Source: Lawyer Liu Honglin
Many friends have found that MEME coins have almost occupied the "top-stream" position in this round of the bull market. Why? Because it has several unique characteristics.
First is the low threshold. MEME coins do not require the complex technical background and substantive application support like mainstream cryptocurrencies, and do not even need to look at the project whitepaper. As long as the name is attractive, the story is interesting enough, and some internet hot spots are packaged, they can easily enter the market. For many new investors, this "everyone can understand" logic makes them more willing to participate.
Secondly, it has high propagability. The core gameplay of MEME coins is "entertainment-driven", and they can quickly go viral through the viral spread of social media. Whether it's the "Doge" meme on Twitter or the fancy chain reaction in the Telegram group, the spread of MEME coins does not depend on traditional marketing methods, but more on the spontaneous promotion of the community. Low cost, but explosive effect.
Finally, there is also the amplification effect of emotions. MEME coins are not just a synonym for speculation, they are more like an "amplifier" of market sentiment. When the market is bullish, MEME coins are often frantically chased by investors; and when the market is sluggish, they can also use the way of "joking" to alleviate the anxiety of investors, giving people a reason to stay in the market and wait for the next bull market.
In general, the popularity of MEME coins is a track driven by emotions, propagation and community, rather than technology. It is precisely because of this that it has become the undisputed "top stream" in this round of the bull market.
Where there is demand, there is a market. In order to make it more convenient for cryptocurrency players to trade MEME coins, platforms like DEXX, a MEME coin full-chain trading platform, have emerged. According to the relevant information, DEXX supports the trading of assets such as SOL, ETH, TRX, BASE, and BSC, and provides functions such as on-chain mobile stop-profit and stop-loss, hot spot push, and copy trading. Compared with the mature full-chain trading platforms like Banana Gun and UniBot, the differentiation that DEXX is pursuing is smoothness, and it even has the reputation of "on-chain Binance".
However, I found that people generally have a misconception that decentralized projects like DEXX are a "technology-driven" market, and they don't need to pay too much attention to legal and compliance issues, but the ideal is rich and the reality is bleak.
Recently, DEXX has suffered a serious attack, resulting in a large-scale theft of user assets. According to the investigation of blockchain security companies such as Slow Mist, the main reason for this incident is the improper management of user private keys by the platform. User private keys are stored in plain text on the official server, and there is insufficient encryption protection during the transmission process. This means that attackers may intercept user private keys during the transmission process and obtain access to asset permissions. This private key management method obviously does not meet the industry's basic requirements for decentralized security, and greatly increases the risk of user asset theft.
Similar cases are not uncommon in the Web3 field, but the scale and impact of the DEXX incident are particularly huge. Although DEXX did not directly handle fiat currency transactions or user identity information, its vulnerabilities in managing user assets will inevitably arouse the questioning and attention of regulatory authorities. In fact, the regulatory authorities of many countries are turning their attention to the DEX field, and the legal constraints on these platforms will only become stricter in the future.
In the discussion of the DEXX incident with lawyer Liu Honglin and industry friends, there is a particularly interesting technical detail that we have been discussing: why would service providers like DEXX choose to control user private keys, rather than use the way of decentralized wallet contract authorization to complete transactions?
After all, from the perspective of decentralization, wallet contract authorization is obviously more in line with the concept, and can also greatly reduce the risk of private key leakage. But after careful consideration, there are actually several "inevitable" reasons behind this.
The first is operational convenience. For many users, especially newcomers to the circle, making them understand wallet authorization, transaction signing and other operations is tantamount to making them understand blockchain technology. In comparison, entrusting the private key to the platform and completing the transaction logic in the background is much more convenient for users. The service provider naturally also hopes that the user experience will be as simple as possible, and reducing the operation threshold becomes a priority.
The second is flexibility and intervention ability. Centralized management of user private keys can allow the platform to take measures more quickly in the event of abnormal transactions, such as canceling an erroneous transaction, freezing suspicious assets, or even "rescuing" user funds in the event of a hacker attack. Although this is somewhat at odds with the concept of decentralization, from an operational perspective, this "rapid response" is actually a risk bottom line for the service provider.
The last is the difficulty of technical implementation. Although the wallet contract authorization method is good, it is not easy to implement, especially in a multi-chain environment, the contract compatibility and the complexity of the authorization logic will increase sharply. The centralized custody solution is more direct, reducing the development and maintenance costs of the service provider.
Ultimately, these choices are the trade-offs made by service providers between user experience, platform flexibility, and technical costs. Although it may be more efficient in the short term, it also sows hidden dangers for security and compliance, and the DEXX incident has undoubtedly proven that once these hidden dangers explode, the consequences will be extremely severe. This contradiction between technology and industry choices is not only a problem exposed by the DEXX incident, but also a pain point in the development of the entire Web3 field. How to find a balance between user experience and decentralization is a key issue that entrepreneurs and technical teams need to deeply consider.
Compliance Advice from Lawyer Mankun
Based on the DEXX incident and the current industry situation, as a lawyer in the Web3 field, Lawyer Mankun hopes to provide more specific and practical advice to entrepreneurs, helping them find a balance between technology, compliance and security:
First, clarify legal responsibilities and design a compliance framework. When starting a project, entrepreneurs need to formulate a clear compliance strategy based on the regulatory environment of the target market. For example, if the project plans to enter the US market, it needs to pay attention to whether the traded tokens will be classified as securities and whether they involve the requirements of the Securities Exchange Act. At the same time, in the platform design, you can set up an independent technical service company to separate the transaction function from the user data, thereby reducing the risk of direct contact with user assets. This not only protects entrepreneurs from regulatory accountability, but also establishes a good compliance image for the platform. In addition, the platform should clearly define the legal responsibilities of all parties in the user agreement, especially the solution mechanism in the event of asset loss or transaction anomalies. Through these architectural designs, the uncertainty caused by policy changes or market fluctuations can be minimized.
Secondly, prioritize the use of decentralized solutions in security design. One of the biggest lessons from the DEXX incident is the vulnerability of its centralized private key custody. If the platform can adopt decentralized technologies such as multi-signature wallets or smart contract authorization, not only can it improve the security of user assets, but it can also reduce the systemic risk of single point failures. At the same time, the platform should also pay attention to the security management of the system architecture, including: regularly inviting authoritative third-party agencies to conduct comprehensive audits of smart contracts and technical architectures; establishing a reporting and response mechanism for security vulnerabilities, and promptly fixing potential problems; designing security measures with redundancy, such as a multi-level transaction verification system, to prevent large-scale attacks. In addition, with the popularization of cross-chain transactions, entrepreneurs also need to pay special attention to the design and security testing of cross-chain bridges, as cross-chain bridges have become one of the main targets of attackers in recent years.
Finally, balance transaction freedom and compliance transparency. Although the attractiveness of decentralized trading platforms lies in the high degree of user freedom, completely letting it go unmanaged may also bring huge legal risks to the platform. Entrepreneurs can introduce on-chain smart analysis tools to avoid regulatory issues by real-time monitoring of high-risk trading behaviors. For example, they can identify and mark abnormal accounts or large-scale transfer behaviors that may involve money laundering or terrorist financing, and clearly define the platform's response measures to illegal activities in the user agreement. In addition, in high-risk user usage scenarios, appropriate KYC mechanisms can be introduced, especially for large-volume trading users, to conduct identity verification, so as to achieve a balance between protecting user privacy and meeting regulatory requirements.
Finally, build a user trust and brand protection mechanism. Entrepreneurs should be aware that compliance and security are not only the bottom line of the law, but also the cornerstone of user trust. Regularly disclosing the results of the platform's security audits and compliance practices to users can enhance users' trust in the platform. At the same time, by cooperating with industry associations or technology alliances to participate in the formulation of industry standards, the platform's market position can be further enhanced.
Conclusion
Through these suggestions, we hope that entrepreneurs can learn from the experience of the DEXX incident. In a technology-driven market, legal compliance and security guarantees are not only the cornerstone of success, but also the key to risk avoidance and long-term development. Manqun Law Firm is willing to escort every Web3 entrepreneur and jointly build a healthier and more sustainable industry ecosystem.
