Crypto in 2018 Part 1: The year of decentralised exchanges

Finally getting around to putting down my thoughts on what I believe will happen in the crypto space in 2018. There are several things I see coming, this is the first. The crypto exchanges with the highest volumes today are all centralised. But in the near future, decentralised exchanges will take that volume and the centralised exchanges will reduce in number significantly. I believe in 2018 we will see the rise of decentralised exchanges.

What is a decentralised exchange?
It is an exchange where the trading takes place between peers, there is no 3rd party to settle transactions. The traders own all their private keys (in a centralised exchange, the traders own no private keys, they’re kept by the exchange). These exchanges also do not require any information form the traders. You can create an account and begin trading without any Know Your Customer (KYC) processes.

I am extremely excited about this. With the rise of regulation in general, most especially in regards to exchanges, crypto fans and users will be looking for better ways and and more private ways to trade.

As governments around the world pressure exchanges to raise their KYC requirements for new and existing traders, in addition to providing information on their users to their tax bodies, one of two things will happen; 1. the exchanges will convert to become decentralised or 2. they will comply with the government requirements in order to continue operations. The later is risky, as it means losing a significant portion of their customers to decentralised exchanges. Either that, or they will move the base of their operations to crypto friendly countries.

South Korea for example is already attempting to implement some tough rules that are seeing many crypto lovers get cut out of the action. Requiring stricter KYC processes and licences for the exchanges. Though that story is still unfolding and every day seems like a new dramatic chapter in a novel. Most recent is the discovery that top officials had been trading and sold their crypto ahead of the announcements!

I feel that the uncertainty that these crackdowns cause will create a massive exodus over time from the centralised exchanges. Those with significant holdings in crypto will move their crypto out of the regular exchanges, and make more use of the decentralised exchanges. Currently the decentralised exchanges are marred with issues of security and low liquidity. The influx of users will be great because the demand will drive the design/creation of better decentralised places for peer to peer trading. With better features and better security.

Here are a few existing of and up and coming decentralised exchanges (no referral links):
EtherDelta
OpenLedger
Waves Dex
Kyber Network
AirSwap
CryptoBridge

There are more out there, I can't (shouldn't really) list them all. I truly believe that by the time 2018 is coming to an end, decentralised exchanges will have some of the largest trading volumes out there, so look for one you like and start to get familiar with how they work.

All images from www.pexels.com

See you on the next post!

-pinkdust

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