Having recently presented at the Hong Kong Ethereum Conference, The 0x developers see the Cryptocurrency Exchanges as one biggest challenges in the industry due to the massive barriers of entry including the regulations and the cost of building relationships with banks due to the KYC regulations.
But more of a problem is that they are centralised, which causes a large amount of systemic risk, particularly with the exchange of being hacked and customers losing their funds.
So the risk to the exchange is also extremely high, and centralised exchanges are now beginning to see the risk / reward of running these centralised exchanges and realising that their efforts in building these exchanges could easily be undone by only one hacker managing to break into the system and stealing funds fro the exchange to come up against serious scrutiny, scam allegations and basically, a complete loss of business.
0x are taking a different approach.
With the rapid amount of Tokens being issued on the Ethereum Blockchain, and what seems to be even more ever month, what Ox is focused on is building protocol for a Peer to Peer exchange on top of the Ethereum Blockchain that will allow any Ethereum based asset to be moved between counterparts without any sort of risk. Whereas currently, the exchanges that most people use are centralised and actually have many counterparts risks associated with them, ranging from passwords being hacked, email addresses being hacked which can be used to reset passwords to exchange accounts, or the exchange itself could be hacked by outside parties and your funds can be stolen. There is also the risk of the exchange itself not being trustworthy and could be working to build a customer base in order to gain peoples trust to then close up shop all of a sudden one day and disappear. . . with their customers’ funds!!
It is quite obvious that the natural progression for cryptocurrency exchanges is to go in the direction of being decentralised as the risks associated with centralised exchanges, for both the people running the exchanges and for the customers trading on the exchanges are becoming more and more severe as cryptocurrencies become more valuable and hackers becoming more educated on how to break into these exchanges.
At the end of the day, cryptocurrency exchanges are just big honey pots that attract a lot of attention due to the sheer amount of cryptocurrencies that are stored within the platform and being traded.
Another factor that is not ideal for holders of cryptocurrencies is Withdrawal limits on amounts a user is allowed to take out per day, particularly for unverified users. Take Poloniex for example. A unverified user is restricted to be allowed to only take out cryptocurrency up to the value of $2,000 every 24 hours due to KYC regulations etc. or even if you happen to be verified, there is still a limit on how much you are allowed to withdraw every 24 hours.
But it gets worse, even if you wanted to get verified, which by the way means that you will need to disclose your full name and residing address, the process can take weeks, if not months due to the rising amount of people flocking to the exchange to trade crypto’s. And as this is a trend that is not likely to be slowing down anytime soon, you can expect the verification process to only take longer as time goes on.
In a nutshell, and as a whole, centralised exchanges will not only not be able to cope with the rising amount of threats that come from hackers, but also with the rising amount of users and those users applying to be verified.
These problems are very real and these problems are issues that 0x have identified and are looking to solve.
Water tight security is a top priority for holders of cryptocurrencies, which is why we have with Hard Wallets such as the Trezor , KeepKey and Ledger Nano S.
What 0x developers have realised is that users of cryptocurrencies want similar levels, if not, the same level of security that these hard wallet s have when they are trading cryptocurrencies on exchanges.
Having to deal with exchanges experiencing issues that effectively lock your funds up and put your wealth, such as what is demonstrated in the image above, which is a notice put out by Poloniex when it was apparently experiencing server issues. The main issue here is two fold, firstly, you don't really know what the issue is as this is just what you are being told, and secondly, this shows that the security of your tokens/coins are only as secure as the exchange is that is holding them!
Th is why 0x are developing the next level in Decentralised cryptocurrency exchanges, as decentralised Exchanges mean that the user has full control of their funds as they are the only one that has access to their private keys, just as you would with a HardWallet.
In my opinion, Decentralised exchanges biggest hurdle is to attract enough traders so that the trading volumes provide enough liquidity for traders to trade in as high liquidity means lower spreads in the price and a more healthy trading platform.
Also, usability is another hurdle that needs to be cleared as a decentralised exchange will work differently to that of a centralised exchange, particularly where logging in is concerned.
Most people like the convenience of having a simple one worded password, not a 12 word phrase.
Most of the Contracts are already complete for their protocol as are the Security Audits.
Their next stage is the token Distribution that is currently running as a ICO. With a ever-growing community and growing support for the project and its goals.
What is special about 0x?
Ox is currently focusing and putting a lot of effort into creating 0x.js which is a javaScript Library which will make it much easier for people running exchanges and projects who are integrating 0x protocol to build on top of 0x and access the smart contracts.
This is a very promising project that utilises Ethereum and its native tokens for very far reaching use cases and a capacity for uses that stretch further out than just cryptocurrency exchanges.
I hope this article has given you enough insight to the project for you to want to find out more about the 0x Project!
Well, to help you along your way, the ICO for the 0x Project is open to anybody that would like to invest. To find out more about the project, you can find some links below where you can find a great deal more information about the project.;
0x Project ICO Website: https://0xproject.com/
(Registration for contributors begins tomorrow - 09 August, 2017):
Medium Blog: https://blog.0xproject.com/
You can also join the community and speak to the team directly and see what going on by joining their Slack channel. to get your invite, just click on the link below;
