The cryptocurrency market's October 10–11, 2025, crash-marked by $19.3 billion in liquidations-laid bare the stark contrasts between centralized and decentralized exchanges in managing risk. At the heart of the debate: Auto-Deleveraging (ADL) mechanisms, the last line of defense for exchanges when insurance funds fail. Binance, the dominant centralized exchange (CEX), and Hyperliquid, a decentralized exchange (DEX), employed fundamentally different strategies, sparking a public feud between their leaders and highlighting broader philosophical divides in the crypto industry [2].
Hyperliquid founder Jeff Yan accused Binance of underreporting liquidations by up to 100 times during the crash, citing the CEX's practice of limiting reported liquidation orders to one per second even when thousands occurred simultaneously [1]. Binance's CZ fired back, defending the platform's efforts to protect users during the crisis and criticizing Yan's "attack on competitors." The clash drew support from prominent figures in the crypto space, with DeFi veteran Andre Cronje backing Binance and Solana's Mert supporting Hyperliquid, fracturing the industry into two ideological camps [3].
The ADL mechanisms themselves reflect these divergent philosophies. Hyperliquid's system, built on its custom Layer 1 blockchain, triggers only when all other liquidation attempts fail and operates entirely on-chain via smart contracts. This ensures transparency, with every step auditable in real time. During the crash, Hyperliquid's ADL was activated once, prioritizing large positions based on unrealized profit, leverage, and account size [1]. By contrast, Binance's ADL relies on a centralized risk engine and internal servers, with liquidation priorities determined by a proprietary algorithm. While Binance disclosed its ranking formula, the lack of on-chain verification left users skeptical of its transparency [4].
The crash exposed critical vulnerabilities in centralized systems. Binance faced outages and API throttling, leaving traders unable to execute stop-loss orders during peak volatility. Meanwhile, a single Hyperliquid address-linked to former BitForex CEO Garrett Jin-profited an estimated $200 million from pre-crash short positions, raising questions about market fairness [2]. Hyperliquid maintained 100% uptime and processed nearly half of global liquidations, but its ADL system, though rare, forced the liquidation of over $1.2 billion in user funds, with 205 traders losing more than $1 million each [5].
The incident reignited debates over trust and transparency. Hyperliquid's on-chain execution and real-time data verification became a selling point for proponents of decentralized finance (DeFi), while critics argued Binance's opaque processes and alleged "non-ADL protocols" for VIP clients eroded neutrality. Analysts noted that while Binance's insurance funds and user compensation checks offered reassurance, they were rarely tested in systemic crises [6].
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