In Decentralization We Trust
Hacks occur at centralised locations such as Mt Gox, Bitfinnex and others that have bled assets all the way to bankruptcy in some cases Users need to move from wallets to exchanges and then return to wallets again. The move can bring hacks and other problems to the fore during the transfers.
For instance, Poloniex lost 12 percent when its removal codes were abused by a hacker. Generally speaking, problems with cryptocurrencies regularly take place and an alternative would be decentralized exchanges.
Right now decentralized exchanges are not very numerous. However, investors in many cases have had enough of centralized ones which can stop withdrawals at any time.
Centralized exchanges may not go away, but they may become far less popular. Decentralized exchanges, with their trustless approaches and lack of cybercurrency movement, may be seen as more and more favorable and easier to operate.
Whales meanwhile have centralised most of the bitcoin. In fact four entities own much of bitcoin and this raises questions about bitcoin going forward. Having so much bitcoin in so few hands influences the way it is held and traded.
In a twitter, John McAfee announced that, "Decentralized Exchanges are the Next Big Thing." He suggested that decentralized exchanges are rising in acceptance because Bitcoin and other cryptocurrencies frighten governments and the people who use them and cause crackdowns.
You cannot find out how much money they are making through Bitcoin, what they are buying, what they are selling. Governments make income by taxing the movement of money but not in this case. He emphasized that Bitcoin and cryptocurrency payments are largely untraceable, curbing the ability of governments around the world to keep tabs on their citizens.
“Our income taxes are the greatest source of revenue, but if everybody’s using Bitcoin, the government doesn’t know what your income is. They can’t tax it, and if you choose to say I didn’t make anything, they cannot prove otherwise.”
However, McAfee is confident that governments can’t really do much to stop Bitcoin or other cryptocurrencies because it’s not technically possible.
“It will eventually frighten every nation state, but it doesn’t matter what they do, there’s no way you can create a law or to legislate something that will stop Bitcoin or any cryptocurrency because technically, you cannot,” he added.
https://cryptovest.com/news/john-mcafee-says-bitcoin--cryptocurrencies-frighten-governments/
Centralized Rules
Overall globally, demand for this new crypto industry is booming. Its tough to navigate the changing landscapes for mass market adoption. There was an excellent report recently out from out-law.com:
https://www.pinsentmasons.com/PDF/2017/FinTech/Bitcoin-Blockchain-guide.pdf
The French Central Bank mentions the use of decentralised exchange systems that will be made possible through blockchain technologies. Blockchain technologies have been touted by many banks and financial institutions as providing a revolutionary way to redesign a lot of back-office industry. The report highlights some uses like collateral management that can see immediate gains with the adoption of blockchains.
Israel Bitcoin Regulation/status/views The bitcoin community in Israel represents one of the most active bitcoin communities in the world. In June 2016, Intel announced the creation of a fintech lab in Tel Aviv. The research conducted will revolve around blockchain technology, biometrics and the Internet of Things and the lab will be in association with The Floor, the Tel Aviv Fintech hub.
China recently shut down exchanges but that only increased the conversation about decentralized exchanges.
South Korea: On 29 September 2017, South Korea’s financial regulator banned ICOs and announced that virtual currency trading should be tightly controlled.
Nigeria: There are no explicit regulations concerning bitcoin in Nigeria. The Central Bank of Nigeria stated, in 2017, that “they cannot control or regulate bitcoin.”
Japan On 1 April 2017, Japan implemented a new law which categorises bitcoin as a legal payment option within the country.
On 1 July 2017, Japan’s tax reform bill eliminated consumption tax on the sale of bitcoin.
On 17 September 2017, it was announced that a number of Japanese banks, including Mizuho Financial Group and Japan Post Bank, have joined forces to launch a new digital currency called J Coin which will be pegged to the Yen, to be issued by 2020 Olympic Games held in Tokyo.
Germany’s designated businesses now also include those in “the business of issuing, transmitting, transferring, providing safe custody or storage of, administering, managing, lending, buying, selling, exchanging or otherwise trading or intermediating convertible digital currencies, including crypto-currencies or similar concepts where the concept is accepted by persons as a means of payment for goods or services,a unit of account, a store of value or a commodity.”
The Netherlands views bitcoin as a medium of exchange, since it seeks to provide a solution to the exchange of goods and services in daily life; however, bitcoin trade is not regulated or monitored by the Dutch financial authorities. The Dutch authorities are considering taking measures, however, to curb money laundering and illicit practices using bitcoin.
https://www.pinsentmasons.com/PDF/2017/FinTech/Bitcoin-Blockchain-guide.pdf
Solutions
Decentralized exchanges could be a problem for government regulatory agencies, as these exchanges make it more difficult to trace funds for the purpose of taxation. Perhaps this is part of the reason why governments like China and South Korea have recently made moves to regulate cryptocurrency exchanges.
SHAPESHIFT meanwhile is among the very largest decentralized exchanges currently available. It is a “revolutionary part of the cryptocurrency ecosystem and gives you the power to quickly swap between assets – no account required.”
https://www.slush.org/news/future-economy-will-based-cryptocurrencies-decentralized-ecosystems/
Another decentralized exchange is The Komodo Platform. Komodo incorporates ZCash and adds to the formulation of BitcoinDark and SuperNET. ZCash involves a Proof of Work (dPoW) with 64 pre-selected nodes. Komodo includes BarterDEX, which involves decentralized atomic swaps and order matching.
DICO is decentralized initial coin offering which Komodo adds BarterDEX and Jumblr options. Investors are intrigued by Komodo and the initial dICO availability could be offered in November.
Such exchange basics as Komodo are part of decentralized efforts. Such an exchange cannot be shut down by Chinese regulators or highly regulated.
Decentralized exchanges offer a good many positives and are not used in centralized format. Centralization of exchanges is antithetical to way currencies operate. DEXs allow cryptocurrencies to grow.
DEXs don’t allow governments to control currencies. DEXs allow crypto to be built up by individuals. DEXs allow continued volume for cryptos/tokens that can’t be lifted as a result of regulations.
Downside of DEXS
DEXs includes negatives. People are not used to decentralization. We enjoy such services because they are easy to use and their use tempts us to surrender such things as self-protection and liberty generally.
But since they are not widely used, and there are problems with lack of volume eg; liquidity. Most DEXs are being beta tested and those involved can lose money because their capital is not sufficiently anchored. And for such reasons, you might decide that DEXs are not going to be viable.
After evaluating DEXs, we might not think that DEXs cannot prosper in current environments. They will be shut down or changed in such ways that they will not resemble what they are now.
The various removals of exchanges in countries such as China, Korea and Russia make it necessary to try something new. Most of these decentralized exchanges have arrived on the scene within the past year and some are already in beta. People are very serious about them and about decentralization generally.
This is part of the larger issue regarding exchanges and cryptocurrencies. There is definitely struggle between central banking and exchange-based currency which is getting deeper and more complex.
The bottom line here is that central bank currencies are hardly cryptocurrencies at all. They are merely digital currencies. The things that make cryptocurrency different and valid will be disposed of with central banking cryptocurrency.
The result is that people have raced ahead with decentralized exchanges. Centralized exchanges are the weakest point of cryptocurrencies and have been responsible for much of the bad news regarding cryptocurrencies.
The idea that people would come up with new ideas as necessary seemed to be optimistic at best. And yet it has happened and very quickly. These exchanges have been under development since before the Chinese banning. There are many people who are determined that private money succeed and prosper.
Central banking is quasi-public money. But cryptocurrencies are private money and private money is growing rapidly as it did for thousands of years before governments took over such money intermittently.
The central banking is determined to create digital currencies that will make transactions visible to all who use them. Privacy will be a thing of the past.
The stakes are huge when it comes to the Internet and cryptocurrencies. Either we will be controlled by central banking forces or we will use private money unencumbered by such forces.
Examples Linked: