Bitcoin price briefly plunges to $0 on lesser-known Paradex exchange

[d5000]

If decentralized exchanges can perform rollbacks—a process in which a blockchain application resets its state to a previous point in time to correct erroneous data or transactions after a technical error—wouldn't this affect the decentralization that these platforms claim to support, or could it be misused in the future?

Paradex seems to run a "centralized sequencer" on their appchain, which is provided by the Starknet software stack (Starknet is an Ethereum layer-2). This means that they're essentially a private blockchain. One could also describe that model as a "CEX which instead of using a traditional database adds a blockchain structure, but without adding the blockchain consensus mechanism".

So it's not surprising that such a rollback is possible without major difficulties. If it was a Proof of Stake chain, the rollback would have been much more complicated. They would have to have convinced validators to adopt a rollback feature, just as Ethereum did in their TheDAO rollback in 2016.

First of all this was not real decentralized exchange, and I honestly doubt they had real Bitcoin mainnet listed.
This was probably some of their token XYZ-biTc0iN on some random blockchain, and not the real bitcoin.
Proof for that is that rollback happened on some random chain, not on bitcoin blockchain.

I'd also not describe that really as a DEX.

There's still a difference to a CEX: The users indeed hold their coins on their own addresses with their own private keys (based on the Ethereum address scheme), so in theory the "Not your keys, not your coins" doesn't apply. However, this isn't worth that much if you can "receive" coins and then the centralized entity, while they can't steal your coins directly, they can revert that transaction to your address.

And the withdrawal process also makes the rollback (or other centralized intervention) easier. Of course on the appchain the Bitcoins are not real Bitcoins but tokens on that appchain. There is a native mechanism to send the "Paradex-Bitcoins" to the Ethereum mainnet and get wrapped Bitcoins for them (which are still not "real" Bitcoins, but at least if you use e.g. Threshold tBTC they're relatively decentralized tokens). But that mechanism seems to be quite complicated and thus most users use "bridges", which are in reality CEXes, which take your Paradex "BTC" and then send you real BTC.

Of course a call from the Paradex management would have stopped all that bridge activity, and the withdrawals from those wo got Bitcoins for nearly $0 would thus be stopped.

From a legal standpoint this could however be challenging. Even if it was a "glitch", there are now probably many angry users who will claim they got legit Bitcoins for a low price ...

[MusaMohamed]

So it's not surprising that such a rollback is possible without major difficulties. If it was a Proof of Stake chain, the rollback would have been much more complicated. They would have to have convinced validators to adopt a rollback feature, just as Ethereum did in their TheDAO rollback in 2016.

Either layer 1 or layer 2, if they do a roll back, it's a big twist for their own benefit while with cryptocurrency community and users, it's a bad centralized decision. They should also not take Ethereum the DAO hack and consequent rollback in 2016 as a case study for announcing that their rollback will not affect their community.

Many will consider blockchain rollbacks as bad action and it's like SMH with many cryptocurrency users as it shows that blockchain, that project is no longer trusted. They can rollback the blockchain with any reason they see fit while they can do it like a scam tool. Rollbacks can create panic in that blockchain community and can result in very dangerous future of that blockchain.

Let's know that Binance after a big exchange hack, CZ raised the idea of rollback Bitcoin blockchain but his idea received a lot of critiques.

[Hamza2424]

If decentralized exchanges can perform rollbacks—a process in which a blockchain application resets its state to a previous point in time to correct erroneous data or transactions after a technical error—wouldn't this affect the decentralization that these platforms claim to support, or could it be misused in the future?

This is really wrong but I read this post on the other forum already and also read how it happened, but thanks for sharing it here it need to be discussed here as well. The platform was using both centralized and decentralized models, so it is kind of a hybrid model.

This is exactly how platforms are tricking people into thinking they are decentralized while half of their project's part is centralized or based on a centralized entity. Bitcoin is completely decentralized and the most secure one hence proven as well.

[Akuma_]

Paradex confirmed it rolled back the chain to block 1,604,710 after a faulty database migration caused erroneous pricing data.
The glitch sent bitcoin’s price to zero on the exchange, triggering mass liquidations; all open orders were force-cancelled except take-profit/stop-loss (TPSL) orders.
Trading resumed at 12:10 UTC following roughly eight hours offline, while Starknet’s STRK token fell about 3.6% after the incident.

If decentralized exchanges can perform rollbacks—a process in which a blockchain application resets its state to a previous point in time to correct erroneous data or transactions after a technical error—wouldn't this affect the decentralization that these platforms claim to support, or could it be misused in the future?

In my point of view. Before useing those Blockchains do propar fundamental analysis abuot the Blockchain history, bugs and other indoor situations. If those analysis help you to get positive feedback then you can go. Otherwise get back beacose without positive review and feedback you will face suffer and it could be a reason of your cry.

[Webetcoins]

If decentralized exchanges can perform rollbacks—a process in which a blockchain application resets its state to a previous point in time to correct erroneous data or transactions after a technical error—wouldn't this affect the decentralization that these platforms claim to support, or could it be misused in the future?

This is really wrong but I read this post on the other forum already and also read how it happened, but thanks for sharing it here it need to be discussed here as well. The platform was using both centralized and decentralized models, so it is kind of a hybrid model.

This is exactly how platforms are tricking people into thinking they are decentralized while half of their project's part is centralized or based on a centralized entity. Bitcoin is completely decentralized and the most secure one hence proven as well.

This is exactly why I avoid any place I do not trust. If I am going to use a centralized exchange then I am going to use one for real, like Binance, because while I know they are centralized, at least I know that they are who they say they are and have the power to be able to provide funds even if something goes wrong.

Places that are decentralized looking but have these type of outreach are the worst places and I would rather lose it all at decentralized place and not have rollback option available than have a place that can do it if they wanted to.

[TastyChillySauce00]

If decentralized exchanges can perform rollbacks—a process in which a blockchain application resets its state to a previous point in time to correct erroneous data or transactions after a technical error—wouldn't this affect the decentralization that these platforms claim to support, or could it be misused in the future?

This is really wrong but I read this post on the other forum already and also read how it happened, but thanks for sharing it here it need to be discussed here as well. The platform was using both centralized and decentralized models, so it is kind of a hybrid model.

This is exactly how platforms are tricking people into thinking they are decentralized while half of their project's part is centralized or based on a centralized entity. Bitcoin is completely decentralized and the most secure one hence proven as well.

These decentralized Perp Dexes like paradex was never really decentralized. They can freeze your money on a whim when you used their dex but such occurrence is rare because people would lost their trust. They basically have emergency mechanism for it.

Another fun fact, do you know that even though they are using smart contract code to hold people's money in their custody eliminating the so called counterparty risk, but the contracts are mostly upgradeable contracts that can be changed by the devs?

[ThemePen]

When Paradex chose to reset a chain after having a bug of a timing error on January 19, 2026, it shows that there is a deadly clash in decentralized finance. This resetting chain which is really narrow spot of trust, in which users may have to rely on main team to make sure that data is handled in right way, bringing risk that this power may be used badly in future to make one sided rule or in answer to government pressure. DeFi group is currently thinking about idea of Rule Based Unchangeable Wait Times in reply to this event that had site go offline for time of eight hours instead of expected eight minutes. Although as of later the year the new guards on price-range were added to Paradex, as well as checks done on all the 200 accounts part of it, event has left site in new group of Mixed Exchange (HyDEX), where safety does not try to completely free site.

[zasad@]

If decentralized exchanges can perform rollbacks—a process in which a blockchain application resets its state to a previous point in time to correct erroneous data or transactions after a technical error—wouldn't this affect the decentralization that these platforms claim to support, or could it be misused in the future?

First of all this was not real decentralized exchange, and I honestly doubt they had real Bitcoin mainnet listed.
This was probably some of their token XYZ-biTc0iN on some random blockchain, and not the real bitcoin.
Proof for that is that rollback happened on some random chain, not on bitcoin blockchain.

Exactly right.

No rollback has EVER occurred on the BTC mainet since the overflow bug incident in 2010.
NO single BTC exchange (or pool) can initiate a rollback as it requires an immediate consensus action between all large pools to agree on the rollback target block they will build new work on for it to happen. Without that majority using the new target block all that can happen would be the exchange or pool doing it on their own making an unsupported fork & they start following the wrong chain.

As dk said, it was mostly likely a token that paradex alone controls. It may be recorded on the BTC mainet like Odrinals or Runes or other ERC-xxx tokens are but has nothing to do BTC proper. Only the data sets associated with the token will be affected.

If we're talking about Paradex, this exchange is technically decentralized.
Trading on the exchange is done through smart contracts, and access is via a wallet connection. However, exchange administrators can terminate the smart contract at any time and do whatever they want with user funds.
Such measures are used in extreme cases, but we need to keep this in mind.