Adel ▲ Opinion ▲ 12 ▲ Crypto Trading for Everyone

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By: Gabriel Dusil, co-Founder & General Manager, Adel Ecosystem Ltd.
John McLeod, Founder, JEA Associates Ltd.

For centuries, the exchanges of London, New York, Frankfurt and Tokyo have dominated the buying and selling of equities, commodities and other asset classes. Although technology has improved over the years and people can engage with these markets from the comfort of their own home, the core premise of a centralised exchange has remained the same. The dawn of Blockchain has the potential to radically disrupt the way traditional exchanges operate and the way in which clearing services carry out their functions. The ‘Distributed Ownership’ nature of blockchain could be transformative through the effective use of distributed ledgers.

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Given cryptocurrencies didn’t even exist a decade ago (unlike their traditional fiat exchanges which have operated for more than 200 years), existing exchanges are less evolved and unable to execute in heavy trading conditions, compared to more established equities. Brownouts and service blackouts are a reflection of the immaturity in crypto markets. Many exchanges experience service disruptions because they haven’t create an ideal load balancing architecture or high availability contingencies.

Despite these initial discrepancies, the design of Decentralised Cryptocurrency Exchanges (DCX) could provide insight into the future of equity trading and how people engage with markets and claim ownership of their assets. As it stands today, centralised exchanges are governed by laws and regulations in the countries where they are registered. Participants have to abide by a set of rules that may forsake the control of their assets, use of private data, or even risk devastating security breaches. It’s no coincidence that crypto liberalists avoid centralised platforms when building blockchain infrastructures.

Decentralised platforms, on the other hand, are still at the starting gate, in terms of development maturity. Regardless, they have the foundations to be adaptable and scale well, due to their inherent distributed architecture. Instead of having the oversight of national governments and regulatory bodies, they are governed by communities, and can adapt to exceed the resilience of the most advanced centralised platforms. By definition, this technology isn’t hardened from an IT or security perspective, compared to mainstream exchanges. For example, Nasdaq can process one million transactions per second (tps), where most crypto exchanges struggle to process up to 100,000 tps- however DCXs offer a viable alternative that enables tradable assets without the vulnerabilities of centralized control.

There are those who argue that introducing middle-men into the crypto supply-chain would help to facilitate widespread adoption. But crypto liberalists prefer to eliminate their function , even if they serve to increase ease-of-use, stability, reliability and other features that may not be easily accessible in their absence. Exchange services, for example, can be viewed as a classic middle-man service, directly in conflict with this core ideology. These intermediary services inevitably become the catalyst to global adoption where cryptocurrency trading needs to reach mass-market potential. Furthermore, decentralized exchanges can be accessible to anyone in the world. Challenges however, remain in the areas of market volatility, regulatory compliance, and security best practices before this can take place.

There are also legal issues, as investors suffer when an exchange is shut down due to non-compliance. The issue here is the single point of failure when centralized services store large sums of wealth, and sensitive information. Until relevant legal structures and safeguards are created, mainstream consumers will hesitate to trust the Blockchain as a repository for their money. Then there is looming threat of protecting personal wealth from hackers, phishing attacks, malware, and zero-day attacks, adding further Fear Uncertainty and Doubt (FUD).

In many ways the discussion regarding regulatory oversight and protective legal controls cuts to the core of the Blockchain debate. Crypto libertarians dream of a world free from big brother, and are willing to accept the risks that come with that. Will there be a balanced equilibrium of regulations that protect consumers in the wild-west of virtual currencies? Will governments allow their central banks be sidelined as virtual currencies grow from infancy to maturity?

The relationship between free markets and collective responsibility has been one of the driving economic and political forces in history. The advent of Blockchain technology has contributed yet another dimension. The impact of decentralised services on existing financial systems and regulatory oversight remains to be seen. In the meantime, stakeholders have never had a greater opportunity to take ownership of their financial future, even if that path remains volatile.

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▲ Blockchain Will Transform Retail Lending

▲ The Next Evolution in Crypto Trading

▲ Paving the Way for Crypto Financial Instruments

About the Authors

Gabriel Dusil, co-Founder & General Manager, Adel

John McLeod, Public Relations, Adel

  • John has spent nearly a decade working for a number of leading public relations firms in London, focusing primarily on PR management in the financial services sector. John’s expertise includes blockchain technology and the evolution of cryptocurrencies in financial services. That’s why he recently founded his own consulting firm, JEA Associates Ltd., which is specifically positioned to communicate the value proposition of this burgeoning technology. John has spent the past year successfully executing campaigns for a digital currency consultancy, decentralized financial solutions, and online payments platforms.
  • LinkedInhttps://uk.linkedin.com/in/john-mcleod-a323799

More Opinions

Check out more Adel opinions via these links:

▲ 1 ▲ The Right Path to Funding Decentralized Organizations

▲ 2 ▲ The Next Evolution in Funding Innovation

▲ 3 ▲ A Philosophy for Blockchain Integrity

▲ 4 ▲ A Collaborative Blockchain Incubator

▲ 5 ▲ Blockchain Diversity & Passion

▲ 6 ▲ Blockchain Startup Expertise

▲ 7 ▲ Blockchain Portfolio Diversification

▲ 8 ▲ Blockchain Incubation to Employment

▲ 9 ▲ From Blockchain Innovation to Execution

▲ 10 ▲ Blockchain Will Transform Retail Lending

▲ 11 ▲ The Next Evolution in Crypto Trading

▲ 12 ▲ Crypto Trading for Everyone

▲ 13 ▲ Architecting Crypto Financial Instruments

▲ 14 ▲ Crypto, For the People, By the People

Adel ▲ Opinion ▲ 11 ▲ The Next Evolution in Crypto Trading

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By: Gabriel Dusil, co-Founder & General Manager, Adel Ecosystem Ltd.
Jessica Zartler, Director of Marketing & Communications, Adel Ecosystem Ltd.

In the revolution of emerging blockchain technologies, shifting from legacy models and habits to embrace this paradigm shift, occurs in iterations. Arguably, the most significant aspect of blockchain is decentralization, which allows for programmable trust, distributed ownership, and removes the necessity for third-party arbitration.

Money is flooding into cryptocurrency, seen by a market cap increase from 18 billion US$ to more than 600 billion US$ just in 2017. That is a 240 fold increase. With 99 percent of transactions still residing in centralized exchanges (Coinmarketcap.com), the shift to fully decentralized platforms is just on the horizon. Several major catalysts are contributing to the move to decentralized cryptocurrency exchanges, also known as DEXs.

DEXs are superior in security and provide instant account creation. However, in their current state of development, they lack liquidity and their user experience and user interface (UX/UI) are still immature compared to their centralized counterparts. Generally speaking, the more liquid the market, the less volatility and price manipulation, making DEXs vulnerable at this stage. At the moment, investors are still walking a thin tightrope between friction and fluidity, causing growing pains before mass market adoption.

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To understand the importance of this shift and what it means, we should understand how centralization affects the investment ecosystem, and explore the development steps needed for DEXs to reach their full potential. Centralized exchanges are platforms that allow investors and traders to buy, sell and exchange cryptocurrency against fiat or other crypto assets. Traders deposit funds and the exchange issues an IOU that is freely tradeable on their platform. When a trader wants to withdraw funds, the IOUs are converted back to currency and returned to the trader.

Centralized exchanges are an on-ramp for people with fiat currency (i.e. dollars, euros, yen or otherwise) to purchase cryptocurrency. While these exchanges allow movement from fiat to crypto, they are a prime target for hackers, and have been taken for billions of dollars. Exchanges which follow regulatory guidelines have lengthy registration processes which further hinders investment speed. They also have service lags (brownouts or blackouts), and may be susceptible to government shutdowns.

DEXs shift investments from a centralized third party, to peer-to-peer transactions, through proxy tokens or assets or a multi-signature escrow system, among other solutions being developed. This allows investors to remain sole custodians of their funds rather than relinquish their private keys (the passwords used to secure their accounts) to centralized exchanges. DEX benefits include instantaneous account creation, elevated privacy, and decentralized server resilience, ensuring that the infrastructure cannot be shutdown.

If DEXs are the next evolution, why only a one percent market adoption? To begin with, the DEX concept is brand new. As centralized exchanges proceed through their own market maturity lifecycle, decentralized services are only at the starting gate. Because DEXs are blockchain driven, account control resides solely in the hands of the trader. If they lose their private key, or make a mistake when entering a buy or sell order, then there is no recourse – liability resides exclusively with the account holder, and there can be no finger-pointing. In addition:

  • Margin lending and other more advanced trading options are not yet available on DEXs.
  • There is a chicken-egg effect at play, resulting in low liquidity. Since transactions happen on the blockchain itself, there may be issues of scaling pressure if the connected blockchains have not been architected well.
  • Miners can see the blockchain transactions before they are cleared, resulting in front-running risk and market manipulation.
  • Fiat to crypto trading in DEXs will require the cooperation of banks which introduces a new centralized point of failure.

The list of challenges for DEX developers is long, however, they are making quick progress. Developing user-friendly interfaces (UX/UI) continues. Issues like liquidity, scalability and front-running are being solved with new technology models such as relayers, off-chain transactions, hardware-wallets, as well as using a hybrid of centralized and decentralized exchanges to pool liquidity.

Although development is happening at lightning speed, trading performance highlights o a huge gap in the market. While NASDAQ processes one million transactions per second, centralized crypto exchanges average just ten thousand per second. If development is any indicator of velocity, crypto exchanges estimate a ten-fold improvement in the next 12 months.

Progress continues and the momentum is starting to shift in the direction of DEXs, the next evolution of cryptocurrency investment. Those who can iterate the quickest, will unleash full speed liquidity and capitalize on the decentralized nature of blockchains.

More Articles

Check out other articles:

▲ Blockchain Will Transform Retail Lending

▲ The Next Evolution in Crypto Trading

▲ Crypto Trading for Everyone

About the Authors

Gabriel Dusil, co-Founder & General Manager, Adel

Jessica Zartler, Crypto Marketing

  • Jessica is an award-winning multimedia journalist, content strategy expert and digital marketing consultant with more than ten years of experience. Her work has appeared on several platforms including Forbes, The Associated Press, The Wall Street Journal, MSNBC, Fast Company and Entrepreneur. Fascinated by the burgeoning blockchain space, she loves to contribute to educational communication about the potential of this new technology for revolution, and the incentivization of fair, inclusive, and environmentally conscious business practices.
  • LinkedInhttps://www.linkedin.com/in/jessicazartler/

More Opinions

Check out more Adel opinions via these links:

▲ 1 ▲ The Right Path to Funding Decentralized Organizations

▲ 2 ▲ The Next Evolution in Funding Innovation

▲ 3 ▲ A Philosophy for Blockchain Integrity

▲ 4 ▲ A Collaborative Blockchain Incubator

▲ 5 ▲ Blockchain Diversity & Passion

▲ 6 ▲ Blockchain Startup Expertise

▲ 7 ▲ Blockchain Portfolio Diversification

▲ 8 ▲ Blockchain Incubation to Employment

▲ 9 ▲ From Blockchain Innovation to Execution

▲ 10 ▲ Blockchain Will Transform Retail Lending

▲ 11 ▲ The Next Evolution in Crypto Trading

▲ 12 ▲ Crypto Trading for Everyone

▲ 13 ▲ Architecting Crypto Financial Instruments

▲ 14 ▲ Crypto, For the People, By the People