Three Biggest Changes Next Generation Crypto Exchanges Will Bring to the Bitcoin Trading World
The crypto trend continues to spread around the world, and with more and more people entering the digital currency space, there are also new exchanges that are emerging and trying to acquire dominance over the industry. These days, there are more than 200 of them around the world, which makes it rather difficult to choose which one to use.
Of course, with time, crypto exchanges themselves have started to evolve. They are already more than simple trading platforms. Instead, they are becoming highly-secure, institutional-grade infrastructures with an ever-growing number of trading options. These changes are about to become even more noticeable with the new generation that is about to hit the crypto market and provide new ways to use and trade cryptocurrencies.
Meanwhile, regulators around the world are gaining better insight into the crypto space, and are thus providing better regulations. New regulations are also expected to start arriving in the following months, making 2019 and 2020 quite an exciting time for the crypto industry.
As mentioned, the large competition among the exchanges requires constant evolution of these platforms. Those who understand this will soon begin to stand out, while those resisting the change are unlikely to last. With that in mind, here is what the next generation of exchanges will bring.
The first thing to note is that a lot of exchanges right now are incorporating institutional-grade infrastructure. In other words, they are providing the transparency and functionality of traditional global exchanges. This includes things such as highly-scalable systems, which were among the more troublesome aspects in the past. Another thing that comes as a direct consequence is a high liquidity ratio, which allows better prices and fast transaction completion.
Exchanges with low liquidity, on the other hand, suffer from higher prices and less visibility, which leads to loss of their credibility. The exchanges achieve increased liquidity through new technology, but even the improvements that were already witnessed are likely nowhere near the capabilities that the next generation exchanges will be able to offer.
Add to that much higher levels of security, as well as instant international transactions, and higher volume of trades, and it is clear why advanced, innovative exchanges are in a hurry to improve their technology. Progress has been seen from the regulatory point of view as well, with more and more exchanges requesting regulatory approval. This requires them to introduce KYC and AML programs, and they are more than willing to oblige.
Security has been a problem in the crypto space for a long time. While cryptos are secure thanks to the blockchain, centralized exchanges saw a number of hacks, particularly in 2018. Meanwhile, ICO Rating's Exchange Security Report V2.0 analyzed around 130 different platforms. Not a single one received the top rating of A*, while only 16% of them got A.
This only confirms that their security still remains far from proper levels, which is something that many of the exchanges have started focusing on. Some of them chose to provide depositary accounts, which are more secure, and capable of holding the assets before, as well as after the trade is made. Another highly secure option includes segregated custody accounts, which are attractive to mutual funds, hedge funds, and ETFs.
The exchanges with the highest levels of security can be recognized by their tendency to encrypt data and demand that the user creates a complex password, as well as to use 2-step verification. Another great option for keeping the users' funds safe are cold storages, which are the safest method for storing cryptos for individual users and exchanges alike. As for online funds, multi-signature wallets are the best way to go.
These, and other options, such as monitoring network activity and using perimeter security systems are marks of the exchanges enhancing their security and keeping the users' assets safe from hackers. The security will never be perfect, of course, but the exchanges must never stop improving themselves since bad actors will certainly never cease their attempts to steal investors' money.
Establishing A Bridge Between Crypto And e-Commerce
The biggest difference between the new-gen exchanges and the others is that they are using digital currencies in order to establish new payments ecosystem. Ever since the rise of tokenized offerings, the crypto economy has progressed dramatically. However, there are still similarities between it and the economy of traditional currencies. Of course, they are not exactly overlapping, and even if they do, it is still down at the minimum, meaning that coin holders still cannot use their cryptos in terms of making payments and buying goods and services.
However, the crypto market continues to grow at its own pace, and experts are predicting that crypto and blockchain market on a global level might reach as much as $42.1 billion in the next three years. Such expectations are a huge incentive for crypto integration into traditional payment systems.
Meanwhile, the most innovative exchanges are entering partnerships and creating new payment channels with those few who are already willing to accept crypto, such as merchants. They are pioneers in leading the crypto space towards the mass adoption, and as such, they are bound to become great in years to come.
For now, the process is still going slowly, and it will be a while before these goals are achieved on a larger scale. But, the shift towards digital money is a big deal, and the fact that there is progress at all means quite a lot, especially after the bear market of 2018.