Today, exchanges across the cryptocurrency sector, including market leaders like Binance and Coinbase, were plagued with service disruptions. According to Yahoo! Finance, Coinbase was “investigating delays in withdrawals for ethereum and ERC-20 tokens due to network congestion,” while the platform itself experienced “intermittent downtime.” Binance also announced “temporary halts on ethereum and ERC-20 withdrawals.”

“What people don’t realize is that there are two different metrics for exchange success. In order to be a successful exchange, you need the proper marketing. You need to be able to draw in customers. The number of traders using your platform and the volume traded is how we typically rank exchange platforms. But there’s another aspect to a successful exchange, and that’s the technology stack they’re using to actually run it,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

“The problem is that exchanges are eager to start implementing a marketing strategy, and, to do that, you need a product. You need an exchange that’s up and running. So, often, they race to market. That becomes a problem when you build the technology to be good enough for the volume of activity you expect tomorrow or next week. But, what happens when you have record volume. Is that technology still competent when faced with never-before-seen traffic? Many exchanges only invest enough in their technology to make sure it performs well enough to launch, not well enough to succeed,” said Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies, including a white label exchange solution which allows exchanges to scale more than 10 million transactions per second with less than 40-nanosecond latency. Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago. 

“I think what we’re seeing here is that the global leaders, certainly in the marketing aspect and in successfully signing up users, are experiencing issues with their technology stacks. They may be short-term delays, or they may signal a deeper problem that will need to be addressed as more traders enter the market. But, if global leaders are having trouble with their technology, what are the chances that regional leaders or small local exchanges have a technology stack able to withstand tremendous volume spikes? Everybody talks about doing due diligence when investing in cryptocurrencies, but nobody is talking about doing due diligence when selecting an exchange operator. That’s something that we, as an industry, need to normalize. Exchanges should be competing based on their ability to handle volume spikes and enhanced hacker activity. Safety and proper functionality should be the most important aspects a trader considers when choosing their exchange,” opined Gardner.