Paradex, which is a decentralized crypto exchange (DEX) built as an appchain on top of Ethereum layer-two network Starknet, recently experienced a technical glitch that resulted in bitcoin being priced at $0, according to a report in The Block. As a result, a large number of unwarranted liquidations took place, as Paradex operates as a perpetuals exchange.
A crypto perpetuals exchange is a type of financial platform where all trades are effectively leveraged positions held in perpetual futures contracts (oftentimes called perps) based on the user’s collateral. In other words, traders are placing bets against each other on the future price of various assets rather than holding the assets themselves. Hyperliquid originally came to prominence in 2025 as the most successful and well-known example of this particular type of crypto exchange, and Paradex is another such platform that focuses more on privacy and does not operate on its own layer-one blockchain.
The Paradex bug was reportedly introduced during database maintenance, and the team behind the exchange will now rollback the state of the exchange to a time before the maintenance in an effort to reverse all of the activity that occurred based on false market data. According to a report in DL News, Paradex has also claimed all user funds are safe.
It’s unclear how many unwarranted liquidations took place or how many users were originally affected. In terms of usual activity levels, Paradex has averaged more than $1 billion in daily trading volume for the past month. Of course, Paradex users will be unable to trade until the issue is resolved and the rollback is complete, and the exchange does not have an ETA for how long this process will take at the time of this writing.
The use of a rollback is particularly controversial in crypto, as it oftentimes exposes the lack of true decentralization in various apps and blockchain networks. For example, multiple blockchains either implemented rollbacks or froze user funds as a result of a $120 million Office Space-esque hack last year. These sorts of hacks and bugs have sent a chilling effect throughout the entire decentralized finance (DeFi) space, as it’s proving difficult to be sufficiently assured that a DeFi app is secure and will not eventually necessitate centralized intervention. Downtime at large cloud-based infrastructure providers have also led to DeFi apps becoming inaccessible for users, as was the case with a major outage at Amazon Web Services last October.
Of course, these sorts of issues are not new. Ethereum dealt with a controversial, hard-forking fix for an exploited smart contract in its early days after a hacker was able to exploit a much hyped project of the time, known as the DAO. Even Bitcoin, which is still generally viewed as the gold standard of crypto in terms of decentralization, had its value overflow incident in 2010 where transactions that allowed bitcoin to be created out of thin air needed to be retroactively rejected by nodes on the network. That said, such an incident occurring on Bitcoin today seems unimaginable, as the development process around the base protocol layer moves at a snail’s pace for safety, security, and reliability reasons.
The increasing centralization found in the crypto space is becoming a common criticism of the sector, as Coinbase battles with banks for preferential treatment from lawmakers and more activity continues to move towards controllable stablecoins rather than native crypto assets. While Paradex users who would have otherwise lost money will be happy to be bailed out by the centralized entity behind the appchain, this situation also illustrates the lack of credibility associated with the exchange’s supposed decentralization, which has become par for the course in crypto.
