Crypto trading is on the rise with the continued popularity of cryptocurrencies as a means of alternative finance. Historically, crypto trading has been problematic, with regulatory challenges as well as outright bans in certain jurisdictions. Many traders were uncertain about trading on exchanges and how cryptocurrencies were viewed by the regulatory authorities.
But the industry has come a long way with a number of key innovations in the space. There is more confidence in the overall industry which is set to grow and expand even further. Here are some of the most useful crypto trading innovations.
1. Decentralized Exchanges
The decentralized exchange (‘DEX’) is an exchange that is not centralized. They do not hold funds and there is no need for third-party custodial services. They are also far cheaper given that the trades are executed automatically. Hackers and server downtime are less of a concern as decentralized exchanges offer enhanced security. In addition, this eliminates many of the compliance and regulatory checks associated with traditional exchanges.
KYC protocols have become increasingly invasive for anybody wishing to trade and it forces people to give their personal data away. This is not the case with decentralized exchanges. However, it needs to be said that there are few pure decentralized exchanges in use right now – it has too many regulatory implications. But they are going to be the future of crypto trading due to the benefits on offer. IDEX and Waves are examples of decentralized crypto exchanges.
2. The Atomic Swap
The atomic swap is the exchange of one cryptocurrency token for another. The process takes place simultaneously. This might not sound like much, but the implications are huge. Third-party intermediaries are usually needed to ensure that transactions can be facilitated. They are there to enforce security in a trust-based system. Otherwise, one party could run away with the funds. But with atomic transactions, the entire swap has to be completed. So each party will get the full amount of agreed cryptocurrency tokens, or else the transaction will not be completed.
Atomic swaps will be the basis of decentralized exchanges. While atomic swaps have been completed by decentralized exchanges, a standard protocol needs to be developed, as there are still some challenges.
3. Centralized Exchanges
While decentralized exchanges have been promoted, the technology is not yet there. But a number of centralized exchanges have popped up with a focus on regulatory compliance. A prime example is the Etherbase centralized exchange in Europe that provides a full suite of banking services with SEPA transfers and a debit card.
These are fully-fledged crypto exchanges offering traditional banking services. It is the integration of cryptocurrency products into the existing financial infrastructure and should serve to boost trade volume and general acceptance.
4. Hyperledger Fabric
Hyperledger Fabric is one of the most important crypto innovations, with a huge range of applications. It can be used to build interoperability between blockchains and is a framework for the implementation of blockchains. Many enterprises and financial institutions make use of HyperLedger Fabric for various projects.
Sberbank in Russia has traded commercial bonds on the blockchain with the assistance of the Hyperledger Fabric platform. There are a large number of projects under the large umbrella of Hyperledger and the architecture is widely used by crypto exchanges, financial institutions, and blockchain developers for a number of different purposes.
Cryptocurrencies are notoriously volatile. The price of Bitcoin can fluctuate as much as 10% in a single day. It can be very difficult for traders to get a grip on this asset and it is entirely possible to blow an entire portfolio, if the appropriate risk-mitigating procedures are not put into place. Enter stablecoins. Stablecoins are coins that are pegged on a one to one basis with a stable currency, such as the USD or the Euro. They strive to reach equilibrium with a stable fiat currency.
A prime example of a stablecoin is the USDT. ‘Tether’ coins are backed on a one-to-one basis with the dollar. This company is audited, though it has undergone considerable controversy. There are also a number of other stablecoins that have maintained parity with the US dollar. Some are collateralized with other cryptocurrencies, such as MakerDao. Stablecoins allow traders to enter the world of cryptocurrency more easily. There is greater trade volume for stablecoins than for typical cryptocurrency pairs and it provides a safety net for the trader.
6. Cryptocurrency Derivatives
The increase in cryptocurrency derivatives is excellent for adoption and trade volume. Bitcoin, Ethereum, and Litecoin futures have been introduced in Europe and the US. This allows traders to place positions on derivative contracts. They can trade on margin with these derivatives, meaning that more trades will be placed. In this way, the total trade volume of BTC will be boosted, similar to how all other assets classes are boosted up by the derivative trade volume.
At present, many people cite the fact that the BTC trade volume is a fraction of what the fiat market represents. This is true, but mainly because the derivative market is vast. When crypto derivatives become even more popular, the total trade volume will increase. Delta Exchange is a crypto exchange that offers crypto derivatives on BTC, ETH, XRP, and XLM.
Superorder is the newest innovation in the crypto sphere that allows traders to sync their existing exchange accounts into the cryptocurrency trading platform and automate customized trading strategies. The interface is beautifully designed without compromising on the latest features necessary for the successful execution of trades.
Superorder not only facilitates the orders. A built-in visual strategy planner assists traders to define their trading strategy in an aesthetic manner. At present, Binance, Bittrex, and BitMex are supported exchanges, with more to be added soon.
A 14-day free trial is available to get a feel for the platform with all the necessary features, from the strategy builder to portfolio tracker. It is the perfect platform for new and experienced traders alike.