Atomic Swap VS Centralized Exchanges
Nowadays, cryptocurrency technologies are on top. Just look at the statistics to see the market capitalization is estimated in billions of dollars. The volume of transactions keeps increasing, the cryptocurrencies becomes recognized by the government. Looks pretty optimistic, doesn’t it?
Transparency and decentralization of the crypto exchange without third parties has always been one of the main goals of blockchain technology. As of today, however, the situation is the opposite: most of the top crypto exchanges are centralized.
At the recent “TechCrunch Sessions: Blockchain” conference, founder of Ethereum Vitalik Buterin said:
Despite the audience reacting with laughter and ovations, centralized exchanges still remain a monopoly with security issues. Let’s take a closer look at reasons for Vitalik’s statement.
All centralized crypto exchanges work on the same principle: they accept a user’s deposits on their wallets and allow the user to exchange assets as part of the deposit.
1. The user must create an account and undergo a verification process to exchange large amounts. Many exchanges put restrictions on trade volumes and daily withdrawal limit for unverified users (e.g. Bittrex, Binance)
2. The user creates an order to buy or sell the coin.
3. The exchange takes a trading fee to execute an order. Once complete, the user can withdraw coins to an external wallet, if necessary.
Hence, the user pays a withdrawal fee, the network fee and a service fee.
- Trading via bots.
- Increased liquidity for popular trading pairs.
- Automated order execution.
- Friendly user interface.
- The exchange is a centralized solution prone to hacker attacks, regulation issues and server failures.
- Custodial working principles: users must entrust their funds to third-parties.
- Weak security level: the exchange receives a user deposit and transfers it to a payout (hot) wallet and/or cold wallet. Hence, huge amounts of crypto are accumulated on cold wallets. Frauds can take away up to 90% of users’ deposited savings through security breaches.
- Withdrawals may be frozen due to transaction verification issues, hot wallet maintenance, lack of liquidity and so forth.
- Trading is available by predetermined trading pairs, usually BTC / ETH / USD pairs. To exchange one coin for another, users must make at least two trades.
- Withdrawal restrictions put for unverified users.
- Delisting unpopular coins.
- Untransparent order book and possible falsification of trading volume.
Examples: Bitfinex, Binance, Bittrex and many more.
Since the early days of Bitcoin, the cryptocurrency market has evolved into a sophisticated multi-blockchain phenomenon. According to coinmarketcap.com statistics, cryptocurrency market contains over 1,5K different currencies with exchange turnover of over 14 bln in dollar equivalent daily. In addition to Coinmarketcap statistics, we should consider the volumes of intransparent and unregulated peer to peer exchange market as well.
Almost every major exchange has ever experienced security breaches. One of the most disruptive failures was the Mt. Gox exchange collapse. It took a year for the exchange to recover. The list of the publicly known biggest failures of custodian-based centralized crypto exchanges looks impressive for an unprepared spectator.
This list is far from complete, but it gives a good picture of the security level in centralized exchanges. However, the good news is that we all can learn a good lesson and come up with some conclusions: your funds are not safe unless you own your private keys. Anyone can hack and steal them, and this process is irreversible, unfortunately.
Being on the way to mass adoption, the crypto industry is expected to solve security issues only with a fundamentally new approach based on the initial idea of decentralization in digital assets exchanges. The Atomic project was created as a reaction to the current challenges of the industry, a convenient and versatile decentralized solution for the custody-free cryptocurrency trading. Atomic Wallet platform is based on a unique, proprietary engine, specially designed to solve its specific tasks. You can know more about Atomic Wallet security from our special article.
Here is the brief description of Atomic Wallet Atomic Swap exchange. In the nearest article, you can find a detailed step-by-step manual!
Create a wallet — registration is not required.
- Top up the wallet.
- Party A selects an order from the BitTorrent order book.
- Party A enters an amount of coin to swap or coin to receive.
- Party A confirms the swap.
- Party B receives notification.
- Party B confirms the swap.
- Both Parties check the contracts.
- Both Parties receive their coins!
Atomic wallet Atomic swap exchange pros:
- No registration, verification.
- Custody-free solution.
- No amount restrictions.
- Fixed rates on hash time locked contracts.
- Guaranteed transaction rollback, if failed.
- Direct exchanges of one coin for another without intermediary pairs.
- User-to-user exchange.
- User-friendly interface.
- Decentralized order book.
- Serverless solution.
Atomic Wallet Atomic swap exchange cons:
Not all supported coins are available for the swap yet ю
We truly believe that decentralized technologies will play an increasing role in the crypto-exchange market of the future!
Try Atomic Wallet by yourself — https://atomicwallet.io/
Stay tuned and follow us:
Facebook — https://facebook.com/atomicwallet
Twitter — https://twitter.com/atomicwallet
Join our Telegram chat:https://t.me/atomicwalletchattruly believe that decentralized technologies will play an increasing role in the crypto-exchange market of the future!
Try Atomic Wallet by yourself — https://atomicwallet.io/
Stay tuned and follow us on: