Exchanges have been the epicenter of the recent crypto bull market, facilitating the surge of bitcoin (BTC) and other coins towards new all-time highs. However, while they have almost certainly profited from the record prices and volumes the market’s now witnessing, many have been found lacking as new traders flood into the ecosystem.
We’ve witnessed repeated outages afflict even major crypto exchanges, including Coinbase, Binance, Kraken, Bittrex, and others. Casual observers would be forgiven for assuming that these platforms would have prepared for increases in traffic by now, yet service disruptions continue to happen almost every time there’s a big volume spike.
According to platforms speaking with Cryptonews.com, most exchanges are constantly taking steps to increase their capacities. Some suggest that, with much of the industry undergoing a process of constant discovery, it’s hard to predict just exactly how much capacity you truly need.
We have literally lost count of how many service disruptions and outages exchanges have suffered over the past few months. Basically, any time there’s a big rush to buy or sell, you can almost be sure that some exchange somewhere is effectively preventing its customers from trading.
As Raúl Marcos, CEO of crypto consultancy Carbono, told Cryptonews.com, such outages have almost become an inevitability.
“Regarding exchanges experiencing service outages, it’s normal and understandable: when there are significant price movements, especially when bitcoin breaks a new all-time high, people’s interest grows exponentially, and everyone wants to act,” he said, adding,
“Exchanges try to prepare for these situations, but I know firsthand how difficult it is to estimate these problems and allocate resources for them.”
This is basically the account given by most exchanges. In particular, Sathvik Vishwanath, Co-founder and CEO of Unocoin, the operator of one of the oldest crypto exchanges in India, suggested that it’s very hard to predict when an exchange is likely to experience a surge, and also to predict how big a surge will be.
“The surge in the crypto industry when it comes to new user sign-ups and the number of transactions is very unpredictable. Scaling setups are costly to have it always on stand-by and even if they are on standby it won’t be sufficient for some of the surges and hence the down time to be expected while their engineering team works on getting back the servers online with greater capacity,” he told Cryptonews.com.
More fundamentally, Binance CEO Changpeng Zhao said that running a centralized exchange poses various significant technical challenges for any company brave enough to accept the challenge.
“This is probably the first internet-based financial application that requires real-time response for people all around the world, and the orders must be processed in a central order matching engine. Crypto exchanges are direct to consumers, in all parts of the world,” he told Cryptonews.com.
The CEO added that, compared to other internet platforms, crypto exchanges have to operate with almost extreme rapidity. “If you submit a sell order, and it has not been executed in 0.1 second, people will be displeased,” he said.
He also pointed out that traditional financial exchanges usually serve customers located only in a single geographical region, while crypto exchanges serve users from multiple regions simultaneously. This “requires some very innovative performance optimizations,” he said.
“We do work very hard to try to prevent or minimize them, but I believe all exchanges will face system issues over time,” the CEO added.
Binance said it’s continuously working to improve its technical capacity, while the CEO has on Twitter recently spoken about its desire to scale customer support.
At the same time, other exchanges are also hard at work improving their throughput and avoiding future disruptions.
“The high volatility in markets has coincided with a time of huge growth for eToro […] We continue to scale our systems to ensure that we can provide a frictionless trading and investing experience on eToro,” said a spokesperson for the international trading platform.
The spokesperson added that, even if it continues to suffer the occasional disruption, its capabilities have improved considerably since the 2017 bull market.
“We now have over 19 million registered users from more than 100 countries. Our platform can handle the volumes we are seeing and more. We are continuing to enhance our systems to handle volumes up to 100x the volumes we saw last year, as we grow as a platform and as we add more assets to our offering,” they said.
Likewise, Australian exchange Swyftx — which recently suffered from a global networking infrastructure outage (that also affected PlayStation Network, Netflix, and Fortnite) — is also striving to improve its scalability.
“Swyftx has consistently increased overhead on server resources to ensure the platform can sustain large market movements and user volume spikes are easily met,” said a spokesperson for the platform.
The same goes for the India-based Unocoin, which has “implemented auto-scaling capable of scaling to dozens of servers automatically,” according to Sathvik Vishwanath.
Reputation and money
It’s possible that outages will gradually decline over time, as exchanges implement new infrastructure and get a better handle on the kinds of volumes they’re likely to encounter in the future.
“Exchanges do their best to avoid these problems. They lose money and reputation when these outages happen,” said Raúl Marcos.
However, some accept that, even if they decline, disruptions are likely to remain a fact of life.
As Marcos concluded, “It isn’t easy to prevent [outages], so I expect them to happen in the future from time to time.”