The decentralised future of Centralised exchanges
WazirX is launching decentralised exchange (DEX)

The decentralised future of Centralised exchanges

By Tonythomas | TechBox | 28 Jul 2021


 

The crypto regulations and crackdown of centralised exchanges are becoming a common sean now. Starting with the on-off relationship of china to the crypto world  to the UK's all-on takedown of Binance UK and regulatory uncertainty in Japan and Canada for Binance is a huge road blocker for the overall crypto economy in general.  Simply speaking,  all the major exchanges in the world are in constant fear of having a total regulatory takedown if the aren’t 'Compliant' with the Governments around the world.  Binance's recent withdrawal of the stock tokens and the chaining of the UK entity that offers derivatives are just an example. As CZ mentions in his blogpost. its not that easy to comply with the governments around the world due to the lack of clear regulations around the world. 

It's down when needed - Coinbase

The major problem faced By the centralised exchanges is having a single point of failure. It's very easy to take down a CEX with a DOS attack and they are very much prone to Hacks and eventually to crackdowns. Even though there are funds like Binance's SAFU and Crypto.com's 100% cold reserve which is insured $360M for physical damage of the cold store are relaxing factors in case of a hack, those will not account for the downtime of exchanges like Coinbase and Binance during high market turbulence leaving thousands not able to buy or sell and eventually lose money.  This makes more and more people go to decentralized exchanges like Uniswap where you have full access to your money and trade without the need for any KYC. Decentralised exchange Uniswap has recorded more volume than Coinbase during times of market volatility must have made many CEX CEOs thinking of changing their business models to evolve into a DEX ecosystem. 

The Evolution

CZ has made it clear soon back in Feb of  2020 about his plan to replace the entire backend of Binance.com with a Dex buy leaving just the front-end alone. CZ was working hard since 2019 right from the Binance dex to achieve this goal.  The recent success of cDefi (Centralised DeFi) on the Binance smart chain clearly shows the future of binance.com. Dapps like Pancakeswap and anySwap had millions in volume as more and more defi enthusiasts tried to leverage the speed and cost-effectiveness of the smart chain. even though exchanges like Huobi and Okex haven’t made a clear announcement  regarding their future as a centralised Exchange, are trying to replicate Binance's success on the cDeFi ecosystem with their on heavily centralised not so smart 'smart chains' 

The largest crypto derivatives exchange FTX has announced that they are downgrading their leverage limits to its users due to regulatory obligations and higher limits will be exclusively available on their decentralised exchange Serum run on solana.  This makes the future of centralised exchange a decentralised one. 

The Next step

Binance owned Indian Crypto Exchange, WazirX - which process the most volume in India - has made its plans clear with the recent interview with Economic Times. WazirX is building a decentralised exchange that will go live in two weeks in light of the regulatory difficulties in India. The cofounder  Shetty added that the recent development into a dex will help cool off the steam regarding the data needed for the federal government to tackle money laundering in India. The Enforcement Directorate of the central government of India had issued a show-cause notice for 2700 Crore INR (3.6 billion USD) in foreign trade.  The decentralized nature of the exchange will make it easier for developers to push new code without the fear of a regulatory crackdown. WazirX's Dex is currently under serious testing on a private network before the launch. It's  Speculated that the WRX DEX will be an Uniswap AMM model  Binance Smart chain DEX which plans to adopt cross-chain capabilities.  

The eventual replacement of the backend of the centralised exchanges will help the users to gain total control of the crypto and makes an easy path for crypto to fiat on and offramp. 

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Tonythomas
Tonythomas

A crypto and Blockchain enthusiast check out my website at tonythomas.crypto


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