token.

We want our community to take stock of these risks because as a general matter, trading risk may be compounded by operational stress whenever volume increases at massive scale over short periods of time. In addition, understanding these risks is important because to offer our services, Poloniex requires users to agree to our terms and accept these trading and operational risks.

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