Tools for crypto trading like a wallet, crypto portfolio tracker or exchange have been around for a long time to assist crypto investors.
However, recently there have been many security issues regarding cryptocurrency exchanges. Cyber attacks and bankruptcies are increasing every year and it seems like they are becoming the new norm of crypto trading. Institutions and individuals are once again becoming uncertain about centralized crypto exchanges.
However, security isn’t the only issue regarding crypto investing at the moment. Major crypto exchanges are now increasingly involved in frauds like the Canadian QuadrigaCX exchange.
Yet, these matters are widely-known and many crypto projects are trying to tackle them and create a safer environment for investors.
Even though crypto coins were created to be decentralized, trustless and transparent, most crypto exchanges are far from that. Among the most crucial issues of these platforms is transparency.
In cases of both QuadrigaCX and Bitfinex, the companies failed to inform their customers about the issues of the platforms. This led to unfavorable consequences for both companies.
Additionally, it is widely known that a large number of crypto exchanges participate in market manipulation and report inaccurate trading volumes. All of this goes to show that transparency is, in fact, a great problem in the ecosystem.
Transparency is needed in two instances: proving trading volume and proving solvency. These aspects are important since indefinite information can be risky for traders and investors on the platform. Yet, most exchanges don’t want to publicly reveal the financial information of the company.
To solve the issue a company called Blockstream, developed a tool that enables confirming solvency without revealing any internal documents. Even though it is a great solution, it still doesn’t grant exchanges the level of privacy that they want. Blockstream is still working on this issue.
Arpa, a similar project, relies on privacy and sees maintaining privacy as its principal goal. Apra works through a unique cryptographic technology that enables exchanges to calculate averages without disclosing important information.
Some centralized crypto exchanges provide quarterly reports or keep a steady relationship with regulatory authorities to ensure the safety and trust of their users.
Make Exchanges Fully Decentralized
It is also a common notion that the best way to eliminate these issues from the ecosystem is completely removing centralization from exchanges or get rid of exchange custody over investor holdings. Many believe that this is a risk to security. Seeing that we’re moving towards trustlessness in industries and technology custody of funds by centralized entities should be eradicated.
Despite the fact that decentralized exchanges have existed for some time now, the notion of peer-to-peer exchanges is increasingly gaining interest only recently. The issue of these platforms is that most of the time they are less liquid than centralized exchanges.
As putting trust in exchanges becomes more difficult and the issues of transparency spread the market is going to move more and more towards decentralized exchanges.
In spite of the issues facing cryptocurrency exchanges, crypto trading remains popular as ever. To succeed in the market of crypto trading you should know how to effectively manage your funds with a crypto portfolio tracker. If you want to learn how to do this, take a look at the best cryptocurrency portfolio tracker guide.