Do We Really Need Exchanges?

We might need it! But let’s elaborate more of what exchanges are all about. An exchange is a marketplace in which cryptocurrencies are traded. The core function of an exchange is to ensure fair and orderly trading, as well as efficient dissemination of price information for any cryptocurrency trading on that exchange.

Underline the sentence “to ensure fair and orderly trading” and let’s move to another fact that each exchange has certain listing requirements for any cryptocurrency that wishes to offer tokens for trading.

We can simply put that an exchange is trying to be FAIR to any cryptocurrency but NOT TRULY FAIR since they only accept a few that are really liquid and have reasonable supply & demand. In the end this could increase their revenues.

So what happens to those with lower or no supply & demand at all, yet? What happens to hundreds or maybe thousands of digital currencies that will emerge in the years to come? For now we still depend on Bitcoin to buy most altcoins.

If this is the case, do we really need exchanges?

Bancor provides an answer to that question. Bancor Protocol enables built-in price discovery and a liquidity mechanism for tokens on smart contract blockchains. These “smart tokens” hold one or more other tokens in reserve and enable any party to instantly purchase or liquidate the smart token in exchange for any of its reserve tokens, directly through the smart token’s contract, at a continuously calculated price, according to a formula which balances buy and sell volumes.

In other words, Bancor gives you the ability to exchange any tokens instantly, without exchanges and no fees! Imagine if you want to convert BTC into STEEM or even to fiat money using an easy user interface, anytime, anywhere, without need to sign up for an exchange or without need to deposit any money.

If we are talking about decentralization then using exchanges not decentralized at all. You still put your cryptocurrencies in the hands of 3rd party exchanges. Not to mention that some exchanges need your private data like passport or driving license as part of their security efforts.

The number of ICOs happening has been on the rise and a reoccurring question seems to be “when will the token hit the exchanges?”. The problem here is that companies do not know if their token will be liquid enough to hit any exchange.

Bancor’s liquidity solution is the answer to all new cryptocurrencies which have not yet traded on exchanges. It is now possible to make any tokens to become liquid and tradable without needing to be listed on an exchange.

Now there is nothing wrong with exchanges. They can still continue to exist, but with the technology from @Bancor-Network , at least we are not DEPENDANT on exchanges each time we want to trade our cryptocurrencies.

Less liquidity doesn’t mean more risk.