Typically, blockchain exchanges and traditional exchanges like the Nasdaq or the London Stock Exchange have been viewed as opposites, where blockchain exchanges are viewed as a more open, community-focused option, while traditional exchanges are viewed as relics of the old financial system – stuffy and against blockchain technology and crypto.
That seems to be changing now as the blockchain exchanges have finally started to form strategic partnerships with traditional exchanges that will allow the blockchain exchanges to deploy their technology in their operations. Is this the future of blockchain exchanges?
Problems with traditional asset exchanges
There are many drawbacks to traditional exchange platforms that blockchain technology and exchanges can address. First, traditional exchanges open and close at set times, which can limit trading activity by retail investors who may be busy during market hours.
In addition, traditional exchanges can have very expensive and complex fee schemes to trade. This can also discourage investors with less money from trading overall.
Many traditional exchanges are still slightly inaccessible to smaller retail investors who may still want to get involved in trading. This is because many traditional exchanges don’t offer a partial buy, which is the purchase of a fraction of an asset. Rather, the user must purchase a specific amount of the asset or an individual value of the asset.
Despite the inherent advantages of blockchain-powered exchange platforms, there are still many benefits that can be achieved through blockchain exchanges using the technology developed by traditional exchanges.
Some traditional exchanges have developed trading systems that can be easily scaled as the volume of trading increases. Given the exponential rise in the popularity of cryptocurrencies, ensuring scalability is critical to running a cryptocurrency exchange. In addition, these trading systems have low downtime and a high level of reliability, which ensures a seamless trading experience.
Additionally, many critics have held the widespread belief that crypto exchanges are like the Wild West and are not regulated. By forming partnerships with traditional exchanges, crypto exchanges are legitimized, and traditional exchanges such as the Nasdaq would therefore not agree to otherwise work with the specific blockchain exchanges.
After all, many cryptocurrency exchanges have previously faced unethical trading issues. Traditional exchanges now have systems that automatically monitor all trading activities on their platforms. For comparison, cryptocurrency exchanges have only recently started using these technologies to ensure that there is no abusive trading and to reduce the cost of surveillance operations, making cryptocurrency exchanges safer for traders.
The partnerships between traditional exchanges for exchanges and assets as well as crypto trading platforms can hopefully help continue a growing trend of seeing cryptocurrencies as a valuable, safe and valid commodity.
The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Oluwatobi Joel is a freelance copywriter, community manager, blockchain expert and serial entrepreneur. He has worked as a marketing strategist with various blockchain startups. He is also interested in innovative projects in the blockchain area.