Examining the need for decentralized cryptocurrency exchange development
While cryptocurrencies have grown fast to disrupt the operations of financial markets, they still lack mainstream adoption despite their promise of quick and secure transactions. It does have certain positives in the form of consensus mechanisms and a higher level of decentralization.
Some reasons why Centralization cannot be eliminated from the industry despite the advent of decentralization
Financial institutions like banks that insist on following regulations will never trust permissionless systems such as Bitcoin or Ethereum for handling data related to KYC/AML.
Higher throughput for certain purposes can be achieved by leveraging second layer scaling technologies such as the Lightning Network which introduces decentralization to open systems by facilitating instant transactions among a network of participants.
Figuring out the requirement of full-fledged decentralization
Decentralization is a solid reason behind the popularity of cryptocurrencies for more than a decade now. It does have certain limitations in the form of energy inefficiency, limited utility, and scalability. The process of upgrading the network takes a hit due to the distributed nature of blockchain and the powers available to miners.
Hence, an appropriate balance needs to be struck between complete decentralization and complementing decentralization with a certain degree of centralization. Decentralization is definitely needed for gaining better control over funds, handling personal data and executing cross-border transactions at affordable rates.
Answering this dilemma is important as many investors and exchange operators are making a shift to using decentralized cryptocurrency exchanges though issues such as limited trading volume and high latency exist.
While the ideological clash can lead to mass adoption, decentralization’s operating model needs to be analyzed. It has massive potential but must overcome challenges like bugs, limited performances and challenges in functionality. For those who prioritize the quality and reliability of products, centralized exchanges would be better.
Investors want to recover their personal data in case of identity theft, need facilities to reverse a transaction sent by mistake, and seek third-party assistance to resolve disputes.
Hence, solving user’s challenges need to be prioritized by developers for popularizing decentralized cryptocurrency exchange development. Centralization can be used if it enhances the throughput and ensures a trusted environment to carry out sensitive processes.