To date, over $6B has been invested in cryptocurrencies, and the industry total market capitalization is projected to be over $1 Trillion by the end of 2018. These significant investments have often been made without considering a platform to facilitate the movement of currencies. Cryptocurrency exchanges are the foundation to the cryptocurrency market, but the vast majority of these exchanges face limitations like centralization and low liquidity.

Centralized Exchanges: Working Against the Ideology of Cryptocurrency

There is no question that centralized exchanges, like Binance, have contributed to the accessibility and popularity of cryptocurrencies, but these platforms work against the decentralized ideology of cryptocurrency.

It has been reported that 99% of trades still occur through centralized exchanges, but more than 30 of these centralized exchanges have been hacked since 2013. Since centralized exchanges are susceptible to the same vulnerabilities as any other centralized institutions, users are exposed to counterparty risk. This risk is real as nearly $15 billion USD have been stolen in exchange hacks.

“Bitcoin is the most secure financial network on the planet. But its centralized peripheral companies are among the most insecure.” — Nick Szabo

The publicized negativity of exchange hacks undoubtedly hurts public perception and slows down widespread adoption of the technology as potential traders fear the risk of losing their investments.

Since users on centralized exchanges do not hold the private keys to their funds, their money is subject to the risks of the exchange itself. As a result, a centralized exchange will never offer the level of security that a decentralized exchange could offer for trading.

America’s number one cryptocurrency exchange, GDAX (operated by Coinbase) lists only a handful of coins and offers high-but-concentrated liquidity. When a new coin is added to GDAX, it inevitability gains traction, but this system keeps traders from reaping the high gains that can be derived from investing in a new coin prior to crypto mass-market.

Decentralized Exchanges: Less Vulnerable, Still Problematic

DEXs, decentralized exchange protocols, could be a potential solution to the issues identified in centralized exchanges. Decentralized platforms offer a wide range of tradable assets and allow users to control their own funds to trade in a peer-to-peer manner. This process drastically reduces fees. Because there is not a single point of entry, decentralized exchanges are significantly less vulnerable to malicious attacks.

However, decentralized exchanges, like EtherDelta, are not foolproof because they require some amount of user adaptability. Since decentralized platforms do not offer the user-friendly tabs that are common among their centralized counterparts, navigating the exchange may prove to be challenging while being limited in capabilities; trading features (like stop-loss) can be noticeably absent. Leveraging smart contracts keeps users from relinquishing control of their funds until the trade has been executed, but reviewing a plethora of these contracts can be perplexing to even the savviest of crypto traders. Furthermore, decentralized trades are typically slow, due to low levels of liquidity.

Atomic Swaps

Exchanges, like AltCoin, use atomic swap technology to guarantee user funds. Atomic swaps offer increased security, but the time-consuming limitations of this technology will keep it from being utilized on a professional level.

LQDEX: The Next Generation Digital Asset Exchange

LQDEX is a decentralized, cross-chain exchange. The system is determined to solve the obstacles identified in the exchange marketplace.

Cross-chain, Without The Use of Atomic Swaps

LQDEX does not use atomic swaps and does not require modifications to the existing blockchains. LQDEX does not have miner fees, nor does it require the use of browser plugins or wrapping Ether. LQDEX users maintain custody of their own assets and engage with a smart contract to exchange tokens across multiple blockchains in a peer-to-peer manner.

Multiple Nodes
LQDEX will be hosted on multiple nodes. If one LQDEX node were to be hacked or taken down, the entire system would continue functioning.

Proof-of-stake

The LQDEX blockchain (LB) is a proof-of-stake blockchain. The network can issue native tokens, similar to Ethereum. The main currency of LB is called LQDEX (LQD), which can be traded on cryptocurrency exchanges and purchased for Bitcoin, Ether, USD, or other currency.

LB can natively execute smart contracts with native tokens, LQD or proxy tokens. All trades are performed as smart contracts using proxy tokens, with zero counterparty risk.

LQDEX will be the next generation digital asset exchange. Millions of people will be able to use LQDEX to access new markets and new ideas, while adhering to the values of decentralization.