One of the greatest aspects of cryptocurrency and blockchain technology is that they are decentralized. Decentralized effectively means there is no central authority that has control over a project, company, currency, or token.
However in recent times, this decentralization effort has been manipulated by centralized controls. The biggest manipulation being centralized exchanges, place where one can trade from one currency to another.
The largest centralized exchange in South Korea, Korbit, removed the listing Monero as well as several other privacy currencies. Japan’s largest exchange, Coincheck, has also said they will be removing the listings of Monero and other such privacy coins. The Financial Services Agency of Japan has been trying to put pressure on all their centralized exchanges to follow.
All privacy based currencies have take a hit almost four times as much as any other cryptocurrencies because of this practice, and it doesn’t seem to be letting up.
Why? Because of privacy concerns.
Ultimately the same claims once made against Bitcoin, are now being used against privacy coins saying that the majority of people using them are criminals and that is why they want privacy coins.
Of course because of the privacy integrated in these currencies there is no way to actually rebut the claims being made but there is also no way to substantiate them.
There is simply no way to know what these coins are being used for, and as such, regulatory bodies have a serious problem with this.
All of this leads to the question of, is it time for people to start making the switch to decentralized exchanges that cannot be controlled in such a manner?
There are many different decentralized exchanges that exist, however they are not truly decentralized as of yet. All decentralized exchange that we have looked at and searched, are not truly decentralized as there is still a central authority surrounding what coins will or won’t be included or excluded from the exchange.
Some, such as the upcoming Next Exchange, utilize a community vote to decide what coins/tokens will be included in their exchanges. However still these exchange require someone to program into the exchange the new coins/tokens – so there is still a centralization surrounding that.
Many also claim to be able to perform atomic swaps, but of these it is still based on the coins that are introduced into the platform.
So far, we have not found any working exchanges that will allow anyone to list any token they have or want to get listed that will simply be added to the exchange. This doesn’t mean none exist, just that we have not found any that are working as of yet.
The problem with a truly decentralized exchange is transaction fee’s of the currencies. With a centralized exchange, the exchange can do what is called off-chain transactions.
This means the exchange has massive wallets of each currency and token they list. They can then move the currencies from one account holder to another, and only have to pay the transaction fee’s when someone tries to withdraw the coins off the site thus creating a blockchain transaction.
Without the ability to do this, each party involved in an exchange has to pay the transaction fee’s of swapping currencies.
If Alice wants to send bob 1 ETH in exchange for 0.08 BTC, Alice must pay the transaction fee of ETH, and equally Bob must pay the transaction fee of BTC. This means both are paying higher amounts than the transaction they wish to make, and both parties are losing out.
This is not a problem with large scale trades however it does become a problem if the transactions are to low. For example if Bob is sending Alice .00000050 BTC, he is paying more in transaction fee’s than the cost of the trade.
This presents a problem for newer coins and tokens that may only be worth one sat (the small unit of bitcoin).
Due to manipulations and controls of completely centralized exchanges, it may still be worth the effort of finding and utilizing as many decentralized exchanges as one can, but there is still a long way to go before a truly decentralized exchange can compete with a centralized exchange.