The founder of Hyperliquid accuses CEX of underreporting liquidation data, while CZ emphasizes "protecting users": personally shelling out hundreds of millions of dollars as compensation.

The crypto market experienced a large-scale liquidation wave from October 10 to 11, escalating tensions between the decentralized derivatives exchange Hyperliquid and the leader among centralized exchanges. Hyperliquid co-founder Jeff Yan publicly accused CEX of "significantly underreporting" user liquidation data and lacking transparency. In response, CZ indirectly retaliated by emphasizing that key participants in his CEX and BNB Chain ecosystem "forked out" hundreds of millions of dollars to "protect users," framing the public dispute with the remark of a "different value system."

Hyperliquid founder accuses CEX of "low reporting liquidation"

Jeff Yan posted on platform X, comparing Hyperliquid's on-chain settlement data with what he calls "underreported CEX settlement," arguing that decentralized systems have a key advantage in transparency.

· Lack of Transparency: Yan stated that the on-chain system allows anyone to verify transactions, orders, and settlements in real-time, ensuring transparency and fairness; while some centralized exchanges have public documents showing that they "significantly underreport" user settlement data.

· Distortion of clearing data: He pointed out with the example of a leading CEX: "Even if thousands of clearing orders occur within the same second, only one is reported." Since clearing often occurs in concentrated bursts, this can easily lead to underreporting by a factor of 100 under certain conditions.

· Call for industry standards: Yan emphasized that transparency and neutrality are key advantages of decentralized infrastructure and urged the entire industry to adopt higher reporting standards.

CZ's Response: Emphasizing the Value Difference of "User Protection"

CZ subsequently published a post that was widely interpreted as a response to Yan's accusations, shifting the focus of the discussion from data transparency to value systems.

· Emphasizing user protection: CZ retorted, "Some people ask why #BNB is so strong?" He responded that while other competitors try to "ignore, hide, shirk responsibility, or attack their competitors," key participants in the BNB Chain ecosystem (including CEX and Venus) have "dug into their own pockets" to take out hundreds of millions of dollars to "protect users."

· "Different value systems": He concluded with a succinct phrase, "different value systems". Many believe this is an indirect rebuttal to Hyperliquid's criticism of CEX's lack of transparency, suggesting that the "user protection" measures of centralized exchanges are more important than the "complete transparency" of decentralized exchanges.

Tensions Rise Amid Market Turmoil

The public confrontation between the two sides is set against the backdrop of a massive collapse that swept the crypto market from October 10 to 11 last week, erasing over $19 billion in leveraged positions.

· CEX Failure and User Loss: During the market chaos, its CEX experienced temporary technical issues, causing some users to be unable to close positions for nearly an hour, with traders complaining that the delays exacerbated their losses.

· DEX performance is strong: In comparison, Hyperliquid handled trading volumes of $50 billion to $70 billion during turbulent times without any downtime or interruptions.

Although another post shared by CZ shows that the long liquidation rate on his platform (60%) is lower than that of decentralized exchanges like Hyperliquid (close to 90%), trying to prove that the liquidation mechanism of the exchange is not too aggressive, the issue of transparency remains a core point of contention.

Comparison of Old Connections and New Forces

CZ clarified that there is currently no association between the platform and Hyperliquid, but acknowledged that its founder was part of the exchange's early incubation program.

· Historical relationship: CZ clarified that Hyperliquid's co-founder Jeff Yan participated in the first incubation project in 2018 through YZi Labs.

· Company failure: CZ added that the startup ultimately failed, and the exchange was unable to recover its investment.

· The Rise of Hyperliquid: Hyperliquid has transformed significantly, operating on its own Layer-1 blockchain, and has become one of the most active decentralized perpetual contract trading platforms. DefiLlama's data shows that it handled a trading volume of $319 billion in July.

Conclusion

The accusations by Hyperliquid co-founder Jeff Yan regarding the "low reported liquidation" data from centralized exchanges touch on long-standing concerns in the crypto market about CEX transparency and risk management. CZ's response of "digging into his own pocket to protect users" attempts to shift the focus towards the user protection capabilities of centralized platforms in extreme situations. At the core of this debate is a clash of two "value systems": decentralization's emphasis on "absolute transparency and verifiability," versus centralization's focus on "direct economic protection for users at the cost of some transparency." As the trading volume of decentralized derivatives exchanges continues to hit new highs, this debate about transparency versus protection, code versus human governance, will undoubtedly have a profound impact on the future evolution of crypto trading infrastructure.

Note: This article is for informational purposes only and does not constitute any investment advice. The crypto market is highly volatile, and investors should make decisions with caution.