Exchanges play an important role in the massive growth of cryptocurrencies. It is where people can trade cryptocurrencies for other digital currency or traditional currency like US dollars. These exchanges connect buyers and sellers and take a fee from each transaction.
These are a few roles of cryptocurrency exchanges:
- Receiving cryptocurrency and issuing IOUs
- Receiving fiat
- Processing an order book
- Redeeming IOUs
To get the best liquidity and lowest spreads requires a large and active order book, and this means that most people gravitate toward a few core exchanges, leaving everyone exposed to the semi-frequent exchange hacks that steal funds. Moving money into or out of an exchange often incurs a significant time delay, which means that active traders must keep their funds on the exchange. This magnifies the amount of risk to users of the exchange. It also magnifies the risk to all users in the cryptocurrency ecosystem. Each large security breach results in significant sell pressure, from both the thief looking to cash in their loot, and from regular users hoping to sell before the thief.
If exchanges play an important role then why people keep complaining about many things? There are a few concerning issues regarding current exchanges platform:
- Fees; Most exchanges charge fees for all kinds of transactions. Fees can differ substantially depending on the exchange you use.
- Payment Methods; Some exchange has limited payment options which make it not convenient to be used for trading. Purchasing cryptocurrencies with a credit card will always require identity verification and come with a premium price as there is a higher risk of fraud and higher transaction and processing fees. Purchasing cryptocurrency via wire transfer will take significantly longer as it takes time for banks to process.
- Verification Requirements; This is one of a long and inconvenient process. The vast majority of the cryptocurrency trading platforms both in the US and the UK require some sort of ID verification in order to make deposits & withdrawals.
- Geographical Restrictions; Some exchanges can only be accessible from certain countries.
Using exchanges to store any cryptocurrency that you are fond of is not a good idea. This results in the popular exchanges becoming a honey pot for hackers to target. Many people losing lots of money not because of the currency itself, but because the exchange had weak points that were taken advantage of.
Bancor provides a solution for all of those issues by creating the first decentralized liquidity network. The Bancor Protocol™ removes the barrier-to-liquidity by employing an asynchronous price-discovery model enabled by asset-holding Smart Tokens™. Smart Tokens™ are always purchasable and sellable for the token(s) they hold in reserve.
You can trade any amount, at any time, from anywhere, no one must approve your account and there is no withdrawal limit. You have complete financial freedom.
With Bancor your trades (buy/sell) execute instantly. Unlike centralized exchanges, there can be no high-frequency trading, front running, or hidden orders. This puts all parties on a level playing field. Usually traders go to great lengths to get as physically close to the exchange systems as possible, because they need to make decisions so quickly that the speed of light is a considerable factor. The Bancor Protocol™ is a location-neutral, and gives everyone equal opportunity.
