Why Centralized Exchanges Are Decentralizing

All We Need Is…Trust?

You can recall the well-known truth: “Building trust is difficult, but losing confidence is easy enough.” Without a doubt, trust is exactly what any of your relationships are built on, whether it’s important family, friendship, or partnership, in business.

And it was precisely the loss of trust in centralized organizations that laid the foundation for the creation of blockchain technologies, which, in turn, are based on decentralization.

But here, it is crucial to understand one simple thing. The use of blockchain technologies by any company does not automatically make it more reliable. Reliability in the blockchain goes beyond the choice of design that a business makes when using them.

But it doesn’t have to be this way

In other words, the leaders of this industry make the choice of design that can maximize the level of trust. Such companies try to start the decentralization process for key business functions to strengthen their “foundation.”

Custodial solutions often appear on the exchange — users must deposit their funds into a centrally controlled wallet to start trading. However, non-custody solutions allow users to fully interact with the exchange without requiring a deposit to a centrally controlled wallet. This means that access to and control over funds never involves the presence of a third party.

The decentralization of the custody element — a small change in business models — ultimately leads to the decentralization of trust. By reviewing how trust is processed using a system that cannot be trusted, exchanges are gradually recovering some of their lost reputation among consumers, paving the way for new relationships where the element of trust is no longer an obstacle to doing business.

Decentralization redistributes power and trust

Of course, one cannot but agree with the fact that decentralization contributes to security, transparency, financial accessibility, and clarity of regulation.

Decentralization redistributes power and trust in a person. Gone are the days when customers could not withdraw funds or gain access to their funds due to hacking or insolvency of the exchange. Clients can instantly interact with multiple exchanges without waiting for funds to be transferred from one exchange to another.

The hurdles faced in adopting decentralized solutions

The presence of the decentralization aspect in your business certainly increases the level of competitiveness, but it’s worthwhile to clearly understand that if you nevertheless chose this particular style of doing business, you have to overcome some obstacles:

The first thing to think about is liquidity. It is worth paying attention to the fact that exchanges based on decentralization have significantly less liquidity compared to their centralized counterparts.

An equally important point that deserves attention is performance and speed since they are the limitations of decentralized exchanges.

Well, the last thing on our list, but not by value, is the user experience and functions. Since decentralized exchanges are still in the early stages of development, they often lack functions, which imposes restrictions on the trading experience of users.

Instilling trust today for the financial systems of tomorrow

Tomorrow’s financial systems will be responsible for trading real estate, gold, money, securities, cryptocurrencies, and other digital assets. Given the trillions of dollars flowing through these systems, the design choices we make today are more important than ever to inspire confidence in these systems — believing that our assets are always at our disposal; trust that our assets are safe; Believe that the companies with which we do business are honest and fair.

Decentralization can be safely called the first and by no means unimportant step on the path to trust, because it is this concept when properly implemented in business processes and systems, that help to develop transparency of politics, security in business relations and establish high productivity.

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