Decentralized Exchanges: The Future of Crypto Trading

The cryptocurrency world has increasingly begun to feel the heat from regulators. Chinese officials recently announced a ban on exchanges, trading, and all ICO activity in the country pending an investigation while Russia’s top brass have also been dropping hints that state intervention is an inevitability. In the past few days, Bitfinex has announced that it is withdrawing from the US market and expects all of its American customers to withdraw their funds by November 9, while Bittrex users have been experiencing difficulties accessing their accounts with some complaining of sudden account closures. These events are all working to accelerate the rise of decentralized exchanges and there are a number of platforms well positioned to benefit from the various shifts in policy. 

Decentralized exchanges do not rely on a third party service to hold the customer's funds and use an automated process to facilitate peer to peer trades directly between users. This system also allows for the creation and trade of  proxy tokens or crypto assets that can represent a fiat or crypto currency as well as assets and commodities and are maintained via a decentralized multi-signature escrow system.

In contrast to centralized exchanges, the decentralized platforms are trustless by design meaning that users are not required to trust the integrity of the exchange and traders get to keep their funds in their personal wallets. Decentralized platforms also allow for increased levels of privacy with traders free to use the exchange without disclosing their personal details unless a bank transfer is involved. 

More established decentralized platforms like Bitshares and Etherdelta can expect to experience an upturn in users and traffic while the decentralized exchange space will soon have a number of platforms jockeying for position. The 0x protocol which launched just months ago is already close to unveiling the Radar Relay and Paradex exchanges that will run via its protocol. 0x is also set to host the Ethfinex exchange a decentralized exchange project backed by the Bitfinex team.  These platforms will allow users to trade their ERC-20 tokens for Ethereum via a peer to peer network. 

On top of this there are a host of new entrants to the game including Airswap, Cobinhood, Kyber Network and Loopring which all have something special to offer and shall be covered in more depth later. For fans of even more flexible, peer to peer trades, Bisq allows users to negotiate their own prices and organize payment terms as users deal directly with other individuals. Qvolta is also set to facilitate peer to peer trading and sees itself as a decentralized alternative to LocalBitcoins.com. 

The future looks set for the next generation of exchanges with the leaders in the space to be determined by the ease of platform use and the levels of liquidity available on the platform.