Hybrid Cryptocurrency Exchange: Moving Towards A Better Future

The idea of crypto exchanges began with peer-to-peer trading of cryptocurrency, giving rise to decentralized exchanges (DEX). As decentralized exchanges don’t need a middleman, the cost of transaction and trading fees are next to none.

They are also far more secure. However, as trading transactions take longer to process, most DEXs lack liquidity. They also have laxed KYC and AML verifications, and are not regulated.

Cryptocurrency exchanges (CEX), just like their traditional counterparts, act as intermediaries. So, they charge trading and transaction fees. As a centralized white label crypto exchange has to follow KYC and AML regulations, most CEXs are legal and regulated. They are also easy to use.

Recently, hybrid exchanges seem to have taken off.

A hybrid exchange offers the perfect combination of centralized and decentralized platforms.

CEX + DEX = HEX

These exchanges aim to provide speed, legal compliance, and liquidity of a centralized exchange along with the security of a decentralized exchange. You will be able to enjoy all the perks of a CEX while trading directly from your hardware wallet as a DEX does.

Right now there are only a handful of hybrid exchanges such as Next and Eidoo. However, as various companies have started developing hybrid white label exchange software, we will see new platforms emerge in 2019 and beyond.

One of the primary reasons why the trend is shifting towards hybrid exchanges is to provide the best possible functionality with enhanced security.

CEXs are vulnerable to cyberattacks. As the CEXs act like intermediaries, investors are required to trust them for keeping their funds and identity safe. They don’t have any control and custody over their funds. In other words, hackers can steal hard-earned funds from traders although exchanges get hacked. In a recent cyberattack on Coincheck, a Tokyo-based cryptocurrency exchange, cybercriminals stole crypto assets worth almost $533 million.

Most centralized exchanges, especially the ones that are not regulated, are also notorious for engaging in front-running. Front-running involves exchanges inserting their own orders first in anticipation of big price movements. This considerably undermines the trading capabilities of individual traders.

DEXs, on the other hand, lack liquidity as they are not suitable for institutional investors. That’s why many crypto experts are exploring the possibilities hybrid exchanges can offer.

Hybrid cryptocurrency exchanges offer a few stellar benefits to both, individual and institutional investors.

• They bridge the gap between DEXs and CEXs in terms of functionality, regulation, and transparency. It’s a win-win for everyone.
• They provide access to the real-time trading process for individual traders.
• You can integrate existing conventional trading solutions into the exchange platform using blockchain infrastructure.
• Users can enjoy a transaction speed as fast as or better than CEXs. It applies to both, crypto-to-crypto and crypto-to-fiat currency transactions.
• Traders get access to an extensive array of trading tools that provide better reliability, modularity, and scalability.
• Traders will not need to keep their funds on the exchange. Thus, their crypto money will be less vulnerable to cyber attacks.
• Users don’t need to manage two sets of credentials as most HEXs require a synchronized identity model.

Hybrid exchanges combine the features that are individual to CEX and DEX.

• It comes with advanced trading features and tools.
• It is easy-to-use, especially for individual traders.
• Enables faster transaction speed and higher liquidity.
• Users control the funds, not the exchange.
• Attracts zero or low trading fees.
• Excellent security owing to the lowered risk of losing money because of central server hacks or maintenance downtime.
• May require identity verification. However, the high level of security will keep your personal information safe.  

The hybrid crypto exchange market is still in its infancy. Many hybrid crypto exchange software projects are in the final stage of development or have been deployed recently.

Here is a list of few promising hybrid crypto exchanges.

• A Next.exchange

Incorporated in the Netherlands and also registered as a Limited company in England and Wales, NEXT.exchange is a hybrid crypto exchange platform currently in function. It boasts more than 150 cryptocurrencies and various fiat payment gateways. Users can trade cryptocurrencies directly against fiat currencies such as USD, Euro, and British Pound, among others.

The platform provides each trader with their own individual Blockchain wallet address for enhanced security. The V1.1 of the trading platform comes with escrow functionality. It will allow traders to instantly transfer funds from their digital wallet balance to their trade account balance.

• B Eidoo

Eidoo is a Swiss-based hybrid exchange platform. It was introduced in the market in July, 2018 as a separate application called “Eidoo Preview.” The user accounts are based on Ethereum smart contract, where tokens are placed. You can safely trade ETH and ERC20 tokens via smart contracts on this platform. It does not require KYC verification.

Each user gets a personal and trading wallet. A personal wallet comprises all your digital assets, while the latter holds the crypto assets to be traded on the exchange. This system protects traders from possible hacks. The hybrid platform is available as an app on iOS and Android along with the desktop version.

• C Qurrex

Qurrex is perhaps one of the most talked about hybrid exchange platforms that will enter the market in late 2019 or early 2020. The platform comes with a central node that can route trade orders placed by institutional investors while providing transparency. At the same time, a decentralized network connected to the node will allow individual investors to place orders using their own private keys.

Platform developers claim to have the most robust cryptocurrency trading software with a transaction speed of 70,000 operations per second. There is also a latency of 650 us (99%). It will have a wide range of trading analytics and tools while ensuring zero loss of data.