Crypto Exchanges: The Markets Unsung Hero

Lennix Lai, Financial Market Director of Okex

Lennix Lai, Financial Market Director of Okex

Things have enormously changed since the early days of cryptocurrencies. Once the province of niche tech enthusiasts, the crypto space has been pushed forward by the seemingly unstoppable advance of Bitcoin and other cryptoassets in ways that even now are only beginning to crystallize.

One of the most important dynamics has been the rapid proliferation and improvement of cryptocurrency exchanges. If we cast our minds back in time just five years, the landscape looks almost unrecognizable. Nowadays, we have seen blockchain technology be applied to various industries, e.g. healthcare, retail, banking and finance, and it will still be welcoming a blockbuster year for blockchain development. The market has reported that the global market cap of blockchain at $708 million in 2017 is anticipated to reach $60.7 billion in 2024.

Blockchain in The Early Days

In the early stage of emerging technologies, challenges like scalability, cost and education limiting the development of breakthrough applications and mass adoption have always been the talk-of-the-town to be associated with, and there is no exception for blockchain. Blockchain has often been stereotyped or correlated with Bitcoin and cryptocurrencies. Indeed, its applications are far beyond those, e.g. in auditing, healthcare, commerce and even cloud computing.

Today, blockchain has become the core enabling technology for financial institutions to move into the modern age of real-time transactions. Government, medical and IT industries are all experimenting with the advanced blockchain solutions. Corporates can work with NGOs to sustain a healthy and transparent way to give back to society by creating a social good ecosystem.

In today’s crypto economy, exchanges are no longer used as mere on-ramps or means of trading top cryptoassets. They also offer users an ever-expanding variety of new services - as exchanges both adopt and cultivate the latest blockchain innovations.

Competition has been a tremendous source of innovation. Advances in security, price discovery, as well as a host of new services and uses cases were created thanks to the competition between exchanges.

Emerging in The Force of Crypto Exchanges

Decentralized finance (DeFi) covers a wide array of financial services available through decentralized applications (DApps), a kind of applications that aren’t owned by one particular entity and can’t deny services to individuals based on arbitrary factors.

As never-seen-before financial policies are being enacted, DeFi is already giving users power back. This is influencing the banking industry itself, but blockchain’s potential runs deeper still.

The gaming industry, for example, is ripe for blockchain disruption, and allows gamers to actually own their items via a token on the blockchain, and to transfer them as easily as they send friends a text message. This creates the potential for entirely new in-game economies.

The gambling industry presents another example of rapid innovation. Contracts on the blockchain can easily be audited, so it’s easy to see if an online casino, for example, is truly being fair to its players and isn’t manipulating results.

This type of transparency and immutability also means it will soon be possible to process real estate transactions for a fraction of the cost, as ownership of a specific property can be represented through a token on a blockchain.

Tokenization also means that a great deal of trades will take place. The most popular blockchains that accommodate tokens include Ethereum and TRON, and it’s necessary to own these cryptocurrencies to pay for transaction fees and have access to the tokens.

Exchanges allow access to both, while ensuring that users need not concern themselves with keys or other crypto-native terminology. Through the past lessons-learnt, crypto exchanges helped the community understand the potential weaknesses of the new asset class, and the role of exchanges themselves changed from being passive participants to becoming active innovators.

As an essential role in running the ecosystem to kick and keep the ball rolling, there are many pricing strategies offering in the market, with many exchanges offering different products portfolios, there are exchanges like OKEx that offer a full suite of product portfolios – fiat-to-token, spot and derivatives under the same roof. Users can enjoy switching around their trading portfolio along time and at their convenience. Reputable exchanges should always be the home for traders’ investment strategies.

The Journey Ahead

In addition to exchanges’ own efforts in, regulators too have stepped up their role and compliance has become a major area of development for crypto exchanges. While this does mean that users have to go through know-your-customer (KYC) and anti-money-laundering (AML) checks to trade large amounts, it also means trading platforms can help keep bad actors at bay.

The crypto space is far from mature, and undoubtedly has room to grow. But we have seen rapid advancement in recent years, and exchanges have been on the front lines of the battle to have the space become accepted by regulators, institutional investors, and the population at large.

Ultimately, this means it will be easier for people to “be their own bank,” stay free of financial coercion, and become empowered with financial services they wouldn’t otherwise have access to.