In The Beginning
First Mt. Gox came and opened the floodgates of blood into the world of crypto. 650,000 bitcoins were lost and sent the market on a spiral down which took years to recover.
Altcoins were not immune to such theft, fraud, mismanagement, or a combination of these cases in altcoin exchanges. Mintpal, a monster sized cryptocurrency exchange dealing in many bitcoin paired cryptocurrencies was the first to follow the way of Gox.
Since then, Crypsy, another large exchange that was around for a long time also too went under causing many traders and collectors to loose bitcoin and Altcoins costing them millions.
Now we have the Bitfinex hack where reports of 100k+ bitcoins were stolen or mismanaged. Only time will tell what really happened and to be honest, we may never know.
What is Their Problem?
It appears that these centralized exchanges charge fees and give a false sense of security to many who trade on these platforms.
One could also say they have insider knowledge when they get hacked, loose funds or mismanage their books and use that insider information to trade and short on the market.
The ethical cases against centralized cryptocurrency exchanges can be summarized into one sentence.
Cryptocurrency is to be decentralized as per Satoshis vision and not congregated into large bank type markets allowing for massive security attacks.
Why has the decentralized cryptocurrency community leaned towards using such platforms?
When Gox first came on the block it was the first exchange of its kind. It was built to trade Magic Gathering cards and not be a massive financial trading platform. Oh how did people decide that a Magic Card trading site would be secure to hold millions of dollars?
Why Do They Exist?
It is hard to find bitcoin outside of exchanges. It is much more rare in the fact you can't just walk down the street and buy it like you can a bag of drugs. To get bitcoin, you have to know people in the bitcoin community.
I used to travel 2 hours into the city in the middle of the night to meet my bitcoin dealer. Cash for bitcoin. Most people are not apt to doing this. The ease of using centralized exchanges which are converting Fiat currencies to bitcoin and other competing cryptocurrencies is too tempting and easy not to take advantage of.
Centralized exchanges capitalize on this market. Unfortunately, time and time again, they prove to be untrustworthy and highly dangerous when it comes to holding or trading your funds.
Some of these exchanges have began practicing under the law. This still does not protect you as the law will eventually come down on all these exchanges, making it hard to once again get cryptocurrency.
So what do we do?
It is my firm believe the time has come to begin using decentralized exchanges. It is past that time. People need to start putting their money where their principles are and helping decentralized exchange projects thrive.
There are a few on the market right now which cost nearly nothing to use. All you need to do is learn how to use them.
I like Bitsquare. It just is not as user friendly as is some of the centralized exchanges. It needs to be more simple even for the expert trader to use. It is a great start and I hope that other decentralized exchange platforms ensure that competition will thrive to produce hopefully the best exchanges yet to date.
Essentially I think that if cryptocurrency projects do not want to lose massive amounts of value overnight every time there is a hack or a centralized exchange goes under, we need to come together to build a decentralized exchange for all cryptocurrencies.
One that is completely voluntary and easy to add an project. Doesn't require massive amounts of wealth to trade on and is safe as that a hacker can not hack the whole exchange. One that does not force you to do anything.
Sure there will be some hacks, but individuals being robbed is a lot easier to cope in a market than a huge collective being robbed at one time.
Self responsibility. Protecting your wealth should be as if you had gold and kept it in a safe. Would you trust a bank with your gold? Why do you trust an exchange with your digital gold, bitcoin?
There are a lot of scams out there in the cryptocurrency world but I truly believe there are just enough good people and cryptocurrency projects which adhere to the decentralized principles that we can get this started.
I am hoping that other cryptocurrency developers join together and we build an open sourced decentralized cryptocurrency exchange to free bitcoin and other cryptocurrencies from exchange centralization.
Cryptocurrency will never get any Stronger without it.
This is a foundational decentralized principle which must be payed out before any more cryptocurrencies move forward.
Keith Smith is a Team member of the Nexus Project. He enjoys spending time with his family, nature and cryptocurrency technology.