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Centralised Exchanges Ruining Crypto Trading?

The recent days have seen a spate of new launches of digital currency exchanges and many existing ones have come up in the news for varied reasons. SIX, the owner and operator of the Swiss Stock Exchange has announced plans for a cryptocurrency exchange regulated by government authorities, while HUOBI is slated to open registrations on its US-based exchange by 10th July.

The world of cryptocurrency exchanges has clearly been seeing several new entrants. However, this is not to say that the existing companies have not made their presence felt lately. Co-founder of BitMex, Ben Delo, dubbed Britain’s maiden ‘bitcoin billionaire’ has had his time in the spotlight recently, with a Daily Mail report dedicated to him. Changing Zhao, the founder of Binance, in an interview to Bloomberg, stated that the profit margins had been skyrocketing for his company, with the 2018 values having already surpassed the $300 million mark. Clearly, this is a time of prosperity for cryptocurrency exchanges as new trading platforms come up and existing ones continue to increase their valuations.

However, a recent comment by Vitalik Buterin, the founder of Ethereum (the second biggest cryptocurrency by market cap), has raised important questions as to whether the rise of exchanges is really a cause for celebration. He has stated clearly that he considers the mushrooming of cryptocurrency exchanges as being severely detrimental to the overall quality of the digital currency space. His dissatisfaction lies primarily with centralised cryptocurrency exchanges that operate solely with a profit motive, which forces research and innovation to take a backseat in this space.

To get listed on any of the key exchanges, a digital currency must first pay a substantial amount. This diverts funds from being utilised in improvements in technology and know-how, which essentially leads the space to suffer. While newcomers and traders look to earn quick profits on a platform like this, emerging and lucrative, the overall future of the digital currency space is called to question.

In a comment about the sale of the crypto.com domain, Peter Grosskopf, the CTO of the cryptocurrency debit card company Monaco, said that we are looking at a hybrid future where cryptocurrency still has to prove itself. Now, in order to do this, the space needs sufficient opportunity to breathe and fine-tune its technology, rather than being sucked into the rat race of being listed on the centralised exchanges that are only growing in number. Buterin’s beef is only with these, and not with decentralised exchanges, that allow buyers and sellers to interact and transact directly without intermediary platforms.

However, the decentralised exchanges are still at a nascent stage that makes them an inadequate alternative.

The rising popularity of cryptocurrency and the attention that it has been receiving from the media houses has created a large class of traders interested only in the profit-making aspect of the space, with little enthusiasm for digging deeper into how the technology works or how the asset can be enhanced and improved.  While they can hardly be blamed for wanting to make a profit, it is rather regrettable that innovation in digital currency is on a backdoor despite the burgeoning interest around the field.

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