Why Hybrid Cryptocurrency Exchanges can bring in a better future?

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Till the date, there are more than 500 cryptocurrency exchanges launched across various countries. No wonder that the number would still start uprising every day. A Cryptocurrency Exchange is an online platform that allows you to exchange fiat currency for a crypto asset or one digital currency for others. However, not all cryptocurrency exchanges behave equally. There are certain differences in the working of the cryptocurrency exchanges.

For now, we are primarily aware of two popular crypto trading platforms called Centralized Exchanges and Decentralized Exchanges. Popular crypto exchanges such as Coinbase, Bittrex, BitMex, Kraken, etc belong to the category of Centralized Exchanges. While Binance (Both Centralized & Decentralized), EtherDelta, Cryptobridge, WavesDex belongs to Decentralized Exchanges.

But an exchange which combines both these features would indeed be the best one! This is what is being termed as “Hybrid Exchanges”. Let’s dig deep into the solution of Hybrid Exchanges and their importance for now!

The Evolution of Cryptocurrency Exchanges:

Cryptocurrency Exchanges have evolved since they were established in the year 2010. Today, these exchanges have extended their functions to include crypto wallets, Initial Exchange Offerings, etc.

According to Global Cryptocurrency Benchmarking study, which was published by the University of Cambridge in April 2017, the number of active cryptocurrency wallets has risen from 2.9 million in 2013 to 5.8 million in April 2017. While a 2016 report by Boston Federal Reserve has stated that around 2.8 million people in the US owned cryptocurrencies and 75% of them have used this for payment services!

Centralized Exchanges

With Centralized Exchanges, intermediaries or middlemen will be readily available to facilitate the transactions. In exchange for these, the platforms usually charge a piece of percentage in the name of a trading fee. Usually, newbies find it easy with Centralized Exchanges with the user-friendly interface to get started.

WORKING OF CENTRALIZED EXCHANGES

 ● The working of Centralized exchanges is straightforward. Consider a person X who wish to by 10 Bitcoins.

● Here, X may go to the order book and find the relevant offer he is expecting for.

● Now the middleman/matching algorithm automates this remaining process.

● If X is willing to buy 10 Bitcoins them, the X’s buy order will be matched automatically with the respective sell order that fulfills his requirements.

However, these centralized exchanges were sometimes lacked high-end security features. To resolve the issues with security, Decentralized Exchanges were introduced.

Decentralized Exchanges:

Decentralized Exchanges weren’t involving any middlemen to perform the transactions. They don’t rely upon any third-party applications to hold the customer’s funds, thus offering automated peer to peer trades.

A Decentralized Exchanges are being considered more secure since they run on decentralized nodes which means that the central system cannot be hacked. Other such benefits were anonymity, less trading fees, etc.

WORKING OF DECENTRALIZED EXCHANGES

Consider a person X who wanted to purchase 10 Bitcoins.

These exchanges would directly match the person X with the respective seller Y who also want to sell 10 Bitcoins.

Thus both X and Y agree on the price and finalize the trade. 

Anyhow due to its anonymous nature, Decentralized Exchanges came with certain drawbacks. It included poor user experience, lack of liquidity, outdated wallet configurations, low trading volume, etc. Moreover, Decentralized Exchanges do not offer advanced trading functionalities such as margin trading, which makes the platform more difficult to use.

Therefore to combine both the tangible features of Centralized and Decentralized Exchanges, a new crypto exchange called “Hybrid Exchange” came into existence.

Hybrid Cryptocurrency Exchanges:

A Hybrid Exchange offers the perfect combination of Centralized and Decentralized Exchanges.

CEX+DEX= HEX

These exchanges are aimed at providing high speed, legal compliance, and liquidity of centralized exchanges combined with the security features of decentralized exchanges. Here is how one of the most popular Hybrid Exchange called Legolas work:

It makes use of a Centralized platform to create blocks of client orders and match them. On the other hand, it contains a Decentralized Ledger which included the lists of orders and transactions.

Features to enjoy with Hybrid Exchanges

 Transparency

Decentralized Security

Fiat integration

Fewer Fees

High Throughput

WORKING OF HYBRID EXCHANGES

 A person X who wishes to sell his Bitcoins and similarly, a person Y wish to buy Bitcoins from the exchange.

Initially, in the Hybrid Exchanges, incoming orders will be encrypted. A log of the order book will be recorded on the Blockchain.

The trader can send their private keys to the order pool which will decrypt the orders and send them to the matching engine.

Those trades which are matched will be recorded in the Blockchain.

Finally, the cash and crypto balances will be updated based on the trades performed.

Importance of Hybrid Crypto Exchanges:

One of the primary reasons why the current trend is marching towards Hybrid Exchanges is that they provide the best in functionality with the enhanced security. As there were limited security features in Centralized exchanges, they were most vulnerable to hackers. While Decentralized Exchanges were lacking the liquidity thus only limited traders were marching towards this.

Therefore, Hybrid Exchanges started meeting both the needs for the exchanges from the traders.

Real-Time Hybrid Exchanges

 Bronix

Qurrex

Eidoo

Next.Exchange

CGCX

Joyso

Beldex

Zeus Exchange

Cloverdex

Zaddex

EZBitex

CoinCasso

Stoxum

Hybrid Cryptocurrency Exchanges offers rich benefits such as:

  • Traders aren’t mandatorily required to store their funds on the crypto wallets. Thus, the funds are less vulnerable to attacks.
  • Users can integrate existing conventional trading solutions with the Hybrid Exchange platform using advanced Blockchain features.
  • Users can enjoy high-end transaction speed using Hybrid Exchanges with good liquidity.
  • Hybrid exchanges provide access to the real-time trading process for individual traders.
  • Traders can get to access a variety of advanced trading features which brings in high reliability, modularity, scalability, etc.

 

With these great advantages for traders, we can expect a good number of users trading with this platform. Hence, we can expect a large number of Business persons who would launch Hybrid Exchanges in the upcoming years!

Hybrid Cryptocurrency Exchanges: What to expect for the future?

Cryptocurrency Exchange Software will remain the magical stick which unites the greatest advantages which were expected by the traders for a long time. They act as the bridge which fulfills the gap between both the exchanges. In this way, you can get the trust of numerous investors by bringing in reliable storage systems.

The traders of the Hybrid Exchanges can take complete control of their funds with the Ethereum Smart Contract on which the tokens will be placed. The future Hybrid Exchanges will enable atomic swaps, by preventing unauthorized access to the funds. Thus, we can expect a good number of Hybrid Exchanges to be launched from the different Fintech Startups in the future.

2 Responses

  1. Crypto Exchanges keep on updating itself up to trend. now hybrid exchange seems like a better option. who knows in the future, people might go behind some other exchanges. Nice Article!

  2. Hybrid exchanges could be the next era of enhanced cryptocurrency trading. Creating an crypto exchange with centralized and decentralized features will be complex task for usual cryptocurrency exchange developers. But, at bitdeal, our expert developers broken the myth, with high end technology incorporation while creating hybrid cryptocurrency exchanges. Check out more about hybrid cryptocurrency exchanges at Bitdeal. https://www.bitdeal.net/hybrid-cryptocurrency-exchange-development

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