To Decentralize Or Not To Decentralize Crypto Exchanges: Vitalik Buterin Weighs In On The Question

Ethereum co-founder Vitalik Buterin said that he hopes centralized exchanges will “burn in hell,” in a July 6 interview with TechCrunch journalist, John Evans. Ethereum is also the world’s second largest cryptocurrency with a market capitalization of around $47.5 billion.

During an event launched by TechCrunch in Zug, Switzerland on Blockchain 2018, Vitalik commented positively and favoring decentralization on a question asked by the host on whether decentralized exchanges will someday gain greater market share or sway away than centralized exchanges”

“The crypto community should be able to take away the ‘stupid king making power’from centralized crypto exchanges and I definitely personally hope centralized exchanges burn in hell as much as possible. In practice, particularly on the fiat to crypto side, it is very difficult to decentralize because you ultimately are interfacing with the fiat world, and the fiat world is one that only has basically centralized gateways…There are valuable services being provided there that are very hard to decentralize.”

However, he is just airing his views over centralized exchanges and their unrestrictive power and knack of giving,”grading to cryptocurrencies”, and, “charging hefty listing feesthat vary from ten to fifteen million dollar’s,”which he finds to be completely unacceptable. He clearly mapped his position as he went over the advantages of decentralization that he believes is more healthy economically and can satisfy the blockchain values of openness and transparency.

Buterin foresees that in terms of trading cryptos for other cryptos, DEX solutions will someday become the most appropriate option since they offer a simple and straightforward user experience devoid of registration, web interfaces, account openings, and it allows users to retain ownership of their cryptocurrencies and private keys. In his opinion, the crypto world will see more and more such exchanges coming into existence.

He further cited an example to validate the advantages of the current decentralization of Ethereum: “if someone puts a gun to [his] head and tells [him] to write a hard fork patch, he would definitely do so. However, relatively few users would then download and run the update, and that, according to Buterin, is called decentralization.

But Ethereum’s level of decentralization has pumped up some experts with several doubts, who cite, for example, the possibility of collusion between mining pools to manipulate the network and the relative lack of liquidity, compared to the centralized counterparts.

Although he articulated the ambiguity on which option will be preferred by large-scale traders, professional traders and high frequency traders have mentioned that even if centralized exchanges do not go away altogether, the upsurge of decentralized exchanges can only be a good thing because it can eliminate what he described as a king-making power from exchanges.

He clarifies his point and said, “…We can really take away this stupid king-making power that these centralized exchanges have where they have this ability to just decide which tokens become big by deciding to list them and then charging these crazy $10 million to $15 million listing fees. The more we can get away from that world and into something which actually satisfies the “blockchain values” of “openness and transparency the better.”

Whether it is Binance, the world’s largest cryptocurrency exchange by volume that has announced its strategies for decentralized exchange in March; Huobi, that has started to transfigure its whole platform to a decentralized exchange since June; or its OKEx due to the large adoption by the analyst to support its DEX model.

The fact is this will remain a hot topic with the majority of the world running in a centralized system.  Now there is a growing number of people seeking a decentralized system of trading that has the potential to leave off the government and other middle men citing advantages in transparency, lower cost, and varied opportunities. In blockchain technology these promises exist but the system is still lacking in adequate safeguards from fraud on both sides of the trading equation.

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