When you receive a fully decentralized crypto currency exchange
The cryptocurrency market has already experienced the peak of fame, but despite the fact that today’s news cryptocurrency world sometimes upset, decentralized stock exchanges continue to compete with each other and with centralized exchanges and create the most advanced developments. The path of development of cryptoplugin complex – it is full of competition, has many hidden nuances and problems. To understand the market, you need to consider the most important questions:
- What is the difference between centralized and decentralized exchanges? Each exchange has its pros and cons, progress is relentless and we will soon see significant changes in both centralized and decentralized sharing platforms, it is inevitable.
- What is high frequency trading (HFT) and what are the benefits and difficulties of implementation today?
In our article we will try to answer these questions.
Classic is NOT immortal
The blockchain technology is helping to implement the global transition to an economy where the exchange transaction means the exchange does not require the participation of third parties (persons).
However, today’s cryptoamnesia exchange, mostly, are not decentralized, leading to many serious threats: they are vulnerable to break-ins, do not respond to the specific processes associated with the technology of the blockchain (such as hard ppl were), and often involve risk to fall under different regulations and rules of different governments of the world.
Centralized cryptocurrency exchanges might soon become obsolete because they neglect to use the blockchain technology to improve their capabilities and increase their effectiveness.
The problems of centralized exchanges are numerous: lack of liquidity, vulnerability, risks, losses and theft as the result of the centralized principle of work. These exchanges represent “a tasty morsel” for cyber criminals due to the fact that through them are made of billions of transactions every day, and the servers exchange store money users.
Decentralized exchange or DEX on the contrary aimed at solving the problems inherent in centralized structures, in that they create markets equal lending (P2P markets), based on the powerful blockchain technology – the Ethereum often that allows traders to keep funds continue to be managed independently.
But the most popular exchanges today are still centralized exchanges – because they are easy to use and provide high trading volumes. A rather ironic paradox: centralized exchanges as the main engine of the decentralized economy.
Decentralized exchange. Research and development
Experts from different industries agree that decentralized exchanges are a few basic and global advantages: complete anonymity, more advanced security measures, and global market coverage.
Moreover, decentralized exchanges are different from centralized because they allow users to directly control their funds and manage them in the blockchain: they use the technology of the cryptocurrencies, thereby ensuring safety and transparency of trading. However, a very important drawback of decentralized exchanges is that they have limitations in the blockchain, the core on which they are written. Moreover, the absence of algo-trading is significantly restricts the target audience of traders.
You need to understand that trading itself is associated with numerous risks – here traders rely only on their own opinion, and is unlikely to face additional unnecessary risks that will lead to minimally profitable or unprofitable transaction.
Highlighting the key benefits we see is that when using DEX the user has no need to entrust your funds to third parties (persons), which guarantees greater safety of funds and storage of sensitive data in a secure environment.
However, DEX also have weaknesses that need to be considered: problems with the scalability of the blockchain on which they are based, the inconvenience of use in connection with certain difficulties with liquidity, complexity of payments and transactions, and the absence of Fiat money.
If truly decentralized exchange, the possibility of high-frequency trading?
A long and winding road passed the market to the emergence of new strategies, non-standard calculations and trading ideas. One of the trends of the past two decades are the high frequency trading algorithms that perform operations over a fraction of a second, a rate completely incomprehensible to the human eye.
What is the main problem of the introduction of HFT on decentralized exchanges? One of the key problems faced by the decentralized exchange is slow in the display units for high frequency trading. The output depends entirely on the hash and the program’s ability to quickly resolve “difficult” computational problem. To ensure high-frequency trading on decentralized platforms are developed specific to partially-centralized system. They are services outside of the network that do not include transactions in the total data chain.
Of course, in case of any problems with the introduction of HFT to the DEX will hurt not only traders but also providers of algorithmic trading tools and bots.
Race of decentralized market exchanges
Now is the best time to participate in the race-competition create the leading decentralized platform. The two giants go hand in hand – a race-the attempt to develop and present the best possible solution.
On the one hand, most recently CEO Binance Changpeng Zhao has announced the demo version of the planned decentralized exchange platform – were shown three main item planned: the creation, listing and trade of tokens. However, since the launch date remains secret, remains to be seen when cryptocurrency exchange number one trading volume, according to Coinmarketcap, will be available and what volume can handle.
Moreover, the exchange Bitfinex, based in Hong Kong, too, has its own plans that it announced earlier. The exchange will be called EOSfinex, it will combine the speed and scale of the blockchain chain EOS.IO experience with Bitfinex on crypto market. The exchange said that investigated a number of technologies at the Protocol level to assess their compatibility with large volume, based on the blockchain.
text: Olga Grinin