What you should know about crypto exchanges in 2019

6 min readSep 23, 2019

Markets, challenges and…threats of the new era

Cryptoassets are slowly going to world adoption as the number of digital assets holders slowly but steadily grows worldwide. The number of crypto wallets reached a record number of more than 40 million users by the end of June 2019! Cryptocurrency exchanges started springing up to provide trading services for this new asset class. However, all is not hunky-dory with the crypto ecosystem and threats still loom large. if the market is to see progress and development, these threats need to be addressed and dealt with.

Digital era trading platforms

Cryptocurrency exchanges provide platforms where crypto traders can buy and sell their digital assets. These platforms are similar to the stock exchange and entail making profits on crypto price fluctuations. Taking into account that cryptocurrency volatility is much higher than stock market fluctuation, chances of traders achieving significant profits in short order are several times higher.

There are more than 500 cryptocurrency exchanges functioning globally, and this number increases every month. While the exact number is difficult to pinpoint, the number is steadily growing. While 200+ cryptocurrency exchanges are listed on CoinMarketCap, several hundred more may be found on other websites. The majority of the total trading volume is divided among leading cryptocurrency exchanges that make up the Top 10. However, there have been instances where some exchanges have shown inflated figures of trading and traffic to boost their rankings and attract more customers.

The most frequently used ecosystems for cryptocurrency trading and investments include:

• Trading platforms — Offer trading services to traders by charging a commission, or brokerage (are regarded as traditional exchanges).

• Direct-access trading platforms — Those are not connected with market indices and are platforms where clients may trade amongst each other by defining their prices.

• Brokers — Websites that offer cryptocurrency buying at broker prices. Such services are like money changers who exchange dollars, euro, and other fiat currencies at a predefined rate.

• Funds — These services are intended for cryptocurrency buying and its storage in the long term.

According to Bloomberg, with data supported by CoinMarketCap, the annual earnings of 10 largest cryptocurrency exchanges are exceed $1 billion.

Global exchange coverage and market dynamics

The largest daily trading volume of $1.7 billion is divided between the Binance and the Hong-Kong-based OKEx. Taking into account a 0.2% fee (OKEx charges only 0.07% fee for the most active traders) Binance is expected to get maximal daily income. The Asian exchanges Huobi, Bitfinex, Upbit, and Bithumb are next in the list. Their daily income from trading fees is from $600 million to $1.4 billion with the average fee being 0.3%.

The U.S. leads the list of countries with the most number of cryptocurrency traders. The majority of traders signed up on Coinbase and GDAX are from the U.S., while traders on Bithumb, OKEx, and Huobi are mostly from Asian countries.

Coinbase is the leading exchange according to the number of visitors. The website is included in the top-250 most popular websites in the world while trading volume is less than $300 million.

The peak of cryptocurrencies market capitalization was attained on January 7, 2018, reaching $831 billion. The reason lay in the spectacular price rise of the most popular cryptocurrency — the Bitcoin. Bitcoin price had increased by more than 1000% during the 12 months (during just December the price had risen by 22% setting a new record, at $19,700).

However, in January 2018, numerous factors such as hacker attacks, the interest of US CFTS (Commodity Futures Trading Commission) towards Bitfinex exchange, the increasing pressure of regulatory authorities and overall negative media attention and sentiment caused the price of Bitcoin and other cryptocurrencies to crash spectacularly.

At the time of writing, the market capitalization of all cryptocurrencies is $263 billion (as of September 23, 2019) which is 3.5X times less than the peak index almost two years ago!

About 81% of crypto wallets are located in Europe, and North America but these regions comprise only 61% of global users. The next region, according to the number of users of crypto wallets, is Latin America followed by Africa and the Middle East.

Market dynamics expectations are mixed — as to the potential growth of cryptocurrency exchanges trading volumes, the majority of the world experts share the same opinion. Cryptocurrencies attract the attention of institutional investors; therefore, professional market participants may bring multi-billion funds, and consequently, trading volumes are expected to increase.

Main threats

The key risks and their possible consequences for cryptocurrency exchanges are :

Risks of cryptocurrencies usage. High volatility of rates

Money flows cannot be predicted. Cash deficiency is a distinct possibility. As a result, trading volumes of cryptocurrency exchange may decrease and cause earnings to reduce.

Investment risks due to wrong crypto fund management

Incorrect budget forming and its distribution for cryptocurrency exchange establishing.

Market risks.

The number of regulations applied to world markets limits the opportunities for projects development.

Political risks connected with state regulation of cryptocurrency exchanges

There exists a risk of a particular exchange being stopped from operating in a region or several countries due to political or regulatory issues. Moreover following of particular demands and security policy is obligatory in countries where special requirements for cryptocurrency exchanges functioning are adopted.

Technical and technological risks

One of the key issues nowadays is cybersecurity. The exchange program code should be written professionally; otherwise, the platform may be hacked, and the assets may be stolen.

Modern technologies can provide long-term benefits and severe threats at the same time. At the moment, quantum computing is one of the hottest topics as it is being associated both with unprecedented benefits and threats to currently existing technologies at the same time. Blockchains and crypto exchanges can become the primary targets of the post-quantum era hackers. Armed with the q-tech of power yet unseen, fraudsters can hack the blockchain in seconds!

In recent big news that is sure to have far-reaching consequences to blockchain technology in general and cryptocurrency exchanges in particular, Google reported attaining “quantum supremacy” — the company has reportedly built a quantum computer more powerful than the world’s top supercomputers. A Google research paper was temporarily posted online this week, the Financial Times reported Friday, and said the quantum computer’s processor allowed a calculation to be performed in just over 3 minutes. That calculation would take 10,000 years on IBM’s Summit, the world’s most powerful commercial computer, Google said.

Google researchers are throwing around the term “quantum supremacy” as a result, the FT said, because their computer can solve tasks that can’t otherwise be solved. “To our knowledge, this experiment marks the first computation that can only be performed on a quantum processor,” the research paper reportedly said.

However, besides the excitement of technological evolution, a quantum computer also implies severe threats — and the cryptocurrency market working on the blockchain technology is no exception. Imagine that just one quantum computer of potentially huge capacity connected to the blockchain is able to perform a 51% attack successfully. It can gain control over a blockchain and may prevent new transactions from gaining confirmation inside a particular blockchain.

Moreover, traditional encryption methods, which are used in cryptocurrency, crypto wallets and cryptocurrency exchange algorithms, may be easily cracked by quantum computers. All the “hot wallets” and all cryptocurrency exchanges (that are equal to “hot wallets”) could be hacked using Shore and Grover algorithms and the assets from those wallets could be transferred anywhere a quantum computer operator desires.

Providing a safer market for tomorrow

Taking into account the possible consequences of the swift development of quantum technology, many companies have started to work in advance to craft comprehensive solutions to address the threat and prevent impending disaster.

The objective of the QUUBE is aimed to create a full-scale and complex blockchain ecosystem, resistant to the “quantum computing attack”, which is supported by 3 “whales” or three key elements adopting quantum cryptography at all stages. They are aimed to provide smooth experience in various segments: a crypto trading platform, STO blockchain protocol, and an IEO launchpad.

QUUBE exchange is ready to accelerate assets trading processes by creating a Security Token Market and Launchpad dedicated to the different types of securities. Our team has succeeded in implementing the first quantum-safe ecosystem and security token Launchpad with the exchange platform allowing STO/ICO projects to fundraise rapidly amongst accredited and non-accredited investors. QUUBE is a unique fundraising engine facilitating asset tokenization and investor relations.

The future holds many secrets, but one thing can be sure: utilizing QUUBE-like solutions is the only real option for survival in the current market conditions. Follow us and subscribe to join the global community. Come and see firsthand what we are building to secure the future of blockchain.

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