Avoiding crypto exchange failures

By developing a trustless model that separates the 3 functions of trading, custodian and settlement, we can avoid putting all our eggs in the same basket.

Various concepts have been put forth for a trustless exchange without the need for a middleman such cross chain atomic swaps https://www.coindesk.com/cross-blockchain-trades-lightning-gives-new-life-atomic-swaps/, P2P trade https://themerkle.com/top-4-peer-to-peer-bitcoin-trading-platforms/, decentralised exchanges http://www.coinffeine.com/ using zero trust exchange algorithm, etc.

However, they suffer from the basic premise of interoperabiliity which gives existing crypto exchanges of ease of use and trading speed. As these concepts evolve, they will hopefully deliver the trustless mechanism and remove the middleman in the process making it as simple as transferring online payments through your local bank.

Smart Contracts

Perhaps the solution lies in the use of smart contracts leveraging on Ethereum or NEO to provide the functions of trading, custodian and settlement. The NEO White Paper aims to:

NEO is the use of blockchain technology and digital identity to digitize assets, the use of smart contracts for digital assets to be self-managed, to achieve "smart economy" with a distributed network.
Source: http://docs.neo.org/en-us/index.html

By applying the use of blockchain technology and digital identity with a trustless mechanism, NEO aims to use smart contracts to facilitate the transfer of digital assets in a decentralised network.

With the impending release of Metropolis on the Ethereum network https://cointelegraph.com/news/ethereum-announces-metropolis-hard-fork-coming-late-september, we are perhaps a step closer to a truly trustless decentralised exchange without all the inherent risks present in current unregulated crypto exchanges.