Crypto Exchanges Planning Significant Changes After Market Mayhem in March
Several large cryptocurrency exchanges are working to improve their internal infrastructure after the volatile March 12th crash exposed a number of glaring weaknesses.
Huobi, a leading exchange based in Singapore, is adding a circuit breaker mechanism that will halt liquidation when prices become too volatile over a short period of time. Although it does not shut down trading entirely, the new addition is similar to existing systems on Wall Street and is designed to prevent excessive losses during periods of market panic.
Global crypto giant Binance is working on a number of changes behind the scenes. CEO Changpeng Zhao tells Bloomberg that issue number one is ensuring the exchange can handle the heavy load it experienced last month.
“We are changing a lot of our internal systems, just to be very cautious and conservative and be safe about it. The number one thing we are focused on right now is just to increase system capacity.”
BitMEX, based in Seychelles, has been working to prevent further attacks on its infrastructure after experiencing two denial-of-service attacks at the height of last month’s big market sell-off.
The exchange says it ended up compensating 156 accounts that had stop-loss prices triggered erroneously.
Why Bitcoin Exchanges Are Building Their Own Blockchain
On April 17, cryptocurrency exchange operator Binance released a white paper describing the inner workings of a new smart contract blockchain, a year after the initial launch of its native blockchain Binance Chain (BC). The new blockchain, dubbed the Binance Smart Chain (BSC), will work as a smart contract layer parallel to the existing chain, the company said.
“This innovative solution brings the interoperability and programmability of the Ethereum Virtual Machine (EVM) to Binance Chain. Both Binance Chain and Binance Smart Chain will allow transfers and other communication thanks to the native support of interoperability,” the exchange wrote in a blog post.
Despite the exchange insisting that the BSC isn’t designed to compete with Ethereum, which is presently the largest smart contract platform, Binance’s new smart contract platform should have superior performance to Ethereum in certain areas, including faster and cheaper transactions, the white paper shows.
The latest Binance white paper in the area of blockchain development is only the latest of similar announcements from bitcoin exchanges.
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Since Binance launched its native blockchain in April 2019, at least three other leading centralized digital asset exchanges have announced that they are developing a blockchain network.
In February, OKEx announced that its own blockchain OKChain was proceeding to test mode. The Malta-based crypto exchange first disclosed that it is developing a blockchain, along with a decentralized exchange (DEX) built on top, in March 2020.
“OKChain is a commercial public chain developed by OKEx independently, and it is already 100% open-source to provide an efficient, free and boundless value-added ecosystem for all of our ecological partners,” said Jay Hao, CEO of OKEx. “The cross-chain and ‘OpenDEX’ technology enable us to push forward our vision of ‘Commercial Chain Alliance’ to facilitate the substantial development of the blockchain industry. “
In March, Huobi also announced that its blockchain was entering test mode, nearly two years since the Singapore-based bitcoin exchange first revealed plans to develop a native blockchain. Bithumb, based in South Korea, is also developing on its own blockchain, according to an announcement published in November 2019.
Some crypto industry participants see the emerging trend as a threat to decentralization, which is a linchpin feature of public blockchain networks.
Exchanges are among the biggest winners of the growing popularity of cryptocurrencies. They play an important role as the gateway to the crypto world, and many of them have built multimillion-dollar businesses off it.
United States-based exchange Coinbase reportedly had a revenue projection of nearly $1.3 billion in 2018. Elsewhere, crypto news website The Block, estimated that Binance had reached $1 billion in cumulative profit, as of Sept 30, 2019. The news website arrived at that figure based on the company’s token buyback structure.
At its core, the emerging trend of exchange-built blockchain platforms is a move by exchanges to consolidate their positions as industry leaders and, in some way, build a moat around their respective businesses. That’s the consensus view of cryptocurrency and blockchain commentators.
By developing their own blockchain, crypto exchanges will be able to grow their market share and operate more efficiently, according to Ken Misuma, CMO of Quras, a smart contract platform that claims to give consumers and enterprises the freedom to set the privacy level of their transactions.
“Digital asset exchanges try to attract as many traders as they can in order to increase their user base, which is a core driver of their profits,” Misuma said. “Developing a blockchain allows an exchange to have more flexibility from a usability and trading offering perspective without the need of a centralized operator.”
Hugo Renaudin, CEO LGO, an institutional crypto exchange based in Europe touched on how having a blockchain could help exchanges become more efficient.
“Operationally, it’s a significant cost-cutter as a lot of operations and fund movements — deposit, withdrawals or settlements — can be automated through smart contracts,” he said. “And because an exchange blockchain lowers the overall listing costs for a cryptocurrency issued the chain, one might argue that it allows exchanges to list more and more assets at a lower cost.”
As the blockchain and cryptocurrency space continues to evolve, an increasing number of digital assets will be issued. The resultant effect of more crypto assets is that the business of running an exchange will enjoy higher demands.
Prior to when exchanges started building their own blockchain, new projects issue digital assets via a public blockchain such as Ethereum. These projects then seek to list their respective digital assets or tokens on different exchanges. Token holders and traders have the flexibility of trading these tokens across different exchanges where they are listed. This flexibility, however, means that the exchanges face a constant risk of losing their user base to competitors, which could lead to dwindling revenues.
In addition to the competition from other centralized exchanges, the emergence decentralized trading is a growing threat.
By developing a native blockchain, to which it invites projects to issue digital assets, an exchange is more likely to retain trading volumes — a critical determinant of their top line.
Still, the principles upon which crypto exchanges are building their exchanges differ and potentially indicate the areas of the industry that each of them wants to be most relevant.
While the development of a dedicated smart contract blockchain presents an opportunity for it to compete with Ethereum, Binance seems focused on growing its market share of the crypto exchange market.
The BSC whitepaper reiterates that the company’s DEX is the “primary focus” of its native blockchain, an indication that the development of a smart contract platform is rather to augment the DEX than anything else.
“The concentration on providing a convenient digital asset issuing and trading venue also brings limitations. Binance Chain’s most requested feature is the programmable extendibility, or simply the smart contract and virtual machine functions. Digital asset issuers and owners struggle to add new decentralized features for their assets or introduce any sort of community governance and activities,” the BSC white paper reads.
Another indication that Binance is betting on the future of exchanges is the February launch of Binance Cloud — an exchange-specific cloud solution. Through it, the company is offering anyone the ability to launch a crypto exchange that leverages the company’s already-established exchange infrastructure. CEO Changpeng Zhao, known in the crypto space as CZ, estimates that the cloud services will become the company’s source of revenue in five years. Liquidity is one of the promises of the cloud solution, a promise possibly insured by the volume-retention benefit of owning a blockchain.
Following the footsteps of Binance to move operations to crypto-friendly island Malta, OKEx has seemingly been playing doppelgänger to Binance. However, OKEx insists that its own blockchain endeavors aren’t an imitation.
“OKChain is not replicating Binance,” an OKEx spokesperson said. “Our blockchain has totally different visions and positioning than Binance Chain and we are actually working on different products.”
The vision with OKChain is to drive the growth of decentralized commercial applications, particularly toward financial inclusion.
“We believe decentralized finance is the key to financial inclusion and financial freedom for all. That’s why we have longed for unleashing the power of DeFi.” Hao said in a blog post announcing the testnet launch. “OKChain is a huge milestone for us, meaning that we are now able to provide an open, low-cost, and autonomous ecosystem for everyone to enjoy the benefits blockchain and decentralization brings.”
Just how the exchange plans to use its blockchain network to play in the DeFi space remains unclear.
For now, OKEx continues to take its exchange business seriously, having said a DEX will be the first application to lunch on OKChain. Compared to Binance, which “is building [its own] chain and creating the DEX application, we are building a financial infrastructure and the OKEx DEX is only one of the applications on OKChain,” the OKEx spokesperson added.
OKEx says it will allow users to create and customize their own DEX on OKChain.
In addition, OKChain supports the deployment of smart contracts out of the box, compared to Binance, which has only just announced the development of a separate chain for smart contracts.
While other cryptocurrency exchanges were avoiding regulators, Huobi decided to build a relationship with China’s government. Last December, Huobi announced that it was joining a government-led blockchain alliance. The exchange is looking to deepen its relationships with regulators, and subsequently financial enterprises, by making compliance central to its native blockchain development.
“DeFi has become one of the most promising applications of blockchain technology but its future requires both sides — regulators and enterprises — to work together to establish the standards and guidelines of the new decentralized economy,” said Ciara Sun, VP of Global Business at Huobi Group. “With Huobi Chain, we want to provide the decentralized framework that facilitates industry-wide collaboration, which is critical to the widespread adoption of DeFi.”
Huobi Chain will allow regulators to take part in the network as validators through a regulatory node feature. This might look familiar to followers of blockchain-related regulatory updates in the U.S. Last year, the Federal Reserve Bank of Boston released a white paper in which it detailed concepts for a “supervisory node” for on-chain regulatory surveillance.
While exchanges blockchains are being set up to address different parts of the blockchain space, they all stand to benefit from a rise in their native token value if their bets pay off.
For one, exchange tokens, which were originally used to pay trading and listing fees, are now transitioning into coins that power an entire blockchain. That widens usability, and potentially, value for these tokens.
In fact, it could give the companies behind each blockchain network a valuation boost, SKALE Labs CEO Jack O’Holleran believes.
“Valuation multiples for exchanges on fees are significantly lower than multipliers on crypto assets, which are non-dilutive compared to equity,” said O’Holleran, whose startup is building a scalability solution for Ethereum. “As a simple example, if an exchange is making $100 million a year in fees, they may get a 5-7x multiplier on their value, meaning they are worth $500-$700 million from an equity perspective.
“If they release a token that is utilized to pay for fees, that token may be worth multiple billions from a fully diluted perspective with the same amount of revenue.”
It’s unclear how much power exchanges exert over their native blockchain networks and that raises questions about just how decentralized these networks are. “One major disadvantage is that exchange-built blockchains are typically not truly decentralized, and decentralization is one of the most valuable aspects of blockchain technology, said Misuma.
Following the release of the Binance Smart Chain white paper, Tom Shaughnessy of Delphi Digital, a crypto asset research firm echoed similar concerns in an interview with Cointelegraph. “Centralized chains miss the point, every time. The point is not to offer cheaper transactions, anyone can do this using Amazon Web Services, but to foster a community-driven ethos of builders who enjoy working together without a centrally derived mandate.”
Rupiah Token (IDRT) Stablecoin Got Listed on Instant Cryptocurrency Exchange Service Changelly
Rupiah token (IDRT), the most adopted Indonesian stablecoin, got listed on the non-custodial cryptocurrency instant exchange Changelly.com. The token backed by Indonesian national currency is now available for instant exchanges from and into 150+ cryptocurrencies listed on the Changelly platform and can be purchased with a bank card for US dollar (USD), Euro (EUR) and the British pound sterling (GBP).
RupiahToken, the first stablecoin that mirrors the price of Indonesian rupiah 1:1, aims to make its national currency more accessible on a global scale. The token can already be traded on various crypto exchanges such as Pintu, Liquid, Binance DEX, HitBTC, Ecxx, and others. The listing of IDRT stablecoin on Changelly is sure to aid in strengthening the Indonesian national currency. With Changelly and RupiahToken becoming partners, the IDRT stablecoin can be seamlessly exchanged for more than 150 top cryptocurrencies, such as Bitcoin, Ethereum, XRP, Binance coin, and many others. Changelly is equipped with a trading mechanism that allows exchanging cryptocurrencies directly among themselves, avoiding double-exchange through Bitcoin.
To exchange any of 150+ cryptocurrencies for Rupiah token, a user needs to pick a cryptocurrency pair on the Changelly website, for instance, BTC-IDRT, and then proceed to exchange. It’s important to note that no user funds are stored inside the service. Instead, when exchanging crypto through Changelly, the funds are transferred directly to a user wallet. This eliminates the risk of hacker attacks.
Jeth Soetoyo, CEO of Rupiah Token, has underlined the importance of this partnership, saying:
“We are very pleased to announce our partnership with Changelly. As we already know, Changelly is a leading global non-custodial instant cryptocurrency exchange that allows users to exchange cryptos instantly and gives them access to 150+ cryptocurrency. With Changelly’s seamless trading experience, we believe that it will ease people to trade using Rupiah Token (IDRT) and boost its adoption globally.”
Eric Benz, Changelly CEO, was also very enthusiastic about listing IDRT, stating:
“Changelly was one of the first platforms to list stable coins and over the years we have seen the stable coin market grow exponentially. I am very excited about our newest stable addition, IDRT. The Indonesian stable coin will be used by many businesses and individuals in this market and this should provide growth for Indonesian goods and people in other global markets in years to come.”
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Author: Aisshwarya Tiwari
Drawbacks of Cryptocurrency Exchanges – How Non-Custodial Services Are the Solution | Sponsored Bitcoin News
Cryptocurrency exchanges are online platforms where one can buy, sell, or trade cryptocurrencies. The aim of crypto exchanges is to connect buyers and sellers by creating a cycle of supply and demand in one place.
However, almost every exchange is prone to hacking, has privacy issues, and users could end up losing their funds. Non-custodial exchange services look to overcome these shortcomings of cryptocurrency exchanges.
Online cryptocurrency exchanges can be categorized into two types: centralized and decentralized.
Even though they make it easier for everyday users to buy and sell digital assets with their interactive interface, one major downside of such exchanges is that they do not give users full control of their cryptocurrencies. The private keys of your wallets are held with the exchanges, so if they were to get hacked, your funds will be lost.
Decentralized exchanges (DEXs) give users more control over their assets as they only act as intermediaries and do not store private keys giving the users full control of their funds. However, these exchanges come up with their own drawbacks such as low liquidity, slow UI, and not being able to handle huge amounts of transactions, etc. There are a very few DEXs compared to CEXs owing to the difficulty that users face while using the former due to complex UI. This is where an instant crypto exchange comes in – users can instantly trade their digital currencies in just 3 simple steps without the hassle of needing to register or worrying constantly about security.
Generally, people prefer CEX over a DEX because of a number of reasons like liquidity, volume, user-friendly platforms, etc. Top centralized exchanges like Bitfinex, Bittrex, Coinbase, Kraken, Binance, Huobi have 99% of the transaction volume and were the first to exist in the market even before the idea of decentralized exchanges came up, so they have an upper hand of being in the market since inception.
Drawbacks of cryptocurrency exchanges
Cryptocurrency exchanges come with their own set of disadvantages, the major drawbacks include:
Privacy: Exchanges store all your information such as IP address, email, and details about your transactions which basically doesn’t leave behind much privacy for you.
Data Breaches: With increased KYC/AML policies by exchanges due to local regulations, security breaches have risen sharply. In fact, over 10000 Binance users’ personal data was stolen in 2019 with the hacker demanding 300 BTC threatened to release the photos which included driving licenses, passports, and face scans of users.
Loss of funds: The majority of the exchanges have had a story of getting hacked and users losing their hard-earned money. The bigger picture is explained in detail in the next paragraph.
The cumulative money lost from just the top three biggest exchange hacks in the last 7 years is over 1 Billion US Dollars, now imagine what the figures would look like if we consider all the hacks. Below is a picture that summarizes the money lost in all major hacks until April 2018.
The world’s biggest cryptocurrency exchange in terms of daily volume, Binance, which is known for its innovative products and strong leadership went through a security breach in May 2019 which resulted in 7000 Bitcoins being stolen from their platform. Even though all the affected customers were reimbursed in this case, it shows how vulnerable it is to leave your money on exchanges.
“Your keys, your Bitcoin. Not your keys, not your Bitcoin.’’
– Andreas Antonopoulos, Bitcoin and security entrepreneur
Cryptocurrency traders and enthusiasts started trending hashtags such as “ProofOfKeys” on Twitter after major exchange breaches to ensure investors and traders stay away from custodial wallets and not store their cryptocurrency on exchanges unless they are trading. Non-custodial cryptocurrency exchanges and wallets started to gain traction as users gave much more priority to their security.
Also, trading on exchanges is not only risky but also a tedious task. In order for you to trade on a DEX, you need to enter your private keys or Keystore or use MetaMask; the latter is the most recommended method. Then you need to send your digital currency from your private wallet to Metamask and then to DEX. Every transaction has to be signed by you. Probably the most frustrating part of using this type of exchange is you have to wait until someone buys or sells so that your order fills, which can take a long time depending on the liquidity on that exchange.
CEXs solve this waiting problem by using market makers, but again, users are required to log in and perform authentication to trade and confirm by email to make every withdrawal. On top of all this, all exchanges require you to do KYC to comply with local regulations, which can take days.
Instant crypto exchange services that require no registration and perform your transactions fast may be the solution. These platforms give you basically as many options as any regular exchange – but overcome their shortcomings.
Another major advantage of such platforms over CEXs and DEXs is that they do not control your funds at all – as non-custodial services, they allow you to keep the keys to your crypto privately. An as there’s no registration required, the crypto exchange is very simple here. For example, on ChangeNOW, all you have to do to buy Bitcoin is to enter the amount of the sum you want to exchange, your wallet address, and to click Confirm.
Along with this, there are several other features that widen the possibilities of a trader on ChangeNOW. For example, they have no upper limits for the crypto exchange; over 200 cryptocurrencies are supported, and it’s possible to buy them with Visa or MasterCard. The rates are very reasonable as the service claims it uses special algorithms that pick the best rate at the moment of the exchange.
So what’s the best place to trade crypto?
Of course, there is no ideal platform to trade crypto out there. ChangeNOW has its own drawbacks – they have no crypto-to-fiat options available, and fiat-to-crypto exchanges are a bit pricy. Many traders consider instant exchange services the best place to trade crypto with security and convenience – but we recommend you doing your own research to choose the best platform that will fit your needs.
Purchase Bitcoin without visiting a cryptocurrency exchange. Buy BTC and BCH here.
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