In the past few months, centralized exchanges similar to Coinsquare, have made a slew of acquisitions within the crypto space that could give their crypto trading platform an edge over the competition (Source). But these acquisitions were often restricted to augmenting their current platforms, to help traders make better decisions and to easily onboard newbies. Coinsquare, on the other hand recently made an acquisition that could herald the future of crypto trading and investment platforms.
Coinsquare, one of the leading Canadian crypto trading platforms, had acquired StellarX in February 2019. What’s so awe-inspiring about StellarX? It claims to be the world’s first decentralized crypto platform with global fiat gateways. Which could mean that users can send crypto to other users directly, without the need for a trusted intermediary and also be able to convert crypto-to-fiat and vice-versa.
What’s a Decentralized exchange?
A decentralized exchange are peer-to-peer crypto trading platforms, monikered so because it is without a central authority. Transactions are can be made directly between users (peer-to-peer) without the need for a trusted intermediary, which means there are no transaction fees for users. For companies looking to issue their tokens, this could mean avoiding the huge listing fees often required for listing tokens on centralized exchanges.
On top of this, decentralized exchanges are much more secure against hackers as there no single point of failure like in centralized exchanges. DEX’s are also relatively free from constricting regulations by governments again as there is no single authority.
DEX’s also use smart contracts to facilitate transactions on its peer-to-peer platform, this could mean that the exchange could benefit from the added layer of security because of the inherently cryptographic nature of blockchain technology.
The challenges in store for DEX
Despite the obvious technological advantages of a decentralized exchange over a centralized one, the latter dominates the crypto space in terms of trading volume. One reason being touted by DEX’s is a serious lack of public awareness, which fortunately for centralized exchanges is driving traffic towards them.
Besides the lack of awareness, DEX’s also suffer from low liquidity and trading volume which isn’t a conducive environment to onboard retail and professional investors. On top of these, decentralized exchanges are notorious for being well-suited for professional investors and not for newbies, as the user interface is often quite perplexing. Most DEX’s currently don’t offer fiat-to-crypto and vice-versa conversion, which is an instant turn-off for most retail investors.
Despite the technology being sluggish to pick-up pace, the recent launch Binanace DEX test-net could be the beacon of hope for decentralized exchanges.
Binance DEX
Binance is the world’s largest crypto exchange in terms of trading volume, the company has already released the testnet of its decentralized exchange Binance DEX. The company aims to mitigate some the major hindrances to mass-adoption of DEX’s, by prioritizing speed, security and user-friendliness. Binance DEX could take design cues from the original Binance which has a comprehensive set of functions, while still maintaining user-friendliness,
Binance DEX was built on Binance chain, which is a custom build for decentralized exchanges that is capable of large transactional capacity and provide transaction speeds on-par with centralized exchanges.
The future could be bright
As companies like Binance and Stellar get behind the concept of a decentralized exchange, it is likely that idea will stick. Most often, it is a lack of general awareness that is hindering mass-adoption. Users will have to be familiarized with DEX’s and incentivized to make the switch from centralized exchanges, both are monumental tasks but can be made significantly easier, if more existing players like Coinbase hopped on the band-wagon
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