One of the key principles of the blockchain is "decentralization". This makes it a more secure system than a centralized system with all the rights. However, almost 1/3 of the blockchains and virtual currencies are held by the centralized exchanges.
Almost all of the richest wallet is owned by the cold wallet of large exchanges.
It is a big irony that most of the blockchains with decentralization as core values are committed to centralized exchanges. Of course, because trading is one of the most important parts, it is also an unavoidable phenomenon.
However, exchanges are exposed to a variety of risks that may arise from hacking and insider cheating. In the case of POW coins, issuance rights, decisions and ownership are separated, so even if a hacker hackers a large amount of coins on the exchange, only the ownership is stolen. However, if issuance rights, ownership rights, and decision rights are determined by stake(POS and DOPS), a hacker can have a large influence on the entire blockchain if a hacker hacked a large number of coins. As the number of DPOS based coin increase, when a centralized exchange is hacked, the damage suffered by blockchain users will be greater.
A decentralized exchange is necessary to prevent this from occurring. In the meantime, various attempts have been made to create a decentralized exchange. But they all have a fatal disadvantage of "slow trading speed". Even the fastest decentralized exchange offered by Bitshare has a delay of three seconds.
For a decentralized exchange to succeed, it must basically provide the same level of trading speed as a centralized exchange. If you can not solve this problem, no decentralized exchange can succeed.
Many teams are currently challenging this issue. And if one of them succeeds, the word "exchange hacking" will disappear into history. It will also enable secure cryptocurrency trading and storage based on blockchain.
This is good information you have here @wans. Actually not information, I would call it a concern. Blockchain technology is amazing though it has many disadvantages. To use blockchain technology we need exchanges, now this comes the irony part, all the exchanges are centralized (this is what you have said in your post). But decentralized exchanges do also possess a concern of hacking. They could also be hacked and I guess they are more prone to hacking. Last I checked, the Korean bitcoin exchange has been hacked and millions of dollar crypto's got lost.
Blockchain technology is good indeed, but it's decentralization is also it's kryptonite, it can't be centralized and until it's decentralized we can't use it properly. We can use it only if it got listed on cenrtralized exchange which make again no sense because of decentralized nature of blockchain. Lot's of confusion, right?
So, I just hope a decentralization exchange with higher protcols and security should come into existence asap.
Loved your article by the way @wans. Big thumbs up for your work.
Hi, crytponet
How about looking this project ?
https://cosmos.network/
They give me a hint and solution about decentralized exchange
This is nice idea, creating a blockchain hub within blockchain to exchange crypto's without the need of an exchange. Well, there are numeous ideas like this earlier as well but all turned to dust . Why?
Because people don't need them . They don't care about the hacking, they don't care about the exchange, they don't care about th crypto's. All they care is just a slight profit in their holding and they sold them off immediately. Most of the crypto trade do this thing. That's why crypto market is highly volatile. There are no other reason of being crypto market this much volatile.
Everyday I hear about the hacking of some exchange yet people are not taking necessary steps to get over it.
This is a great platform by the way - The Cosmo Token. I'd love to see it come into reality. I guess its pre sale would start on 5th august. Wish you luck if you're investing in it. I am looking forward to a lot more research about it.
Yep, people didn't care much about security of their fund.
But I think this will change. Because The size of individuals' assets is growing.
It is possible to store a little fund on centralized exchanges.
But I can't store over 0.2~0.3M dollar on centralized exchanges. The larger the virtual money market, the greater the demand for secure, decentralized exchanges. Especially whales will want the most. :)
Yeah, no one wants to keep their million dollar crypto's on centralized exchange especially now when they hacker are determined to hack the most influential crypto exchanges in past few months. I am looking forward to the decentralized exchange but the concern I believe would really be the same. They would still get hacked like the centralized one's . Don't you think so ? It could only shift the people's focus not their fear of keeping money on exchanges.
Ill decentralize your exchange ;)
The other problem I see is that decentralisation by nature leaves us open to not being sure who to trust.
I'm seeing stories all the time about which exchange did this or that. It makes me think twice before adding any meaningful funds to anything except a private wallet.
It is the most dangerous words in cryptoworld.
"Believe me"
"Trust us"