Centralized crypto exchanges saw over trading

centralized crypto exchanges saw over trading

It may be more then 2 billions USD or not even reach 10 thousands USD.

What are the Flaws of Centralized Exchanges?

Without exceptions, all centralized exchanges have one common flaw. The very concept of centralization neglects many benefits which blockchain provides.

Working via a centralized exchange user cannot fully control the assets. De facto the operate only with numbers, which exchange show on the accounts. There are other inconveniences too:

  • Security Issues – Huge influx of users frequently causes system overload and attracts attention of hackers. According to CipherTrace (American cybersecurity company) report only in the first half of 2018 from cryptocurrencies were stolen around $761 million.

    This number three times bigger compared to the whole 2017 year ($266 million).

This may help increase accountability and transparency as well as ensure an exchange can keep running, regardless of the state of the company that created it.

The trouble is that decentralized exchanges are much less user friendly, not only from an interface standpoint but also in terms of currency conversion. Decentralized exchanges, for instance, don’t always allow users to deposit dollars and exchange them for crypto. This means you either have to already own crypto or use a centralized exchange to get crypto that you then use on a DEX.

You’ll also likely be engaging in direct peer-to-peer trades.

There’s another concern with centralized exchanges: hacking. With a CEX, the exchange holds the crypto traded on its platform—at least in the short term, while trades go through—raising the risk of hackers stealing assets.

To address this risk, centralized crypto exchanges have beefed up security over recent years. Among other strategies, they now store most customer assets offline and take out insurance policies to cover crypto losses in the case of hacking.

If you like the convenience of a centralized exchange, you can reduce your risk by transferring crypto to a separate, off-exchange hot or cold wallet.

Decentralized Exchanges

Decentralized crypto exchanges (DEX) distribute responsibility for facilitating and verifying crypto trades.
Anyone willing to join a DEX network can certify transactions, much like the way cryptocurrency blockchains work.

Company estimates, that till the end of the year centralized exchanges will lose from hacker attacks around $1.5 billion.

  • Insufficient liquidity – Big exchange order not always could be closed. Even with Even with record high prices for cryptocurrencies trading volumes may be low (compared to the traditional markets).
  • Fragmented Market (but not decentralized) – Global liquidity separated between several main markets. There is no apparent leader (comparing trading volumes) which aggravates liquidity problem.
    • High Risks – For centralized exchange there is always risk of intervention from state organizations and accounts freeze.
      Different jurisdictions approach crypto exchanges regulations differently.

    May be charged from seller only, from seller and buyer. Of course there may be other commision.

  • User Data– Standard requirements may ask just for users email. But possible to be extended to full verification procedure.
    When user need provide scan copy of ID and/or other documents.
  • Account Protection – Vary from simple password to complex verification system with 2FA.
  • Ways for Deposit and Withdrawal – Way may as limited as just few payment system. But may allow user withdraw funds via bank transfer or payment card.
  • Daily Trading Volume – Depends on popularity of exchange and listed currencies.
  • Crypto trading may be banned completely (like in China), allowed only for verification users (in South Korea actively fight against anonymous traders).

    Such details influence trading – Exchange will pay great attention to users activity because regulators demands for reports.

    An exchange may be in contact threat of closing, in disputed situation withdraw of assets may take a long time.

  • Lack of Trust and Transparency – Trading process itself not transparent. Actual cost of it very high, even higher then specified commision.

    Accompanied by transactions delays. Exchanges just could not handle pick demand in right way. Exchanges could cut the line and illegally be executing they own orders.

  • Lack of Qualification Users – Marker over flooded with speculators and profiteers.
  • In general, exchanges utilize the same principles but vary in functionality and capabilities trying to attract as many users as possible with the unique features.

    From uses point of view the most important differences are:

    • Choose of Cryptocurrencies – At some exchanges only most popular currencies are traded, when other have dozens and hundreds of currency pairs.
    • Cryptocurrency Withdrawal – At some trading platform user can withdraw only Bitcoin, Litecoin and few other widespread coins, in same time other will allow withdraw dozens of currencies and five fiat currencies on top of that.
    • Ability to Deposit and Withdraw Fiat Money – Certain exchanges work only with cryptocurrencies and not offer such functionality.
    • Commision – Mostly charged from closed deal.

    Are Centralized Exchanges getting Worst Enemy of Cryptocurrency?Written by Alena Karpinskaya – Reviewed by Coin Review Team

    Published: Aug 2, 2018 | Last Updated: Oct 17, 2018

    What is Decentralized Exchange?

    Decentralized exchange – It is platforms and applications, which allows traders buy, sell and exchange cryptocurrencies for fiat money or other cryptocurrencies.

    Such exchanges – Trading areas for tokens and they have great value for digital currencies ecosystem because many of them accept fiat money (you can buy cryptocurrencies with dollars, euros etc.)

    How do they Work?

    Trade and speculation operations at crypto exchanges identical to those on classical exchanges.

    Centralized crypto exchanges, which hold customers’ private keys unlike decentralized exchanges, reported more than $14 trillion in trading volume in the year 2021, according to The Block Research.

    That figure is a massive 689% increase compared to 2020 trading volumes, based on data as of December 24. Last year, centralized crypto exchanges facilitated over $1.8 trillion in trading volumes.

    All these numbers are from The Block’s Legitimate Index, which takes volume data from the largest exchanges that are known to be reporting volumes more accurately.

    Binance continues to dominate the centralized crypto exchange market. It facilitated 67% of total volumes this year, i.e., over $9.5 trillion, according to The Block Research.

    Both centralized and decentralized exchanges saw a huge growth in their trading volumes this year.

    In partnership with Fracton Protocol, the KuCoin NFT ETF Trading Zone will first list 5 NFT ETFs covering hiBAYC, hiPUNKS, hiSAND33, hiKODA, and hiENS4 as underlying assets as a beginning.

    hiBAYC is an ERC-20 token representing 1/1,000,000 ownership of the target BAYC in the BAYC Meta-Swap of the Fracton Protocol. The KuCoin NFT ETF Trading Zone will support hiBAYC token trading first, allowing users to own proportionally shared ownership of native blue-chip NFTs. In the future, KuCoin will launch more NFT ETFs in partnership with the corporate department of the Fracton Protocol.

    The launch of the KuCoin NFT ETF Trading Zone gives the exchange a significant boost in its efforts of accelerating the establishment of a mature NFT market by lowering the investment threshold of high-potential and top NFTs in the crypto industry.

    VICTORIA, Seychelles–(BUSINESS WIRE)–KuCoin, a global cryptocurrency exchange, has announced the launch of its NFT ETF Trading Zone on July 29. The new product aims to improve the liquidity of NFT assets and lower the investment threshold of blue-chip NFTs for over 20 million users.

    The launch of the NFT ETF makes the KuCoin the first centralized crypto exchange supporting such instruments. KuCoin is also the first market player to introduce a USDT-dominated ETF product that marks particular underlying blue-chip NFT assets.

    The new Trading Zone will make top NFTs accessible to a broader range of investors seeking to acquire blue-chip NFTs.

    This makes decentralized exchanges much faster, because transaction verification on the centralized platform may take from several days to several months.

    The main idea of such platform – full anonymity and equal possibilities for all participants. Such an exchange cannot be controlled by the state or any regulators, and no personal data could leak.

    Investors and traders may not worry about hacking or technical malfunctioning. All funds and key stored at the user side. Decentralization makes impossible artificial manipulation with exchange and fake orders creation.

    What are the Simple Security Measures for Everybody?

    Exchanges and regulators constantly working on measures to decrease the scale of cyber crimes.

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