From the very beginning, decentralization has always been the basis of every digital asset that is Blockchain-based. Not making use of a third party – i.e. using a trustless system – is one of the primary reasons why Satoshi Nakamoto created cryptocurrency and Blockchain.
However, it’s 2021, and the price of Bitcoin is risen astronomically, reaching an all-time high of $68,521 on the 5th of November, 2021. Presently, Bitcoin is no longer used by hackers or geeks stuck in the basement anymore.
Now, the industry has attracted a lot of institutional investors, with more companies trying to get their own share of the pie. It has gotten to the point that a sovereign nation, El Salvador, decided to adopt the novel digital asset as a legal tender. For an asset created in 2009, Bitcoin and cryptocurrency, in general, have outperformed any asset class in recent history.
Now, the industry has the attention of world leaders and international bodies looking for a way to either stifle or regulate the booming industry. Due to how fast the industry is rising, we’ve also seen an unprecedented increase in the number of platforms offering several types of crypto services.
With the increased government scrutiny on the industry, several top crypto platforms are doing their best not to get caught on the other side of the law. However, this has made them somewhat deviate from the core values of crypto in general.
While some have completely deviated from the master plan, others choose to steer a middle course. However, the industry is still battling with several problems we’ll address in this article.
The problem
In truth, centralized platforms were expected to be a major driver in the growth of the digital economy. On the other hand, it seems the reverse is the case. It is quite ironic that there has been an increase in the number of decentralized assets created, but they are traded mostly on centralized crypto exchanges.
As a matter of fact, centralized exchanges were literally the first crypto exchanges to launch in the industry. They facilitate trade via a central authority. For example, these exchanges offer an easy to use platform to trade, but it’s done in a regulated space.
Users get a trading option, but it is done under the watchful eye of a third party. The third party checks the order books as well as ensuring that all participants comply with the regulations.
Surprisingly, these centralized exchanges are very much in demand, with millions of users thronging there for many reasons.
As at the time of writing this article, centralized exchanges are right there at the top when you look at their trading volume. This shows there are several investors that are not aware of the problems bedevilling them.
For starters, the fact that these exchanges had to adapt to government regulations regarding new laws poses more problems than solutions. If you are a keen observer, you’ll notice centralized exchanges have updated their terms and conditions.
Now, they have implemented stricter KYC (Know Your Customer) measures and tougher AML (Anti-Money Laundering) laws.
This isn’t a bad thing when you consider how well it’ll restrict actors with malicious intent. However, it’s a double-edged sword that affects millions of users that use crypto for legitimate purposes. These users chose crypto over fiat to key into the features these digital currencies offer but are now being denied it.
To put things in perspective, to confirm the identity of a user, centralized exchanges often require specific data from users. A new user has to submit several identification data – often not needed – to the central authority.
Unknown to the user, this sets them at a huge disadvantage. The user’s assets and data are stored in the centralized database of the exchange. Now, the user’s data and assets are susceptible to data theft and illegal access.
That’s not all, trading on centralized exchanges poses several other issues too. Let’s take a more detailed look at them in the next section.
Challenges of centralized platforms
KYC Measures
To date, KYC measures is still a hot topic that generates a lot of mixed reaction in the crypto community. Some sections of crypto users don’t want laws and regulators constantly chasing them or trying to force them to share personal data. But, like we said earlier, this goes against the basic principles of cryptocurrencies.
Security and vulnerability of getting hacked
The standard practice for centralized exchanges is to store all consumer details and assets in a centralized database which makes it an easy target for hackers. It’s no news that the crypto industry has been a prime target for hackers, and even the most secure exchanges are not left out.
These flaws are too significant to ignore, and it doesn’t seem it’ll be stopping anytime soon. Almost all centralized exchanges have been hit by hackers, and it has really hindered the adoption of cryptos in general.
The new breed of investors we have today need to have the guts to take risks and have a high level of tolerance. That’s not all, investors also need to have a keen eye to differentiate genuine investments from phishing attacks and exit scams.
Unfortunately, the crypto-sphere has been plagued with hacks, scams, and security flaws over the past decade. We’ve compiled an easy to glance list of high profile hacking incidents that rocked the crypto industry:
- Coinrail: This occurred in South Korea. The criminals made away with $40 million worth of digital assets from a boutique exchange.
- Coincheck: This is the second largest crypto exchange in Japan, and NEM worth $500 million was stolen.
- Zaif: This Japanese exchange was not spared either, as $60 million worth of crypto was stolen.
- Binance: This exchange is unarguably one of the largest in the world, and yet it got hacked. About $45 million worth of assets were stolen.
- Bithumb: According to Coin Telegraph, this hack occurred on the 19th of June 2018. The hackers made away with an estimated $30 million worth of tokens.
- BitGrail: This exchange set the pace as the first exchange to list Nano, and yet, $195 million in tokens were pilfered from them.
What this list proves is that no centralized crypto platform is 100% safe regardless of geographical location, size, or how secure its security architecture is.
Withdrawal Limits
It is no news that centralized exchanges often impose limits on customer withdrawals. They do this as a measure of security so there’s a limit to the sum withdrawn from the exchange at the same time.
For starters, the withdrawal limit creates an incentives misalignment. Also, it is a serious inconvenience to the trader whose satisfaction should be the exchange’s utmost priority. One thing users don’t know is that the exchanges gain a lot from doing this as they maximize trading fees thanks to the inaccessible funds.
Expensive Transaction Costs
This is another avenue centralized exchanges use to exploit users. Often, these exchanges are criticized from several quarters for charging extremely high listing fees. If you are wondering why the charges are high, the reasons are not farfetched.
Some factors that lead to inherently high charges are profit, overhead costs, and the security needs of the platform. One way or the other, the customer gets to suffer these incurred costs as they are passed on as transaction fees.
Use of Centralized wallets
One of the major threats of centralized exchanges is the centralized custody of funds. When the market is experiencing a bull run, there’s always cash inflow from new investors. This makes centralized exchanges turn into the proverbial honeypots. This does nothing but put a bulls eye on their back for malicious attackers.
The way centralized exchange go about this is akin to a trusted third party that is tasked with storing the crypto assets of users so they have a liquidity pool. They do this by accumulating assets into digital wallets held by the exchange.
In this regard, we’ll be correct to say that as the market keeps growing, users should expect increased attacks both in severity and frequency. If the attackers don’t make a go for the money, they’ll try to steal private data.
Order Arbitrage
Another telling problem with using centralized exchanges is that they can see outgoing and incoming orders. In several ways, this is unethical as they can gain via front-running. There have also been accusations that exchanges sometimes delay crediting orders to take advantage of the price spreads as price fluctuates.
Transaction and Volume Scaling
When there’s an unprecedented increase in trade volume across trading platforms, centralized exchanges often suffer from technical difficulties and unexpected delays. Unfortunately, large crypto exchanges are not exempted either. In fact, it has become a norm. This is caused by the inability of the exchange’s server to cope with the surge.
There have been instances where these exchanges suffer from 90 minutes of downtime. The loss caused by this downtime was estimated to be in the region of 60000 Bitcoin.
This is just an example among a myriad of problems experienced by centralized exchanges when they can’t deal with increased volume of trade on specific days.
However, it’s not doom and gloom for users as there’s light at the end of the tunnel, thanks to decentralized exchanges.
Advantages of decentralized exchanges
Reduced risk of getting hacked
With decentralized exchanges, you can mitigate the risk of getting hacked. By using decentralized exchanges, you don’t have to transfer your assets to any third party. This way, you don’t have to worry about the platform or company getting hacked.
Checking market manipulation
Because of the nature of allowing peer-to-peer exchange of digital assets, decentralized exchanges stop market manipulation of any kind. This way, users are protected from wash trading and fake trading.
Anonymity
Just as the founder of Bitcoin intended from the very beginning, you get to maintain your anonymity by using a decentralized exchange. Luckily, they don’t require users to fill KYC forms. This way, you get to maintain your anonymity and privacy at all times.
Choosing the right decentralized platform
With a myriad of decentralized platforms out there, it may be a little difficult to make the right choice. However, we’ve taken that burden off your shoulder. To be on the safe side, we’ll recommend Aircash as it ticks all the right boxes and more.
Apart from the ease and simplicity of using the platform, Aircash is the first and largest decentralized over-the-counter platform in the world. Now, you can purchase or trade your digital assets with fiat in a decentralized manner.
By using Aircash, your days of using centralized exchanges are over. You don’t have to worry about hacks or any form of identity theft. Well, hackers cannot steal an identity you never gave in the first instance.
This also means there’s no KYC, you don’t have to create any account of some sort, and neither will you be asked for any personal information. From start to finish, you’ll transact your crypto anonymously.
If you are wondering how to make a trade, it’s as simple as drinking water. The platform uses a peer-to-peer messenger to communicate with a prospective trader. This way, nobody knows the details of your transaction, not even the platform itself.
How do you use AirCash?
Just like we stated earlier, using Aircash is as simple as drinking water. Here’s how to get started:
- First, create a wallet to use for your transaction.
- Next, connect the Wallet to AirCash.
- Lastly, buy and sell any crypto of your choice with the fiat in your wallet and you are good to go.
AirCash is a product of AirCoin Labs, which is a crypto decentralized autonomous organization(DAO).
Where to find AirCash and AirCoin Labs :
AirCoin Lab Website: https://aircoin.cool
AirCash Website: https://aircash.finance
Twitter: https://twitter.com/Aircoinreal
Telegram: https://t.me/aircoinreal
Discord: https://discord.com/invite/aircash
Facebook: https://www.facebook.com/aircoinreal
