Crypto Exchanges: Bridging The Gap Between Sovereignty And Performance

As per the number being used by leading crisis critic, Nouriel Roubini, 99% of crypto-asset transactions were reported in 2019 on centralized exchanges. For the near future, CEXs will most probably continue to be a core component of the crypto world. CEXs are fast and convenient, and yet traders typically need to deposit their money into an exchange-controlled account. Sadly, research by shows that such a loss of sovereignty over the digital assets of the user can constitute a severe and expensive compromise.

Crypto Custody: Control over Confidence –

The nightmare of CEX investors is that they can be hacked or fraud-filled and end up losing their deposit accounts. Although the decline of Mt. Gox in 2014 took seven years, its post remains comparable with the risk of fraud in crypto-monetary terms. Once the biggest exchange in the global economy, BTC, filed bankruptcy in 2014, where approximately 650,000 Bitcoin consumers were missing. Victims continue in the process of obtaining partial remuneration in 2021.

This kind of counterparty risk, unfortunately, is still today a threat. Turkish bursar Thodex fled in April with $2 billion of uncounted investor money. China’s FCoin and also Australia’s ACX shuttered without notifying a year before. It does not make a logical difference to speculators that are out of their pockets whether these failures are caused by hacks, fraud, or problems of a business model. In an idealistic situation, the ability to transfer client funds quietly between accounts must be denied to an interchange operator.

Risk Management –

There are different ways to minimize these risks for well-capitalized or well-connected traders, although the solutions have their disadvantages.

Credits are a way of keeping an account from being pre-funded. Yes, if you are prepared to pay a large premium to a courier or if you can set up yourself as the top consumer and receive a loan line for a specific exchange. In any case, it is costly, and that only the biggest donors can establish so good relations with various currencies. 

Prospect for better DEX –

Can the interests of traders be safeguarded without the inconveniences of existing DEXs?

Cryptocurrency as a source of trust could be used and combined with highly classified computing hardware to manage order mapping. For example, Trusted Execution Environments, which operates separately from the default operating system not available to the network administrator, can configure a special category in a computer processor.

A longer-term perspective can be used to accomplish similar outcomes through the combined effect of other new techniques such as computational multiples or zero-knowledge shreds of evidence, but these strategies are less advanced and applied to real-world situations. It would be hard to implement.

Conclusion –

The pre-financing necessity on cryptocurrency exchange brings problems and risks which pose a major barrier to technology platform adoption. While DEXs offer the investor an inventive option to control the financial resources, they are also subject to significant compensation. Cryptocurrency exchanges have to find methods to increase sovereignty without compromise on accomplishing the mainstream adoption and competitiveness of digital assets.