Going Peer-To-Peer in Crypto Exchanges
Decentralization has always been the core of blockchain and all its manifestations, including its most prominent manifestation – the cryptocurrency. What is the most direct consequence of multiple cryptocurrencies evolving is the birth of the cryptocurrency exchange.
Cryptocurrency exchanges are gaining prominence and relevance with every passing day, and Coinmarketcap has listed about 263 exchanges, and it does not include the unlisted exchanges. One of the factors that contribute to the growth of these exchanges is the fact that it opens up a new avenue for revenue apart from the classic cryptocurrency mining. Crypto gurus will tell you that a crypto exchange it's almost like a casino – the house always wins! Crypto exchanges have been known to net profits of hundreds of millions of dollars. The best part is that with the growing acceptance of cryptocurrency, your exchanges keep springing up every day, and they also offer a lucrative chance to make big profits.
There might be a lot of exchanges, but there are a few core values that need to be upkept across every exchange.
Essential features of a crypto exchange
If you have to uncomplicate security, it simply means that your crypto funds should be there where you left them! It might seem simple on paper, but the fact that hackers have stolen about $927 million from crypto exchanges in 2018 alone puts a lot of Infosys on security - that equates to about $2.7 million every day! Your exchange should offer top-notch security by bringing in factors like multi-signature wallets, two-factor authentication, and the likes.
Your exchange should list multiple coins to be exchanged with and exchanged against. The greater the coins, the greater the possibility of profitability and liquidity! Experienced traders keep moving their funds between exchanges, especially to trade smallcap tokens, and it becomes increasingly irritating if they have to do so more often. Therefore, if your exchange can list a lot of coins and tokens, it is a welcome move.
An impeccable user interface is bound to make or break the reputation of an exchange. It is to be understood that crypto traders are not software engineers, and they might not be comfortable with the complicated processes to execute something as simple as exchanging a coin for another!
centralization versus decentralization
Crypto and blockchain have always been about decentralization. However, crypto exchanges alone have been playing a bit of a cat and mouse game when it comes to the concept of decentralization.
The centralization of exchanges has been responsible for the massive hacks that we have been talking about. One of the best alternatives and also the simplest one is the concept of decentralized exchanges. A decentralized exchange, simply abbreviated as DEX, is touted to be the perfect solution for every trader.
What is a decentralized exchange?
As the name implies, a decentralized exchange or a peer-to-peer exchange is an exchange where the interaction between the buying entity and the selling entity does not happen in the exchange. Instead, decentralized exchanges connect a potential buyer with a potential seller, and naturally, vice versa. If a centralized exchange can be considered the Amazon of exchanges, then the decentralized exchange is probably the Craigslist of exchanges!
Decentralized exchanges bring a huge volume of advantages.
Advantages of a decentralized exchange
The first and foremost advantage brought about by a decentralized exchange addresses the biggest pain point of a centralized exchange. Decentralized exchanges are extremely difficult to hack. As the name implies, the decentralized exchanges… Well… Decentralized! Therefore, it is as secure as the blockchain it runs on. What makes the blockchain secure in the first place is the fact that you cannot compromise on the security of all the nodes involved in the blockchain at the same time. By the time one node is hacked, the other nodes have taken care to secure the network. It is also possible that you can find a way to brute force the private key, but unfortunately, technologies that are so advanced as to steal the private key have not been invented yet!
Since a decentralized exchange directly connects buyers and sellers, there is no specific restriction on the number of coins. One of the reasons for centralized exchanges not being able to list small players is the exorbitant fee charged for listing the coin – in the order of another $2.5 million. Decentralized exchanges list the coins for free, making it a better place for better variety!
The only major disadvantage!
Decentralization is not all about a bed of roses! Decentralized exchanges have their own share of disadvantages as well, and one of them stands out from the rest-the complication in usage. The user interface of a DEX was considered to be extremely unfriendly and cumbersome. Although there are a lot of new exchanges that provide a better UI, the DEX has not managed to come out of the classical image it has created.
Examples of successful DEXs
In all of this, some decentralized exchanges have made a name for themselves by providing users with a better UI. Some of the best decentralized exchanges that we can think of are Volenix, IDEX, and OpenLedger.
IDEX is probably the oldest and the most popular exchange on this list. It specializes in trading ERC-20 tokens and has about 130 tokens listed - which can be considered a good number for any DEX. It is compatible with hardware and software wallets, and all you need is a private key for your account. IDEX simply matches the orders from buyers and sellers, and the trade occurs right within the blockchain.
OpenLedger uses a similar principle, but it works on the graphene protocol by BitShares, making it extremely fast. Another advantage brought about by OpenLedger is that it does not require registration. OpenLedger facilitates trading using more than 50 different cryptocurrencies, including the most famous ones like BTC, ETH, DASH, & NEO. It boasts of an intuitive interface, and it makes it extremely easy for a novice user to play around with OpenLedger if they are familiar with crypto wallets.
Volenix is possibly the most advanced DEX. Crypto pundits define Volenix as a DAE (Digital Asset Ecosystem) more than in DEX. In addition to being an exchange, it also includes a multicurrency wallet, an analytics tool, and a community program. It is quite evident that these are all the things that a trader needs… Making the Volenix one of the most wholesome DEXs.
It is quite evident that P2P crypto exchanges will be the order of the future, and with the intuitiveness of the interface being addressed effectively, it is quite likely to happen in the near future. If you would like to capitalize on this wave of decentralized exchanges, you can create your own exchange by contacting a blockchain development company and letting them know your requirements. They will take care not only to create your exchange but also customize them according to your requirements and your legal needs as defined by your jurisdiction.