The advent of cryptocurrency gave rise to the launch of different exchanges to facilitate the selling and buying of cryptos. Since then, we have had centralized cryptocurrency exchanges, decentralized cryptocurrency exchanges, and now hybrid cryptocurrency exchanges. As a digital asset, cryptocurrencies were met with challenges in their exchange on existing physical networks. This was the reason for the creation of different exchanges.
Trading of cryptocurrency is akin to forex trading in the sense that it involves the exchange of currencies. However, crypto trades deal with solely digital currencies. You can exchange Ethereum for Bitcoin, Ripple for Litecoin, etc, and vice versa. This is the same manner forex traders can exchange the United States Dollar for the British Pound. By levying the traders for a small fee on each transaction, the platforms are able to maintain themselves.
With time, these cryptocurrency platforms, based on their fundamental architecture, were categorized into centralized or decentralized crypto exchange platform. Before we delve into the hybrid cryptocurrency exchange, let us refresh our minds on centralized and decentralized crypto exchanges.
Centralized and Decentralized Cryptocurrency Exchanges
Third-party providers that organize trades between buyers and sellers control centralized exchanges. On the other hand, decentralized exchanges stick to the ideals of Satoshi Nakamoto; thus, thus, they are not run by third-parties. While decentralized crypto exchanges are known for maintaining anonymity and being well secured, centralized exchanges are known for fast transactions and high liquidity. Both exchanges also have their peculiar challenges regarding crypto trading.
The centralized exchanges charge transaction fees and are also in charge of traders' assets on the platform. They also hold the funds of users in the hot wallet (wallets connected to the internet), which are relatively easy to access. Most exchange hacks in the history of cryptocurrency have been on centralized exchanges. Some good examples include Mt.Gox, BitFloor, and Poloniex.
On the other hand, decentralized crypto exchanges are quite slow when it comes to transaction speed. The platform is not ideal for users who want to exploit the volatility of the crypto market. Decentralize exchanges do not enforce an anti-money laundering (AML) and know your customer (KYC) laws, thus making it a hotspot for malicious activities.
We now have an overview of the centralized and decentralized exchanges. Let us explore the hybrid cryptocurrency exchange and what it holds for crypto traders and investors.
Hybrid Cryptocurrency Exchange
The limitations of both the centralized and decentralized crypto exchanges led to the creation of the hybrid cryptocurrency exchange. This specialized crypto exchange combines the positive features of centralized and decentralized exchanges. The hybrid crypto exchanges address all the shortcomings of centralized and decentralized exchanges. They adopt the usability and liquidity of centralized platforms and the anonymity and security of decentralized exchanges.
Here, users have total control of their funds and do not have to hand them over to any custodian. You can trade digital assets directly from your wallets while depositing tokens into the robust smart contract. The hybrid cryptocurrency exchange is undoubtedly the next generation crypto trading marketplace.
Examples of Hybrid Cryptocurrency Exchange
Here are some of the rising hybrid crypto trading platforms:
- Qurrex Hybrid Exchange
This is one of the hybrid crypto exchanges currently available in the market. It is ideal for brokers, high-frequency traders, corporate companies, and arbitrageurs. The platform uses both on-chain and off-chain protocols to process orders initiated by users through an electronic communication network. An electronic communication network (ECN) is a computerized system that automatically matches “buy” and “sell” orders.
Its features include institutional-grade security measures, enough liquidity, greater transparency, 24/7 technical support in multiple languages. Qurrex also has advanced API, fiat integration, an aggregated order book, and a trading facility for ERC-20 tokens.
- Eidoo Hybrid Exchange
Eidoo is another rising hybrid exchange where you can trade cryptocurrency. Your account will link to a smart contract on the Ethereum blockchain; Therefore, no one except you can access or view the funds in your Eidoo account. A smart contract is a computer code that runs on blockchain. Blockchain processes all transactions that happen in a smart contract. The implication is that you can process your transactions without any third party. This hybrid crypto exchange has an in-built Atomic Swap feature that allows users to exchange hundreds of ERC-20 tokens.
- Legolas Hybrid Exchange
The Legolas hybrid exchange is ideal for institutional investors. Legolas incorporates a decentralized ledger within its proprietary platform. It aims to guarantee the order book's inalterability and transparency to ensure a fair trading environment for users. The protocol is a semi-decentralized order matching protocol. All incoming orders and transactions are encrypted and timestamped and stored on the blockchain. The order matching is done off-chain.
The Benefits of Hybrid Cryptocurrency Exchange
- It gives users real-time service access and incorporates solutions that are based on blockchain technology.
- Users can trade on centralized and decentralized crypto platforms.
- It addresses the pitfalls of both centralized and decentralized crypto exchanges.
- The users have complete control and custody of their funds on hybrid exchanges. It doesn't matter if third parties decide to regulate the exchange of cryptos.
- The platform secures users' privacy, but it is also compliant with different laws guiding digital currency.
- The assets of users are not held in hot wallets. This means that funds are placed in cold storage (the digital wallet is kept on a platform that is not connected to the internet), hence making cyber-attacks on hybrid exchange highly improbable.
- The hybrid cryptocurrency exchange is performing fast and transparent crypto transactions. This makes it a very interesting and enticing choice for crypto traders around the world.
Generally, the hybrid crypto exchange platform is scalable. Therefore, it helps to position the platform as a potential crypto exchange hub in the future. Fraudulent practices like what we have experienced with decentralized exchange platforms will become obsolete. Therefore, in the hybrid crypto exchange, you can conduct smooth and safe crypto trading with anyone worldwide.
Features of Hybrid Crypto Exchange
Here are some of the major features present in a hybrid cryptocurrency exchange platform:
- Escrow method
The escrow mechanism will control the stability of crypto funds to ensure the satisfaction of buyers and sellers.
- Flawless transaction execution
Hybrid exchange incorporates top-grade authentication to guarantee seamless transactions in a highly secure environment.
- Atomic Swap Exchange
Blockchain-based atomic swaps will allow traders to exchange digital currencies directly without the help of third parties. Atomic swap is a smart contract that allows users to exchange different cryptocurrencies peer-to-peer, hence eliminating intermediaries. Users can exchange large amounts of cryptocurrencies in this manner.
The hybrid cryptocurrency exchange is the missing link that unites the advantages of both centralized and decentralized exchanges. Time will tell how these platforms will fair in the crypto market. However, the prospect is nothing short of positivity.
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