Centralized vs. Decentralized Exchanges — Benefits Offered by Each Approach
Decentralization has come to define blockchain and cryptocurrency activities, and many believe that decentralized exchanges are the future of the cryptocourrency market. But with demand for decentralized exchange sites growing by the day, is there any room for centralization in the increasingly decentralized cryptocurrency markets?
Halo Platform understands the benefits of diversity in the cryptocurrency services industry. Everyone in the cryptocurrency markets has different needs based on how they use this exciting and multi-dimensional new technology, and we’re developing an all-inclusive and customizable digital currency trading and management platform in order to ensure that all of these diverse needs are being met. This includes the launch of both a centralized exchange — HaloX — and a decentralized exchange — HaloDEX.
Decentralized Crypto Exchanges are Taking Over
Decentralized cryptocurrency exchanges may very well become the new standard in cryptocurrency markets. Much of this is due to the fact that truly decentralized exchanges are secure, since they do not require organizations to maintain wallets fat with users’ coins, ripe for the picking by cybercriminals and hackers worldwide. And with the 57 known cryptocurrency hacks ripping a staggering $1.63 billion from digital coin markets worldwide since 2011, there is a great deal of improvement to be had in the security of even the best crypto exchanges.
Decentralized exchanges lack the main security vulnerabilities that attract hackers to centralized exchanges. As a result, optimistic analysts hope that this next-generation in digital currency technology will put an end to the hacking and cybertheft problems that have proven to be a real bane for the cryptocurrency markets. But, as is true with most things, there’s no easy solution to all of the challenges facing the growing cryptocurrency community. Even as more and more decentralized exchange sites emerge, centralized exchanges maintain an important role in meeting the diverse needs of digital currency users.
Centralization Has its Benefits
Decentralization advocates have taken the spotlight recently, and some of the most noteworthy members of the blockchain and cryptocurrency community have spoken out against centralized exchange sites. Some, like Ethereum co-founder Vitalik Buterin, have used strong language to express their discontent with the centralized character of most cryptocurrency exchange sites. But lest we forget, centralization maintains numerous benefits in this increasingly-decentralized world.
In a Twitter exchange between Buterin and Binance CEO Changpeng Zhao, Zhao reminded his crypto colleague that there is still an important role for centralized exchanges in the evolving market. For example, centralized exchanges allow for regulation and control, which is often necessary in the wild-west investment environment of the cryptocurrency world. Sometimes, curbing the collective control that characterizes decentralization is critical to maintaining the freedom of the cryptocurrency markets and keeping operations up-and-running. In addition to this, order execution on centralized exchanges is currently much faster and as a result, liquidity is higher too.
Clearly in some cases, centralization is helpful in cryptocurrency exchanges. This is particularly true given that decentralization is still in its infancy when it comes to trading altcoins. Centralized exchanges contain a host of invaluable tools for the institutional investor. For the time being, many decentralized exchange sites are lacking when it comes to speed and sophistication of order execution, API, and risk management, so centralized exchanges will maintain an important role in the cryptocurrency ecosystem. Halo Platform is launching two exchanges — the centralized HaloX and the decentralized HaloDEX — in order to capture the full suite of opportunities created by each model. By doing so, we are well on our way to becoming the most versatile and all-inclusive cryptocurrency platform on the web.
Originally published at community.haloplatform.tech.