Welcome readers, we hope that this post will help clarify what we mean when we refer to NEXT.exchange as a hybrid trading platform.
Currently, the exchange of digital assets within the blockchain environment is primarily handled by two types of exchanges. Both types differ in their technological architecture: one being centralized and the other being decentralized.
At the moment, the process of trading cryptoassets within our industry is handled, for the most part, by two types of exchanges. Them being Centralized and Decentralized. Both types of trading platforms are different in their technological architecture.
Centralized Exchanges (CEX): centralized exchanges act as a custodian of a user’s digital assets. A CEX gains complete control of every single asset on its platform, acting more or less like a traditional brokerage platform or a bank, owning all customer funds.
Almost always, the assets are collected in a few hot wallets of the exchange that flow into cold wallets of the exchange as they grow. Forcing users to put all their trust into a third-party to handle their funds. Transactions are recorded and processed via an internal database, allowing CEX’s to provide high transaction clearance speeds. Centralized exchanges are typically led by private entities. However, due to their heavy centralization, many such platforms become prime targets for hackers and can fall victim to internal managerial mischief.
However, Centralized exchanges, despite their shortcomings are more popular and favorited than their decentralized counterparts.
Decentralized Exchanges (DEX): such exchanges were created to act as an alternative to existing centralized exchanges, primarily to alleviate the stress of users not maintaining sole ownership of their funds. Decentralized exchanges act as a marketplace or routing layer for users. They alleviate the need for middlemen to be involved in transactions, trades are executed primarily through the use of smart contracts. With decentralized exchanges, users remain in full control of their funds and private keys. Trades occur in a peer-to-peer manner, from one user wallet to the other.
As a rule of thumb, decentralized exchanges are more resistant to security breaches and bad actor attacks. However, decentralized exchanges are typically limited in the types of assets they can cater to, fiat functionality is also largely unavailable with these types of platforms, and in general, they are more complex and less user friendly than their centralized alternatives. These facts, coupled with limited functionality as opposed to centralized exchanges results in DEX’s generating less volume and being seen as less appealing to new market entrants.
NEXT the HEX.
Under its hood, NEXT incorporates aspects of both Centralized (CEX) and Decentralized (DEX) exchanges for a powerful and efficient combination.
At NEXT, we have our own Blockchain, NEXT.chain, that is based on Bitcoin core with modifications. It too can be seen as a hybrid, considering that it combines aspects of proven Proof-of-Stake and Proof-of-Work consensus algorithms (our Blockchain comes with a Masternode network, NEXT itself can be merge-mined with Bitcoin). On top of this, we have incorporated an additional layer, similar to that of the Bitcoin Lightning Network, to ensure that all transactions are cleared instantly in the NEXT.chain mempool by our Masternode network and then written to our Blockchain.
Our exchange is decentralized up until the wallet. Our order matching engine is centralized. However, transactions on our platform will be recorded on NEXT.chain. This process will make use of the asset creation aspect of NEXT.chain. This is important for transparency and for future regulation. Additionally, we also have cold-storage on board. Users will have main and trading wallets. Users will ultimately have access to the main wallet private keys. Essentially, NEXT.exchange will act as a frontend for trading assets that are tokenized on NEXT.chain. Later on, we will roll out desktop and mobile applications for the exchange.
Have questions? We invite you to join our official Telegram chat where the team is most active.
Author: Gleb Jout