As security of cryptocurrency exchanges is being increasingly questioned in the wake of the recent Bitfinex hack, the developers at Blocknet are calling for an exodus to leave centralized exchanges behind.
Also read: Bitsquare: The ‘Missing Link’ for Decentralized Bitcoin Exchange
‘It’s Time to Remedy the Problem’ – Blocknet
This year there has been quite a few breaches of cryptocurrency exchanges. Platforms such as Gatecoin, Cryptsy, and now Bitfinex have all been hacked for a significant amount of user funds.
But now the Blocknet project (blocknet.co) is ramping up its efforts to encourage people to test their decentralized exchange platform, currently in beta. Blocknet claims to be the only technology that decentralizes the very foundations of exchange protocol such as coin deposits, order books, order matching, and transfer protocol. The Blocknet team says the time is ripe for a solution to failing centralized exchanges, and decentralization is the answer.
Blocknet developers explain:
Cryptocurrencies need decentralized exchanges like the dark ages needed vaccines. Every person in the crypto community will be uncomfortably familiar with ongoing exchange theft, attack, and fraud. One in sixteen Bitcoins have been stolen. Mt. Gox, Bter, Mintpal, Cryptsy, Bitfinex, and an alarmingly long list of other exchanges have significantly damaged confidence in cryptocurrency, diminished exchange liquidity across the board, and lost millions of dollars of customers’ funds. It is time to remedy the problem. The Blocknet offers a solution, in the form of its first consumer-focused spinoff of its core technology.
The team intends to create solutions for the industry with its inter-blockchain application platform, which gives the protocol inter-chain interoperability among a variety of different blockchains. Three core components are integral to the Blocknet system including a blockchain router, end-to-end p2p data transport, and an atomic coin exchange protocol. The final element will be the framework for comprehensive decentralized exchange platform that gives people a safer place to trade.
Exchanges require coins to have a holding tank, orders need to be matched and broadcasted, and trades need to be processed between two counterparties, which Blocknet says, will all be decentralized. For instance, rather than order books being transmitted publicly, orders are relayed across Blocknet’s peer-to-peer blockchain router, thus preventing any outside party from seeing this data.
Will Decentralized Trading Catch On?
Blocknet acknowledges there are several decentralized exchanges currently in existence, yet the cryptocurrency community has not exactly embraced this en masse. One possible reason could be the need for developers to code a new coin into the exchanges interface. The developers explain how their platform is different:
Blocknet’s decentralized exchange requires no code whatsoever in order for every single wallet with the Bitcoin Core API or Ethereum’s codebase to work. Interoperability is a key feature across the Blocknet’s design, and this extends to its exchange technology: using the exchange simply requires giving a local Blocknet node the API credentials of the wallets on your local PC, nothing else.
The push towards decentralized exchanges is exactly what the crypto-community needs right now, the Blocknet developers explain, and they hope to encourage traders to leave centralized exchanges behind.
Today, the decentralized exchange space is growing steadily. Blocknet will already have competitors such as Bitsquare, Openledger, the NXT asset exchange, Bithalo, and others.
Many people believe the concept of decentralized exchange will push cryptocurrencies to the next level by eliminating a single point of failure, also known as the honey pot. And while users will largely decide if decentralized trading catches on, another key factor will be whether cyber thieves will have an answer to such a move.
What do you think about decentralized exchanges as a solution to cyber theft? Let us know in the comments below!
Images courtesy of Pixabay, pexels.com, Blocknet