With the constant growth in crypto trading, exchanges are having to deal with huge volumes of trade in hundreds of million of dollars
As of today there are over 1,890 daily traded cryptocurrencies according to CoinMarketCap in circulation with many more still to be introduced, all thanks to the blockchain technology. The witty technology invention which hit limelight following the debut of Bitcoin in 2009, has aggressively disrupted several industries and also paved way for the adoption of digital currencies for transaction and trading purposes. Since Bitcoin and the emergence of other cryptocurrencies dubbed “altcoins”, following the introduction of Ether, investors globally have shown eagerness to trade in this market and maximise the opportunities it presents.
The rise in the number of cryptocurrencies and the massive interest of the public in trading with them, paved way for several cryptocurrency platforms referred to as “exchanges”- providing avenues for fostering the trade of these digital currencies. These exchanges serve as platforms for traders to buy and sell cryptocurrencies either via other cryptocurrencies or fiat currencies like dollars.
These centralised exchanges as of today have grown to over $13 billion USD in volumes of trades carried out on the various platforms. Exchanges like Binance, OKEx, Huobi, Bitfinex and ZB.COM are currently topping the list of the largest exchanges by daily volumes of trade according to coinmarketcap.
Why Build Public Chains?
With the constant growth in crypto trading, exchanges are having to deal with huge volumes of trade in hundreds of million of dollars. However given the fact that Ethereum has gained more popularity amongst exchanges, several of the coins and projects listed on the various exchanges are tailored to fit the ERC-20 standard. Consequently, this implied that as the volume of trades increase massively on the platforms of these various exchanges, “free” promotions are indirectly given to ERC-20 tokens rather than the possibility of pushing their own ecosystem with their own token standards.
The tokenisation of existing businesses is a trend that a few IoT and industry experts believe will flourish. Even though there has been a clampdown on ICO’s, especially in China, the digitisation or tokenisation of assets is still commonplace. Back in the early 2000’s, internet companies were at the forefront of connecting people and ideas in a much more efficient and cost friendly web gateway. Now, in the blockchain era, enterprises are finding ways to protect their data and digitise certain services on the blockchain. When enterprises tokenise an asset, they need liquidity for such an asset, so exchanges are able to provide the liquidity. Early on in 2017, Binance and other exchanges like Huobi were using the ERC20 standard to list tokens, since many projects were built on the ERC20 standard, and it was easier for exchanges to list such tokens.
An industry insider has mentioned that Binance however, realised they were giving free publicity and support to the Ethereum network. The more ERC tokens they listed, the more publicity Ethereum received. Binance noticed aside from the listing fees, they were not profiting much from doing free publicity to Ethereum. Therefore they began incubating their own ecosystem and recently announced their intention launch their own public chain. Binance believes in the nearest future, centralised and decentralised exchanges will work together complementing each other.
Following the announcement of Binance’s public chain intentions, Huobi and OKEx also followed suit in making public their intentions to launch their own public chains with the platforms issuing their own tokens to facilitate the ecosystem.
These major exchanges are using their own large liquidity machines and their platform tokens to slowly replace ERC tokens, and these exchange tokens are eating away at the market share of ETH. There is a gradual but significant shift taking place, as these large players in the crypto industry are saying no to ETH and building out their own ecosystems. Many industry experts like Eric Gu, CEO of the Metaverse Foundation and RightBTC Exchange, believe this could eventually have an impact on ETH in hte long run.
The leaning towards creating public chains might also be due to the fact that these exchanges aim to stay relevant in the industry, maintain their competitiveness and also avoid the risk of being eroded by others thus they seek to maintain a competitive advantage.
Another exchange which already anticipated this trend and already embraced it earlier in 2016 is the RightBTC exchange. Gu had adopted the idea of integrating the exchange with the public chain in a bid to also maintain a competitive edge over other projects. A trend which is now becoming prevalent today. RightBTC has also recently launched its Right Token (RT), which will give platform users a host of benefits such as trading fee rewards, special promotions, and OTC trading fee deductions.
By creating own public chains, exchanges will be able to continually develop their own projects whilst also enhancing and facilitating their own ecosystems. Tokens issued on these platforms will also be facilitated without giving free popularity to other tokens such as the ETH. This certainly is a trend worth embracing and a further step to creating a decentralised world indeed.
Ethereum Community Still Standing Strong
Even though crypto-exchanges are currently building their own public chains, there are still many projects utilising the ERC-20 Token Standard. Currently, the community of Ethereum is still the most decentralised project out there today. It is so decentralised that when the hard fork between Ethereum and Ethereum Classic took place, the community on a whole decided to split off the chain to prevent the attack. This decision was not made by central governors or nodes; the whole community took part. A glance at the Ethereum Github page also shows a large number of community code and support.
With the rise of these powerhouse exchanges and their own public chain ecosystems will come to an inflection point within the crypto industry. As these exchanges promote their own public chain projects over Ethereum and create their own token standards, we will perhaps see a power struggle between the decentralised foundations of blockchain, such as Bitcoin and Ethereum, to the newly powerful exchanges like Binance and Huobi.
Considering the less than 1% of the market share of the cryptocurrency industry compared to the rest of the global financial markets, the market is still anticipating on the growth and acceptance by the mainstream financial market. How this battle plays out will shape the near future for this industry and beyond.
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