Achilles Heel Of Cryptocurrency Exchanges
By ROKKEX on Altcoin Academy
If you read some of our older articles or at least bits and pieces from our white paper, you must have gone over us talking about how flawed the cryptocurrency trading market is and how we want to make it better. However, we never analyzed it with you. So here it is. Let’s take a deep dive and find out what issues are being brushed under the rug of many major cryptocurrency exchanges.
As you will see, there are quite a few issues following trades from exchange to exchange. However, all of them could be combined into one crucial issue that is being ignored by so many. Can you pinpoint it?
Main Weak Points
If you scroll through at least a few trader community forums, you will see a list of the same problems that they had to deal with. The main ones would be as follows:
- Lack of security
- High fees
- Lack of liquidity
- Lack of pairs
- Problematic interface
- Poor customer support
Security
Let’s start with the big one. When blockchain and bitcoin came to the stage, they have promised a new, groundbreaking, fair, and secure world for your money. However, every year, the media keeps reporting more and more cybercrime loses and victims. Many exchanges do not learn anything from competitors or even their own mistakes.
Here is a list of this year’s biggest crypto losses due to scams, exploits or hacks:
- Bitrue — $5 million
- Gatehub — $10 million
- Cryptopia — $16 million
- CoinBene — $45 million
- Bithumb — $13 million
- Coinbin — $26 million
- Binance — $41 million
If we think about the fact that a year ago (September 2018) over $202B of all the world’s money were in cryptocurrencies, we can understand how much money is out there right now. And it all can be taken if we choose to ignore the importance of cybersecurity. It seems as if at the moment, exchanges are counting on the traders themselves protecting their accounts and funds.
Also, it is not like there are no solutions. There are quite a few. Yes, we all can think about encryption, quality assurance, bounty programs, security tools, and many other basic things. However, the current statistics show the need for more. Direct account thefts can be prevented by adding Two-Factor Authentication (2FA) and implementing advanced security settings such as IP whitelisting. The community could be protected from scams with basic KYC and AML procedures. Though, the most crucial part would be to protect the money in the exchange, which can be done using multi-signature cold wallets. That would not only increase the security, but liquidity too as people would be more trusting to keep and trade more money in that exchange.
Liquidity
The crypto market is still acting like a living being, acting, and reacting according to changes in the social, political, and economic world. This really affects liquidity. It is especially threatening to new or small exchanges. Some exchanges (even some of the major ones) were even accused of faking their liquidity in order to keep up with the competition.
Increasing an active user base is a good solution, but quite a big task to tackle for quite a few or even keep it up at the times when the cryptocurrency market is in the down period. Some exchanges organize giveaways, fee discounts, competitions, or referral programs. It does help. Some people are also talking about the idea of having a joined pool of two or more exchanges. In this case, if the exchange does not have sufficient liquidity, the transaction could still be filled using a collective pool.
Fees
Many exchanges have set such high trading or withdrawal fees that it discourages users from trading. Some are stuck to trade with high fees due to other factors that they value the most and see that exchange as their best option.
It is important to understand that fees are a way that the exchange earns money from their loss. It is fair and understandable, but it would be looked upon more positively if they gave something back. Great examples are exchanges with referral programs or programs that offer decreased fees in exchange for using the platform longer or for bigger transactions.
Asset Pairs
There are so many cryptocurrencies right now. Some have massive communities, and some you could call more of a big family than community. Exchanges do not need to list every single coin, but noticing what the community wants or is looking to try is essential. Adding altcoins or pairs that might be less popular could bring new people, increase liquidity, encourage people to try something new, and help a new coin on the block.
Interface
This flaw is mostly noticed by the newbies but does annoy some experienced traders too. Many exchanges have unnecessarily complicated, overcrowded, uninviting interface. The user-friendly interface not only focuses on the looks, but, also, maximizes responsiveness, functionality, efficiency, and accessibility of the platform.
Well designed and planned interface not only attracts new traders, but it helps all users to go through transactions hassle-free. Of course, it does not mean that all exchanges should dumb down, but find a solution to look both informative and easy to use. For example, on ROKKEX you can choose if you would like to use a basic trade view or a more advanced one. This gives the user an option to choose what they want and switch anytime according to their needs or preferences.
Customer Support
This one is an easy one for the end. Quite a few traders complain about the lack of customer support or the lack of at least proper customer support. Reactive and competent support is vital as exchange users are dealing with their money. The agent’s timing and knowledge can majorly impact the result of any event. Supporters must know all of the procedures, how everything works, the live updates of the system, which all require proper training and communication between the teams.
So Can You Name It?
Can you pinpoint the one unifying problem that is the mothership of these flaws? Think about the reason we are hearing about them. They all come from the new and old traders. They all come from a rapidly growing and reactive community.
The main issue of the most cryptocurrency exchanges is that they are not developing as fast as their community and the demand. All of these flaws are majorly affected by the fact that exchanges are not keeping up with what is needed both to serve their growing user base and to stop fast learning hackers and scammers from breaking them.
Way to Go
Experts keep saying that blockchain, cryptocurrency and everything surrounding it is still at the infancy stage. It is true. However, that also means that this is not it. The platforms, users, technologies, and markets are improving and developing. There is enough researched information and feedback for new players to start stronger than any other exchange before them. We at ROKKEX spent a lot of time and energy on studying and learning from others’ mistakes, so we could do better and here we are. Still growing, learning and improving, but already proud where we are.
At ROKKEX, we take security extremely seriously, and our crypto exchange is built on ‘Security First’ principle. We want to share our expertise with the broader public for the world to become happy, safe, and wise :)
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