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.

[Alex077]

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...

Paradex is better described as a DEX, but with some serious caveats. In reality, it’s a hybrid exchange, not a “pure” DEX in the ideal sense.
Yes, it does have some DEX-like features: trading and settlement go through smart contracts, users don’t hand funds over to a custodian, there are no classic accounts - you connect via a wallet, execution relies on on-chain logic, and so on.
But there’s full admin control. The team can intervene in how the protocol works, roll things back to a previous block, forcibly close orders, and most importantly - key decisions were made off-chain, not via on-chain governance.
At the same time, it’s still not a CEX.
They don’t technically own user funds (though even here there are nuances), but they do control protocol parameters. So the most honest label is a hybrid exchange - something in between a controlled DEX and a CEX.

More precisely, it’s an administratively controlled DEX, even if, honestly speaking, there’s not that much “DEX” left under the hood anymore.

[SquirrelJulietGarden]

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.

According to their service terms and their interpretation of their term applied on a user, it would become a terrible arbitrary enforcement against a user. Extreme cases can be defined very vaguely and enforced arbitrarily by Paradex, so such measure should be consider as very dangerous risk on Paradex.

It's similar with other platforms, and altcoin projects with smart contracts as in your example, can become a favorite tool for any service or project to use against its user. Like stablecoins can be frozen in your wallets (non custodial) through smart contracts.

They don’t technically own user funds (though even here there are nuances), but they do control protocol parameters. So the most honest label is a hybrid exchange - something in between a controlled DEX and a CEX.

More precisely, it’s an administratively controlled DEX, even if, honestly speaking, there’s not that much “DEX” left under the hood anymore.

Like currently hyped Perp Dex, they will have more regulatory challenge from governments as it only takes time for governments to collect data and see which categories in this blockchain and cryptocurrency market to govern more strictly for getting more money for their government budget. Years ago, they did not care about Bitcoin, blockchain, and cryptocurrency market but in latest years, they paid more attention on it when they realized that they can easily get a lot of money from this industry and citizens who invest or trade cryptocurrency.

[Mate2237]

This is exactly why “not your keys, not your coins” still matters. A rollback might fix a glitch today but it also proves that someone is in control when things go wrong. Decentralization that disappears under pressure isn’t real decentralization, it’s just convenience dressed up as ideology.

I completely agree with you these types of situations only remains us that we don't have a total control of our coins when unforseen incidents like this happen the exchange can act without our notice and knowledge and we saw it play out with this particular platform that was reported to have some glitches and so have to reset the price of Bitcoin to $0 I was just thinking about the psychological impact that this would have had on people which were trying to do trade on the platform.


We should always have to be careful of the types of exchanges that we use because, there are exchanges that in terms of security can be compromised so to avoid these types of situations always prioritize reputable exchanges.

[Hamza2424]

More precisely, it’s an administratively controlled DEX, even if, honestly speaking, there’s not that much “DEX” left under the hood anymore.

Yup you pretty much summarized everything and even if they are more like a administration controlled DEX, they should have advertise them the same, instead of advertising as a complete dex, they were scamming their users and investors, but it might not be considered an actual scam.

Because they are trustworthy and as you said, the funds are not controlled by them, so yup, we can still use it even if it is a hybrid model but what's the point of blockchain if the data can be rolled back really.

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?

Well this changes things for me and for alex as well, I will prefer him to have a look, thanks for pointing this out, I will check, as I did not take it seriously as I am not using it, but was following the case.