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Analysis: Centralized Exchanges vs Decentralized Exchanges

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Unlike centralized exchanges, DEXs allow direct, peer - to - peer trading ( P2P ) in cryptocurrency, where users control their funds.

Unlike centralized exchanges, DEXs do not function as a bank or traditional fiat currency exchange, but instead they allow direct, peer – to – peer trading ( P2P ) in cryptocurrency, where users control their funds.

 

Centralized vs Decentralized Exchanges

Centralized markets dominate the global volume of cryptocurrency trade with an overwhelming margin, and the trading volume is much more constant ( although it is still incredibly volatile compared to traditional stock systems ). Centralized exchanges can do so without any problems because trading on centralized markets does not involve any cryptocurrency movement. Digital assets in centralized markets are only transferred when they WITHDRAW from the stock market, not in all transactions. In general, cryptocurrency regulation is still a bit of a legal grey area – especially when it comes to decentralized exchanges. The massive armies of automated price robots for a given market bring rapid changes, so playing multiple markets at the same time offers some additional benefits for experienced algorithmic traders.

Centralized exchanges are fast because they are centralized and do not exchange assets in the chain. The advantages of legitimate central markets include offering substantial liquidity ( approximately 99 percent of cryptocurrency is done on central markets ), offering fiat on-ramp, offering greater trade functionality and the ability to use sophisticated trading strategies, institutional support, and compliance with the laws of the jurisdictions in which they reside. The decentralized exchanges ( DEXs ) are applications built on the dapp platforms ( such as Ethereum ) that use smart contracts to facilitate trade.

To make things more complicated, there are actually several models that are currently used by decentralized exchanges. Centralized exchanges continue to dominate the daily trading volume, primarily due to significant technological and user experience barriers that continue to separate centralized and decentralized markets.

The central exchange can be used as fiat on ramps, allowing customers to deposit money directly from their bank account to purchase cryptocurrency in a trustworthy and compliant manner. Also, the central cryptocurrency markets are capable of offering high – performance trading opportunities and other advanced tools that can attract institutional investors. Today, relays offer highly sophisticated web applications that can compete with the centralized exchange rate of cryptocurrency in terms of user-friendliness.

In general, centralized exchanges are a more straightforward point of entry for new people who are new to digital currencies. Centralized exchanges can also provide additional services for their customers, which are not yet available on decentralized markets such as margin trading, loss prevention, and lending. One of the criticisms of the centralized exchanges is that they oppose the decentralized world of the blockchain, which essentially gives up power to a third party.

More specifically, decentralization causes censors, which in the case of a decentralized exchange, means that no central authority could impose regulations, or even ban currencies and the exchange itself. Without a decentralized exchange, the people’s ability to invest in cryptocurrency is subject to governments, so that cryptocurrency is hardly more democratic than traditional capital markets. Governments can control centralized exchanges, and users are subject to authorities who can track and tax users at any time, or ban currencies.

Decentralized exchanges can vary considerably in terms of technology, lack of trust, security, legal consequences, economic consequences, and many others. Keep in mind that for many decentralized applications, one or more components can be off – chain centralized or have economic incentives to support a trend towards centralization. Most of the decentralized exchange protocols usually work with chips with the same technical implementation and are on the same distributed ledger platform.

 

Though the motive of cryptocurrencies was decentralization before decentralized exchanges can achieve the popularity of centralized exchanges, they will have to become more user – friendly, interoperable between different block architectures and increase their liquidity.

#Exchange

The Death of Cryptopia: How it all Happened?

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Cryptopia has now gone into liquidation and suspended trading operations with them saying that they have been unable to reduce costs and to be profitable.

After the Cryptopia exchange was hit by a big hack back in mid-January which resulted in a loss of around $16 million in Ethereum and other ERC20 tokens, it has been struggling to reopen and find any kind of relevance.

 

Cryptopia decides to liquidate:

The matter of hack was made worse by the fact that the exchange was already becoming completely irrelevant at the time of the hack. Cryptopia has now gone into liquidation and suspended trading operations with the company saying that they have been unable to reduce costs and to be profitable.

 

It was decided that liquidation was the best path forward for all the stakeholders. While the liquidation takes place, all trading and withdrawals have been suspended and the process may take months to resolve.

 

The users still have their funds locked up in the exchange and they are unable to withdraw them because Cryptopia controls the private keys. If ever it becomes possible for the users to withdraw their cryptocurrencies remains to be seen.

 

What kind of obligations will the exchange have to the stakeholders may impact the kind of obligations they have to their users and the funds of the users that are stuck on the exchange.

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Will Bitfinex and Tether Fail? The IEO Chaos, LEO Token and Affect on BTC

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Bitfinex IEO is happening just a few days after the New York attorney general announced that they were taking action against iFinex.

The upcoming Bitfinex IEO is something that is being discussed all around the cryptocurrency space. It is quite surprising that the Bitfinex IEO is happening just a few days after the New York attorney general announced that they were taking action against iFinex, who owns both Tether and Bitfinex.

 

Tether and Bitfinex: The Same Entity

Tether and Bitfinex are largely the same entity. It is worth remembering of course that they lied and said that they were not connected before we had the whistleblower leak called the Panama Papers, which actually revealed their lie and that the audits have never been delivered despite being promised. In an industry in which we are striving so hard for transparency, Tether and Bitfinex have done everything possible to be opaque at every opportunity that they can get.

 

The Issue of $850:

It seems that Bitfinex has misplaced $850 million in corporate and customer fund which has resulted in some rather fancy accounting work which essentially saw an equal amount of Tether underlying dollars used by Bitfinex to cover that loss of $850 million with Bitfinex putting up shares in the company as collateral resulting in Tether only being 74% backed. Bitfinex of course casually forgot to mention all of this to investors or the holders of Tether that Bitfinex had $850 million seized.

 

The 2016 Bitfinex Hack:

Back in 2016, Bitfinex got hacked for 120,000 bitcoin which at that time was worth about $72 million and the losses were spread to users who experienced a generalized loss of 36%. They enforced a bail-in on exchange users and took 36% of account holders funds and the users were given a Bitfinex token in place of their stolen funds. The BFX token was redeemable for shares in Bitfinex. However, the cryptocurrency market was quite different and small at that time with the total market cap of $12 billion (at the time of hack). So, Bitfinex being hit $72 million or 120,000 bitcoins was pretty big because Bitfinex was the king of cryptocurrency exchanges back then, which now stands at #49.

 

The Bitfinex IEO:

Bitfinex is looking to raise $1 billion from big money investors. Each token that they are putting up is going to be worth $1 purchasable with Tether. The token will be called LEO and will be a utility token. According to documents LEO token holders will enjoy reduced crypto to crypto trading fees on Bitfinex and the companies decentralized exchange EOSfinex. Moreover, the token will also reportedly grant decreased lending fee, reduction withdrawal, and deposit fee, discounts and derivatives fees reductions.

Bitfinex has announced that $600 million is already taken in terms of allocation by private investors and the rest $400 million will be available for retail investors on May 10th.

 

If Bitfinex and Tether fail, How will it affect the price of Bitcoin?

If somehow BItfinex and Tether crumble due to the New York attorney general taking action against the company, bitcoin price might be affected at all with only Bitfinex crumbling especially at the current stage in the cryptocurrency game where Bitfinex stands at the 49th position in the top crypto exchanges list. However, if Tether fails, that could be potentially disastrous of a Mt.Gox level proportion if it happens overnight.

Competitors, of course, are scrambling to get bigger and bigger by the day trying to get people over to their services and people are already moving into those alternatives. Every time that happens, the impact of a Tether collapse becomes less and less relevant. However, there is a massive exposure to Tether across the markets with most major cryptocurrency exchanges having massive volumes in Tether pairs and much lower volumes in other stablecoin pairs.

 

What are your thoughts on the upcoming Bitfinex IEO? Let us know in the comments section below.

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#Exchange

5th Largest Korean Cryptocurrency Exchange: Coinnest Shuts Down

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Coinnest which is one of the largest cryptocurrency exchanges in Korea made an announcement that it is going to shut down its operations in the midst of some financial, admin and legal problems.

 

Coinnest Shuts Down:

According to a recent publication by Coinnest, bitcoin exchange, the exchanges is shutting down its operations. Coinnest had earlier closed down its new account creation services on 16th April 2019.

 

According to the exchange, it is going to terminate the trading and deposit features at the end of this month. However, the users shall be able to withdraw their cryptocurrencies from the exchange until 30th June 2019.

 

coinnest-screenshot

website screenshot

 

Following the decision to shut down its operations, the exchange has made an announcement regarding the decrease of the minimum withdrawal amount as well the withdrawal fees. Coinnest warned the users that no user shall be able to withdraw their funds after 30th June 2019.

 

Last year, the CEO of the exchange, Kim Ik-hwan was arrested by the South Korean police for fraud and theft. Since then, the exchange had been facing a bad time. The CEO was found guilty by the court and was sentenced to prison along with a fine of $2.5 million.

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