View profile

Decentralized Exchanges

At least in these early days of the distributed ledger technology (DLT) paradigm (This for some reaso

Satoshi&Co Daily Crypto Newsletter

February 15 · Issue #5 · View online
ZPX | Satoshi&Co Newsletters

At least in these early days of the distributed ledger technology (DLT) paradigm (This for some reason seems to raise fewer hackles than calling this the bitcoin paradigm or the blockchain paradigm), centralized exchanges such as Coinbase, Gemini and Bittrex are doing phenomenally well. Coinbase, for instance, is now a legitimate unicorn, has more trading accounts than retail trading giant Charles Schwab, and is turning away investors, flush with cash as it is. It is also focusing on developing custody solutions to prepare for the expected increase in the inflow of institutional capital. Of course, they also overshot their 2017 revenue goal by 66%, raking in close to a billion dollars in revenue. To put that in context, that is almost $3m a day or over $2000 a minute. Business is definitely good. The story is pretty similar at crypto-only exchanges such as Bittrex and Binance. Especially Binance, which just launched in July, and is now processing over $500 million in trades daily. Daily!
However, in the libertarian core that is at the heart of the DLT movement, centralized exchanges have long been criticized as the Achilles’ heel of the cryptocurrency ecosystem. Although decentralization is one of the foundational tenets on which the blockchain technology and cryptocurrencies rose to prominence, the exchanges that facilitate trading cryptocurrencies, by and large, are centralized and have been the easiest targets for hackers. As evidenced by the famous attack on Mt. Gox and many others since then, centralized exchanges face a constant threat of losing investors’ funds through cyber hacks. Additionally, centralized exchanges are the first in the firing line when it comes to the periodic but increasingly frequent bouts of regulatory wrath being unleashed around the world. So much so that the COO of Shapeshift, an online exchange that exists somewhere in the spectrum between complete decentralization and traditional centralization, is completely anonymous, and just goes by the name Jon. Paradoxically, this probably makes him more conspicuous to regulatory scrutiny, in our opinion.
Anyhow, the libertarian core is engaged in conscious efforts to address the aforementioned drawbacks of centralized exchanges by building a framework for decentralized exchanges that are censorship-resistant and free from third-party risks. However, decentralized exchanges have their own shortcomings in the forms of slow trade execution and slippage risks, and are a few iterations away from being the real McCoy. Even so, they are seeing a lot of adoption.
Notable Dex protocols (Decentralized Exchange) protocols such as 0x, Kyber Network, AirSwap, and OmiseGo are all building frameworks that aim to solve the challenges posed by traditional decentralized exchanges in their own way. With growing concerns around trading, we believe that Decentralized Exchange protocols, along with interoperability across blockchains will emerge to become a key theme in 2018. 

Cryptocurrency of the Week
Ethereum Classic
Ethereum Classic
Ethereum Classic is a decentralized platform that runs smart contracts: applications exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference. Ethereum Classic fuels a new era in the digital world by transmitting value and information across the digital economy in a decentralized manner, supported by smart contracts, and unlocking value worth trillions of dollars in the process. After the DAO hack forced the Ethereum community to implement a hard fork, thereby restoring the siphoned funds to their original owners and wiping out any record of the theft, some participants in the Ethereum community who were against the direct interference with the Ethereum protocol decided to continue the original version, retaining the unaltered transaction history, which includes the DAO theft, and the foundational concepts of decentralization and immutability. Subsequently, the original version of the Ethereum protocol was renamed as Ethereum Classic and its underlying token as ETC.
Investment Positives
We feel Ethereum Classic has the potential to displace traditional metal commodities, such as Gold and Silver, as an instrument to hedge against inflation and to preserve value, akin to Bitcoin, in the long run. Second, Ethereum Classic could well be the fuel that powers the next generation Internet of Things through its inherent smart-contracting feature. We discuss the potential market opportunity for Ethereum Classic in both the cases.
The Digital Store-of-Value Market Potential: As increasing number of investors are substituting gold for Bitcoin as an inflation hedge instrument, we believe Ethereum Classic could be viewed as digital silver or platinum given its store-of-value properties and applications in the digital economy. In addition, Ethereum Classic would be a valuable addition to a Bitcoin portfolio as its negative correlation with Bitcoin will improve risk-adjusted returns of the portfolio. 
The Internet of Things Market Opportunity: As we move further into the digital age, we are going to witness a world where cars, refrigerators, toasters, etc. are connected to each other via the internet, not just humans anymore. According to McKinsey, the total economic impact of full-scale IoT is expected to be between $4 trillion and $11 trillion by 2025. Cisco believes that 99% of physical devices with IoT potential are still unconnected due to the lack of a common platform required to connect all the devices. We believe Ethereum Classic satisfies all the requisite properties to become the gas that powers Machine-Payable web system. 

Crypto News of the Week
$200 million worth of cryptocurrency goes missing from BitGrail exchange
Crypto Trading Ban Downplayed by South Korea After Backlash - Bloomberg
Coinbase Is Adding Segwit Support - Bitcoin News
Thailand: Central Bank Asks All Banks To Avoid Crypto,... | News | Cointelegraph
Did you enjoy this issue?
If you don't want these updates anymore, please unsubscribe here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Powered by Revue
ZPX | 21-01, Clifford Center, Raffles Place, Singapore- 048621