Decentralization has long been a stalwart fixture of the cryptocurrency movement. Therefore, it’s somewhat surprising that most of the world’s major cryptocurrency exchanges remain as centralized entities. There are a growing number of firms, however, that have recently launched decentralized platforms. After Binance announced the advent of a decentralized exchange, the Kyber Network has made its own decentralized exchange (in beta) available for public use.
Kyber’s platform has been designed with liquidity in mind–the network reportedly allows users to instantly and securely trade any token for any other.
In an interview for Bitcoin Magazine, Kyber CEO Loi Luu said that the goals of the latest beta launch are “to drive volume and stress test the platform. We will be tracking the number of users, volume and number of trades. We expect a daily volume of up to $1 million USD after a few weeks in public beta.”
Prior to this public launch of the beta version, the platform held a closed-circuit launch for 10,000 selected users. The daily trading volume during the closed launch capped off at an average of $60,000.
How Will Kyber Work?
Besides traders, there are five ‘actors’ on the Kyber network. ‘Reserve Entities’ provide the liquidity on Kyber–as the whitepaper states, they “can be our own reserve or other third party reserves that are registered by other market makers.”
‘Reserve Contributors’ provide capital to reserve entities and share in Kyber’s profit; ‘Reserve Managers’ maintain the reserve and determines exchange rates. ‘Operators’ add and remove entities and idle token pairings. The whitepaper explains that a ‘proper decentralized governance’ will eventually take over the roles of the operator.
A number of high-profile cryptocurrency exchange hacks that have taken place over the past several months have made it clear that there are some serious security vulnerabilities across the exchange industry–more than $700 million worth of various cryptocurrencies have been stolen since the beginning of this year.
Because decentralized exchanges don’t rely on centralized servers to store crypto or sensitive personal information, they are much more secure. In order to successfully hack any decentralized network, an attacker would have to compromise more than half of a network’s nodes, which is virtually impossible.
The lack of a third-party entity who collects a profit from a decentralized exchange also means that fees on decentralized exchanges can be much lower.
However, there are some drawbacks to decentralized exchanges. In a Bloomberg report, Binance Founder and CEO Changpeng Zhao said that “on the decentralized exchange we’ll have less control. More likely anybody can list any coin. That’s the philosophy of the decentralized exchange, it’s freedom of choice, freedom of investments. But with freedom there will be people who are scammers. That’s not something we can control.”
Decentralized exchanges have also garnered a reputation for being rather user-unfriendly, especially for those new to crypto. However, if Kyber’s new exchange manages to prove its accessibility, it could stand to become a go-to platform in the crypto industry.
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