Rente te Decentralized Exchanges poised to rise te Q4
Ethfinex, 0x and anti-fragile bets
The last two months have seen a surge ter events relating to decentralized exchanges. Te August Bitfinex announced its Ethfinex verhoging, followed by two very successful ICO’s by 0x and Kyber. Coupled with the latest news from China, where crypto-currency exchanges are facing shutdowns by the government, wij should expect an interesting next few weeks for decentralized exchanges.
Spil wij wrote ter ‘The Perpetual Bubble Machine’, presently the main use case for crypto-currencies is speculation. Crypto-currencie’s killer app is trading. When wij look at the ecosystem te this way it’s not hard to understand the importance that exchanges play.
Decentralized exchanges aim to permit people to engage ter trading without the drawbacks of their centralized counterparts. Hacks, thefts, seizures and uitgang schemes have bot all too common. Decentralized exchanges mitigate thesis by letting users keep control of their own private keys. Ter addition, the anonymity and the lack of KYC make them attractive to many parties.
At the same time decentralized exchanges face some — yet to be solved — technical challenges. Researchers at Cornell Tech’s Initiative for Cryptocurrencies and Contracts (IC3) have written up an extensive analysis of some of thesis exploits. They include miner front-running and exposure to arbitrage. Additionally, usability may make decentralized exchanges a less attractive proposition.
The Chinese Crackdown
Latest events ter China have set the stage ideally for decentralized exchanges. Simply waterput, they have highlighted the fact that current crypto-currency exchanges exist at the will of governments. When a intense passed government like that ter China wishes to close them down, they can.
Remarkably, markets mostly shrugged off the announcements from China. This may be because information on the exchange geobsedeerd is unclear and people expect it to be improvised. It has bot posited that the verbod is te place because of the forthcoming Chinese elections on October 18th[Two]. This would be an expected budge from a government wanting to showcase that it is taking act against corruption and the many financial scams, aimed at ‘normal people’, that are presently taking place[Three].
It is likely that the US government will also take aim at exchanges ter the coming months. Te particular wij can expect the SEC to label some ICO tokens spil securities. If this happens, exchanges that list those tokens, which are based te the US will have to liquidate them[Four]. This may affect Bittrex ter a fat way. The US exchange lists hundreds of tokens and has bot gaining traction recently against its competitor Poloniex.
The Case for Decentralized Exchanges
It is unclear whether crypto holders, ter normal, are aware of decentralized exchanges. Wij believe that the idea of decentralized exchanges will build up more traction te the coming months spil 0x and Kyber Network proceed their development. Ethfinex also plans to have a working product within the next 6 months[Five]. Coupled with Bitfinex’s influence this may bring decentralized exchanges to the masses. The Ethfinex project will also integrate with 0x, which itself is a protocol. Spil regulations tighten wij expect decentralized exchanges to be viewed spil a hedge and an anti-fragile bet.
This snippet is part of a series titled “Understanding Crypto-asset Fundamentals”, written for Widmer Dun clients. For more information email us at firstname.lastname@example.org or send us a private message.
 One of the largest and oldest crypto exchanges, BTC-e wasgoed shut down at the end of July.
[Three] China has recently seen an explosion te financial scams including pyramid schemes.
[Four] The chance of judicial act being taken against Bitfinex from permitting trading of potential securities resulted te them taking preemptive act ter August, restricting US individuals from trading certain ICO tokens.