There is an ongoing rivalry between centralized and decentralized cryptocurrency exchanges. At the moment, the majority of top exchanges like Binance, Bitfinex, BitStamp, Huobi, Kraken etc are centralized. They’re easier to use, place less pressure on the customer and some of them offer compatibility with fiat currencies. While there’s a lot to shout about, there are also serious concerns around security and trust that lead some traders to turn to a less user-friendly decentralized alternative.
It can be hard to know where to place your faith as a crypto investor. Should you look for the exchange you think is least likely to be hacked? Or how about the exchange with the highest trading volume? Let’s take a look at some of the features associated with the current offering and ponder where the industry might turn next.
Centralized exchange features
Cryptocurrencies and the blockchains behind them are intended to be open-source initiatives where the community holds the power as opposed to one central owner (Like a government or bank). Therefore, it’s fair to argue that centralized exchanges represent a shift from that ideology, with consumers placing their faith in one profit-minded authority. Alongside concerns around whether or not they fall in line with the community vision, centralized exchanges also raise fears around security and safety of funds. Cyber attacks are prevalent in the crypto world and the exchanges mentioned above are prime targets.
On the other hand, these exchanges are popular because they represent convenience. No need to worry about remembering your private key or where you left your USB cables and offline wallet. There’s also a stronger UX focus and greater trading volumes to consider.
Decentralized exchange features
Decentralized exchanges fall more in line with the ‘we don’t need a middleman’ ethos that the crypto world is built upon. They don’t rely on a third party service to hold consumer funds, offering automated peer to peer trades. A decentralized exchange is considered more secure because they run on decentralized nodes, meaning that one central system cannot be hacked. Other benefits include anonymity (no need to upload countless documents to verify who you are) and no trading fees.
Too good to be true, right? Yes, sadly. A secure, anonymous, peer to peer service does come with its drawbacks — clunky offline wallet configurations, low liquidity, poor user experience, and low trading volumes to name a few.
The future of crypto exchanges
So where do we turn? In a world hungry for innovation, hybrid exchanges could be the answer. Cryptocurrency traders need a platform which can protect their assets and personal data whilst providing a user-friendly experience. One innovative technology startup, DINNGO, has set a goal to revolutionize the industry by providing just that.
DINNGO has come up with an innovative way to solve the problems that exist in the market today.
● Their credit card shaped cold wallet allows you to store your digital currencies offline and connect them to the DINNGO exchange via seamless Bluetooth integration.
● The customized trading interface provides all the benefits associated with a centralized design.
● Cross-chain trading. DINNGO will support trading tokens between different protocols.
We know it’s a profitable industry, you only need to look at the success of Binance to see that, but it’s an industry that’s going to have to adapt if we are to see long-term mass adoption. Hybrid exchanges look like they could be the solution the industry needs.