Timestamp Capital: 8 Must-have Features Of Good Exchanges
On April 16, the Timestamp Capital released the “Research Report of Cryptocurrency Exchanges”, the third of such kind since April.
According to the report, decentralized exchanges will be the future form of digital currency exchanges. At present, qualifications and compliance are vital for the survival of exchanges under the tightening regulations. Also leading exchanges are attracting more users with the receding tides.
Decentralized Exchange Is the Future
The report pointed out that exchanges are the most profitable section in the cryptocurrency ecosystem as it serve as the venue of trading and price-settlement. Currently more than 95% of digital currency exchanges are centralized exchanges, including crypto-to-fiat exchange, crypto-to-crypto exchanges, derivative exchanges, etc. However, due to the drawbacks of security risks, liquidity, fraud, and insider trading in centralized exchanges, more and more decentralized exchanges are emerging.
However, decentralized exchanges are facing problems such as scaling issue on public blockchain network, high transaction fees, miner manipulation of market and difficulty in achieving cross-chain transactions.
Tightening regulation across the world
If security is the Achilles heel of a centralized exchange, then the unpredictable regulatory policy is the sword of Damocles hanging high on the top of these exchanges.
Regulations regarding Cryptocurrency In Various Countries
The pursuit of global digital currency trading has also attracted many illegal criminal activities such as illegal fund-raising, which endangers the financial security and stability of countries.
Therefore, in addition to China’s ban on cryptocurrency exchanges, Japan, the United States and European countries have incorporated cryptocurrency exchanges into the regulatory system. Crytpocurrency exchanges are required to obtain relevant licenses to operate legally. Only small countries like Malta displays an easy attitude towards the cryptocurrency industry.
The report points out that since 2018, regardless of the Asia-pacific, Europe and the United States, local governments have been tightening the supervision of exchange-based unlicensed operations. Qualification and compliance are increasingly important for the survival of exchanges.
Matthew effect becomes more obvious
According to data from the report, the total trading daily volume of exchanges amounts to around RMB 80 billion at present, which is only 1/6 of the peak period in early 2018. After one round of super bull market, the trading volume dropped close to the level of November 2017.
So far there are 188 cryptocurrency exchanges that can still have certain volume in the world. Daily trading volume of top 6 exchanges are over 3 billion RMB, which accounts for 58.9% of the total market volume. These six exchanges are BitMEX. Binance, Huobi Pro, OKEx, Bitfinex, and Upbit. There are 14 exchanges with over 1 billion daily trading volume, accounting for 73% of the total turnover. 82 exchanges are below 10 million RMB, accounting for 43.6% of all exchanges. Some small exchanges have already been closed. The Matthew Effect among exchanges is becoming obvious.
Of the 51 exchanges with a daily trading volume of over 100 million yuan, 23 are located in Asia, which is followed by North America and Europe with 11 and 7 exchanges respectively. There are also 4 exchanges in Australia and 3 exchanges in Africa.
Trading Volume and Location of Exchanges
In the face of a fierce competitive environment, Timestamp Capital believes that an excellent digital currency exchange should possess the following merits:
- High security: financial security and information security
- Good liquidity: trading volume and liquidity
- Low trading fee
- Fast trading and good user experience
- Rich trading pairs
- No withdrawal restrictions (such as restrictions on crypto withdrawal and/or a delayed withdrawal processing)
- Supports multiple derivatives
- API availability
In addition, from the perspective of government supervision, licenses and qualifications are also a major factor in the normal operation of the exchanges.
In summary, the report believes that the exchange should be good at using the appropriate rights and constructing a community while ensuring the user experience and tapping the potential needs of users. The security issue of exchanges can only be resolved through technical advancement.
The full report could be found here.
The Timestamp Capital is a blockchain investment fund under 8btc. The institute focus on research, investment and consulting services in the blockchain field. It can provide one-stop service for blockchain startup in optimizing business model, establishing compliance framework, and accelerating the construction of a global community. Timestamp Capital is committed to serving blockchain entrepreneurs and builds the blockchain ecosystem following the principle value discovery, value creation and value sharing.