To address the liquidity challenges facing decentralized transactions


nnnThis article is an article written by Loi Luu, CEO and founder of Kyrgyz’s digital currency exchange, highlighting the advantages of going to a centralized exchange, such as being safer and more transparent, and analyzing the main obstacles to its growth , Emphasizing the low liquidity is the current centralization of the transaction need to focus on solving the key issues. The way to improve liquidity is diverse, once the problem can be solved, the centralization of the exchange will be more recognized, so as to promote the mainstream of digital currency use.n
nnTranslated by: Inan
nThe total market capitalization of digital money is now more than $ 137 billion, compared with $ 16 billion at the beginning of the year.n
nBut in the digital money market, a large number of transactions must also solve the liquidity problem.n
nLiquidity refers to the extent to which the market allows assets to be traded at a stable price. Lower liquidity tends to cause a large market volatility (especially when there are a lot of orders), making the price change significantly; and high liquidity will make the market volatility is small, the price changes will not be so dramatic.n
nNow the most liquid assets are cash. If you have a $ 1 million deal, the deal can be easily entered into the market without a dramatic change in the value of the dollar. The transaction-related costs and the monetary value of the transaction are also known in advance.n
nHowever, the same amount of Bitcoin or any other digital currency transaction has a significant impact on the value of the digital currency.n
nThis is because the market liquidity is insufficient. The amount of digital currency available on a particular trading platform may be exhausted, which requires the buyer to complete the transaction at a price of 1% to 10% more than expected.n
nTo complete a $ 1 million deal, the final price may be higher than the original 10,000 to 100,000 US dollars.n
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nTo the center of the trading platformn
nSo far, the field of digital money has been dominated by central exchange, in which exchanges can be used to convert the digital currency in government currency.n
nCentralized exchanges, such as Coinbase, are easy to access and use. However, as many of these exchanges fail to adequately protect their clients’ funds, the concept of centralizing exchanges is popular.n
nCentralized exchanges are not prepared for the influx of large numbers of new users, causing major system failures and causing hackers’ attention. While some centralized exchanges are safer, there are still some security vulnerabilities, such as last year’s Bitfinex black event that caused thousands of users to lose their deposits (and later repay).n
nThe centralized trading platform provides another potentially valuable service that promises to have higher security and transparency. They do not rely on third-party services to hold customer funds, but through the automated process of peer-to-peer transactions.n
nThe advantage of using a de-centralized exchange is that there is no need to trust the exchange platform itself, since the funds are held by the user and placed in the personal wallet, rather than by a third party. Centralized exchanges can also provide better privacy for those who understand the technology, while reducing the risk of server downtime.n
nBut unfortunately, to the center of the trading platform is still a lack of goods, easy to use and comprehensive “user support” to attract the mainstream user base. As a result, the liquidity and market depth of these exchanges are still at a very low level.n
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nSolve liquidity challengesn
nIncreasing the liquidity of the decentralized trading platform is a way to encourage mainstream adoption. Of course, many factors help to improve the liquidity of assets. However, if consumers use digital money to trade the way can be simplified, then the demand for these assets will certainly increase.n
nThere is no doubt that in the foreseeable future, the sale of digital money will continue to occur in different types of exchanges, and there will be no more stable single asset to control its value. This means that to overcome the fragmentation of the market and liquidity issues require a unique solution.n
nOne way to solve the challenges of a decentralized exchange is to reduce the conversion costs of digital money traders. If a chain platform can take advantage of multiple reserves and cooperate with a variety of wallet suppliers to reduce the barriers from one exchange to another, the user can log in to his wallet and perform the token conversion, Out of the wallet.n
nSo that you can accept any decentralized platform to support the payment of the token.n
nThe convertibility of “tokens – tokens” is not the only way to solve the liquidity challenge. There are a lot of surprises about how to help users cross-network transactions at a reasonable price, and these solutions will open up new ways for more people to enter digital money ecosystems.n
nIn addition, while liquidity is not the only factor in the adoption of the technology, it is a key component of market maturity. The mobility of the chain-chain ecosystem, particularly in the de-centralization of the exchange, will be the key to making the public view the digital currency as a useful way to securely and reliably trade the currency.n

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