Trading cryptocurrencies has become more than a pastime these days. It has turned into more of a profession, driven by the assets’ volatility as traders, both experienced as well as novices, attempt to make a living out of it. While the profession seems promising, not all crypto trading platforms are currently up to the mark, as most of them are centralized and vulnerable to cyber threats as well as regulatory pressures from the governments. However, in the recent times, the concept of decentralized exchanges (DEX) has caught up, as various industry players try to stay true to the founding philosophy of Bitcoin – decentralization and peer-to-peer exchange of value without intermediaries.
Some of the industry leading DEX platforms to-date include the likes of IDEX, Waves DEX, OpenLedger DEX, Binance DEX and more. All these exchanges are designed to offer a more secure trading experience than their conventional, centralized counterparts. However, the extent of decentralization of the exchanges in the crypto industry is currently limited as there are compliance and other requirements that make certain centralized operations unavoidable.
For better understanding, it is necessary to understand the four core functions of any exchange:
- Capital Deposit and Withdrawals
- Order books
- Order matching engine
- Asset exchange
While it is quite possible to ensure complete decentralization of all the core functions, as in the case of BlockDX, putting it to practice is a challenge due to factors related to regulatory compliance. So, in most cases, only the asset exchange function is decentralized as it is to happen over the blockchain. Complete decentralization of all exchange functions inadvertently puts the platform in a grey area of legal boundaries, despite heightened security and censorship resistance characteristics. Also, in a scenario where the smart contracts or escrow systems malfunctions, users will be left without any protections or recourse – legal or otherwise.
On the other hand, the existing decentralized exchanges are facing challenges of their own, due to lack of available liquidity, scalability and functionality. These decentralized exchanges are not gaining the much-required mass adoption due to lack of efficient fiat deposit and withdrawal options in the absence of KYC and AML compliance (which will require the platform to incorporate centralized infrastructure). If the platform can’t provide fiat options, then it will effectively stop being the point of entry into the cryptocurrency ecosystem for the masses and only those already owning cryptocurrencies will be able to operate it.
The ideal approach at the moment is to blend the best features of both centralized and decentralized exchanges to create a hybrid model to suit the requirements of the community. In doing so, the platform can ensure legal compliance and also secure financial licenses, which will go a long way in promoting cryptocurrency adoption by alleviating the fears associated with crypto among a majority of the population.
An example of such an approach is CODEX – a licensed hybrid trading platform for digital assets and cryptocurrencies. The Estonia-based platform is created and operated by Attic Lab — one of the biggest EOS block producers, and is registered with the Registry of Economic Activities with relevant licenses to operate as a fully regulated exchange in the EU. The platform offers over 100 cryptocurrency pairs and implements state-of-the-art security which has passed stringent external security audits conducted by Hacken. The platform has forged strategic partnerships with industry leaders across various domains to provide the best user experience.
The PCI DSS compliant platform also allows users to purchase crypto assets using credit and debit cards, thereby lowering the barrier of entry to new users. CODEX also has its own CDX tokens for use within the ecosystem. These tokens based on EOSIO platform is generated through CODEX’s Trade Mining feature and distributed proportionally among the active traders. The number of CDX tokens received by the users is also dependent on the number of tokens held in their respective wallets. In addition, CDX is disbursed as part of the platform’s loyalty program as well.
An overview of all the benefits offered by CODEX include:
- It is an officially licensed exchange with license numbers FVR000169 and FRK000141.
- The platform is confirmed to have the highest levels of web platform cybersecurity, audited and confirmed by Hacken.
- CODEX is one of the top exchanges to be certified for liquidity and solvency — a very important certification. Further, CER recently partnered with CoinMarketCap to check exchanges for proofs of liquidity.
- CODEX provides a fiat gateway currently for EUR and UAH currencies.
- Powered by a fast and stable matching engine allowing to conduct up to 500,000+ transactions per second.
- The highest tier security with EdDSA API.
- Extremely low fees (0% for deposit and up to 0.01% for maker/taker trades).
The approach adopted by CODEX makes it one among a handful of hybrid exchanges that are designed to create the best possible option for the cryptocurrency community at current conditions. Another platform, Blockchain.io also has a similar setup that it claims to offer functionality, transparency, and liquidity of Centralized Exchanges along with the security of DEX.