Cryptocurrency exchanges are an essential infrastructure of the entire Cryptocurrency ecosystem. Groundless to say, it is also a profitable enterprise and fortunes are being made from its operations.
It is estimated that the topmost 10 exchanges make a whopping $3 million in a day with annual revenues valued over $1 billion. However, it is a highly competitive market where you must stand out to survive.
Andrew Munro, a Blockchain Technology Analyst asserts that the biggest names in the market each account for a meaningful portion of what might be a multi-trillion dollar market in the coming years and is already well into the multi-billions.
With the ability to do business globally without being hindered by borders, exchanges have resorted to many strategies to cash in on the Cryptocurrency revolution. Be it in lower or no fees, firm security, fiat pairs and an outstanding technological infrastructure are the exemplars.
More importantly, creativity has become the pattern in the industry bringing on board myriad innovative business models. It truly signifies the free market cryptocurrencies embodies with distinct diversification.
Security and Decentralized Trend
Nevertheless, most exchanges are centralized defeating the purpose of Blockchain technologies with its indispensable decentralized nature. In fact, the situation makes security vulnerability inescapable. In the words of Sudhir Khatwani:
It is a shame that the whole purpose of monetary sovereignty for which Satoshi Nakamoto created Bitcoin is still at the helms of centralized parties.
According to Wendy McElroy, Satoshi never envisioned centralized exchanges and the situation would have appalled him. “Bitcoin was forged to avoid centralized third parties, such as banks and centralized exchanges, that require users to trust them with wealth and privacy. Peer-to-peer transfers based on cryptographic proof were supposed to replace the need for a middleman who demanded trust,” McElroy maintained
Therefore the paradigm shift which is geared towards a decentralized exchange as the next generation is in order. It simply means exchanges will be undeviatingly P2P marketplace without storage of digital currencies in a vault by Crypto exchanges
Even the biggest player in the market, Korea-based Binance has hinted that it will soon be taking the decentralized path. The company recently outdoor a demo of their decentralized platform
Currently, there are `decentralized exchanges like Cryptobridge, Komodo, IDEX, Wave Dex, OpenLedger,
Tokenization of Cryptocurrency Exchanges
Another beautiful feature of the industry is growing tokenization of the business. Many Exchanges now have native coins offering customers the opportunities to hold and trade in them
Holders also get to have numerous benefits using such exchanges like no fee transactions, dividend earnings, discount and the use of the token to pay for services on the platforms. Some leading examples of Tokenized digital currency exchange include Binance (BNB), ABCC (AT), Cryptopia (CEFS), KuCoin (KCS), Cryptobridge (BCO).
It is imperative to take a look at some of these exchanges that have adopted unique innovations to stay aloft in the market.
To survive in the market
The platform claims that as part of their membership program they distribute 40% of the total supply of the AT token to reward members who trade on the exchange platform via the “Trade-to-Mine” (ToM) mechanism
They also allege 10% of the total supply of AT will be used to reward eligible existing users based on their cumulative trade volume contribution. Moreover, members can purchase other digital assets, pay transaction fees and gain preferential access to premium services with AT.
The 3rd largest Crypto Exchange Huobi (HADAX) has in place a unique strategy to maintain its market share. It operates mining pools notable for EOS
The Huobi Ecology Fund invests in companies and fosters partnerships in the blockchain space. It has investments in research institutions, media, investment banking, mining pools
Another product is the Huobi Capital but differs from Huobi Ecology. In fact, it focuses on investments in Blockchain technology, digital currency, and Crypto asset.