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Exchanges Are Exchanging In-House Tech With Service Providers?open_in_new
Cryptocurrency exchanges have been in a slow recovery pattern after a couple of major hits last year left the entire market reeling. Poorly executed technology led to major operational failures, including theft and loss.
A dismal financial performance throughout the market left exchanges in a bad state as well. Through the chaos, however, developers continue to work behind the scenes to build new ideas and improve on existing technology, coming up with some innovative ways to help the industry grow
State of the exchange market
As 2019 ushers in a definitive end to the nightmare that was the 2018 digital currency bear market, cryptocurrency investors are breathing a collective sigh of relief.
Plummeting value and low investor confidence were not the only low points for the 2018 cryptocurrency market. Skyrocketing trading fees, the emergence of traditional exchanges rather than blockchain-based platforms, and unstable digital asset holdings within exchanges all caused confusion and general annoyance.
The cryptocurrency exchange sector possibly took the biggest hit from all this chaos. Regulatory changes crippled their trading capacity. Theft from hacking hit all-time highs. In fact, the 2018 Coincheck hack is now considered the biggest cryptocurrency exchange hack of all time.
One exchange, QuadrigaCX, essentially imploded following the untimely death of its founder, Gerald Cotten in November 2018. Investigators from accounting firm Ernst and Young unearthed major problems with the crypto exchange.
Believe it or not, the exchange problems went well beyond the obvious, initial issue, which was that over $160 million USD in investor cryptocurrency was irretrievable. Cotten was the only employee at the exchange. He alone knew the locations and access codes of the cold wallet where the majority of Quadriga assets were stored.
In addition to $160 million in missing funds, Ernst and Young also reported problems such as shoddy accounting practices, misuse of corporate assets, and unexplained debt.
With accounting transparency as one of the core features of any cryptocurrency platform, how does an exchange go so far astray? This disaster can be explained. And it can also be prevented.
New regulatory standards within the cryptocurrency space offer security for investors and exchanges alike. While some argue that regulation only detracts from the decentralization standard that cryptocurrencies were built upon and most still seek to uphold, it also serves an unmet need.
That need is to protect investors from theft, fraud, and other unscrupulous practices. The United States Securities and Exchange Act of 1934 was enacted to protect consumers in the wake of a tremendous financial disaster, namely the 1929 Stock Market Crash, which directly triggered the Great Depression.
With the growing adoption of cryptocurrency as a payment method, store of value, and unit of account, digital assets are complex, and not limited to one country.
China’s tumultuous relationship with cryptocurrency is well known. Its ban on cryptocurrency exchange activity is ongoing.
The United States is taking a different route, essentially seeking to emulate the Securities and Exchange Commission (SEC) in the digital space. While digital currencies are not currently a threat to the Federal Reserve, the SEC and other governing bodies seek to proactively manage any risk that may arise with further growth of the cryptocurrency market.
Centralization issues are emerging from within the exchange community as well. Particularly over the past year, as cryptocurrency prices only fluctuated, but crashed, issues with liquidity in smaller exchanges have led to larger exchanges exerting greater power across the industry.
A market solution
These days, it is now possible to combat some of these issues. New technology has emerged that makes it easier to launch and manage a successful cryptocurrency exchange. Spotware, for example, offers one such solution with its new full service exchange development platform, cXchange.
With cXchange, Spotware is directly addressing a major issue for many newcomers to the cryptocurrency exchange space. The startup costs of an endeavor of this sort are daunting, even prohibitive in some cases.
Building a platform to trade, monitor, and house potentially billions of dollars’ worth of digital assets is a terrifying proposition. It is an enormous responsibility. Nobody wants to be the next Mt. Gox, or worse, Coincheck.
Spotware provides an out-of-the-box trading solution that cryptocurrency entrepreneurs can use to build their own proprietary cryptocurrency exchange. It is a scalable, powerful, and reliable solution from which to create flexible trading platforms.
Most importantly, Spotware’s cXchange is created by a proven team of product developers using cutting edge technology. This ensures security, ongoing value, and lasting product viability.
The Spotware team has designed a simple and elegant product, the kind that is easy to set up, and a breeze to maintain. This was not done at the cost of adaptability or scalability. The exchange platform is ready to meet a variety of investor and transactional demands.
The right choice
Imagine a scenario where a risky and heavily regulated ICO wasn’t necessary in the quest to build a new leading cryptocurrency exchange. Sounds appealing, doesn’t it?
In the aftermath of 2018, there is an understandable reluctance to engage in risky business practices in and around any blockchain venture. The emergence of robust and trustworthy out of the box solutions like Spotware’s cXchange turns a concept like that into a bright new reality.