BlockBeats News, October 13th, Backpack founder Armani Ferrante responded to recent FUD allegations, stating that during the largest liquidation event in history which led to a market crash, many were liquidated, resulting in harm to numerous users. Some users have expressed concerns regarding Auto-Deleveraging (ADL), negative balances, and compensation. Backpack aims to be as transparent as possible, address issues directly, and encourage questioning, standing with the users.
The first recent instance of FUD stemmed from a response to an issue, where approximately 40 users deposited funds before their negative balance was liquidated. This was a minor issue that was indeed real (but easily fixable). However, it was blown out of proportion. Someone took a screenshot of a reply and spread it out of context.
The second recent instance of FUD came from a tweet on Backpack’s Chinese Twitter account. Backpack operates multiple accounts globally managed by local teams, with the marketing team not involved in the management of these accounts. This tweet was circulated within the community as it was frankly out of line. In my opinion, the taste level of this tweet was extremely poor and does not at all represent the Backpack company.
The biggest issue Backpack faces is a lack of liquidity, with its ongoing weakness being the absence of an internal market maker. The industry has exposed many real and severe market structure flaws, and Backpack is no exception. Our goal is to build a completely neutral platform with no trusted trading entity and no counterparty to any trades. If liquidity disappears, Backpack needs to be able to close positions and liquidate positions to ensure system solvency. This decision was originally made based on the Alameda and FTX events. However, the recent crash clearly demonstrated that if liquidity vanishes, even if the risk engine operates as designed, liquidating users to reduce leverage will result in a bad experience for everyone. All trading platforms require liquidation and auto-deleveraging, but Backpack should also strive to minimize such occurrences as much as possible.
