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Coincheck Hack Highlights Need for Proper Decentralized Exchanges

Avatar newsbtc 2 years ago

Many different lessons can be learned from the Coincheck debacle. The heist on this Bitcoin exchange raises a lot of questions and provides few answers. Additionally, it seems criminals will continue to exploit any sort of weakness on centralized platforms. As such, there is a growing need for decentralized trading solutions. These decentralized exchanges will be of great interest to cryptocurrency users worldwide. Even so, this new business model is not without its flaws either.

Several companies and projects already provide a decentralized exchange model. EtherDelta and BarterDEX are two of those examples. They cut out the middleman and let users trade currencies directly. It’s an intriguing business model, although one that still needs some work. In the case of EtherDelta, a few vulnerabilities have been discovered already. The centralized web front-end of this decentralized exchange still attracts criminal activity. Although only minor heists occurred, it is evident things will need to change.

Decentralized Exchanges are the Future

With the recent Coincheck hack, it is evident we need to move away from centralized solutions. That is much easier said than done, to say the least. Centralized trading platforms are very convenient for both novice and veteran users. Despite the convenience, users have to give up the control of their private keys. Most people seemingly have no problem with that, even though they should know better by now. Decentralized trading solutions are not as convenient, as they usually require users to set up and run the software themselves.

How decentralized exchanges will evolve, remains to be seen. There is a genuine interest in this business model, but the current solutions are not as secure as they could be. Moreover, these platforms don’t verify user identities either. Although that isn’t necessarily a problem, it also poses a lot of new challenges. This is especially true when trying to recover lost or stolen funds on behalf of users. In the case of EtherDelta, for example, funds have not been recovered to date.

It’s a matter of time until this situation improves. Decentralized exchanges will eventually become the new normal sooner or later. For now, these solutions struggle to generate a lot of trading volume. This is mainly due to the lack of convenience when using these tools. In an ideal future, the majority of cryptocurrency trading volume will originate from decentralized exchanges. New platforms are showing up on a regular basis, which creates more positive competition.

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