Centralized vs Decentralized Cryptocurrency Exchanges: Vulnerability of Most Trading Platforms

Billions of dollars are traded on major cryptocurrency exchanges like Binance, Huobi, Bithumb, and OKEx on a daily basis, and users tend to prefer these exchanges over other platforms in the market due to their high liquidity.

Binance for instance, the world’s largest cryptocurrency exchange, settles more than $1.8 billion worth of cryptocurrency trades per day, and it is processing $370 million worth of bitcoin trades alone.

But, in order to trade on these platforms with reasonable trading limits and flexibility, users are required to undergo a rigorous Know Your Customer (KYC) and Anti-Money Laundering (AML) verification process, during which users have to submit relevant government-issued documents like passports, carry out face-to-face interviews, and provide bank documents.


For cryptocurrency-only exchanges like Binance and Huobi, KYC and AML requirements for users are significantly less strict in comparison fiat-to-cryptocurrency exchanges. Still, to withdraw relatively large amounts of bitcoin or any other cryptocurrency like Waves, users need to be KYC and AML compliant.

As instant cryptocurrency exchange ShapeShift CEO Erik Voorhees stated before, KYC and AML systems can leave centralized platforms vulnerable to data thefts and hacking attacks, especially if exchanges store sensitive information such as passport data, banking documents, social security numbers, and more.

In June 2015, Voorhees boldly decided to leave a big cryptocurrency market in New York due to the BitLicense, a licensing program for cryptocurrency-related businesses that enforces strict KYC and AML regulations.

“It would maybe be a different story if, you know, companies and governments were able to retain secure records of things. But just last week, there were 4 million accounts [compromised] on several computers – it’s every couple of weeks there’s a big data breach somewhere,” Voorhees said at the time.

Waves Decentralized Exchange

Large-scale decentralized exchanges like the Waves Decentralized Exchange (DEX) that is built into the Waves blockchain protocol essentially allow users to remain in full control of their funds, information, and sensitive data, while still providing sufficient liquidity.

Already, DEX of Waves is processing nearly $700,000 worth of cryptocurrency trades per day. Although the daily trading volume of decentralized exchanges like Waves DEX are low as of current, as cryptocurrency users develop awareness of security and blockchain networks scale better to handle millions of trades on a daily basis, the volume of decentralized trading platforms will naturally increase.

Fred Ehrsam, the co-founder of Coinbase, previously emphasized the importance of decentralized exchanges in terms of security and financial independence. Due to their ability to allow users to possess all relevant information such as private keys and funds, decentralized exchanges eliminate the possibility of hacking attacks. Even if the network is compromised, users can easily retain their funds through their private keys.

“There are a few obvious benefits to decentralized exchanges. First, they allow you to remain in control of your funds. So no risk of the exchange being hacked or going insolvent. This can lead to higher liquidity, as users may be willing to leave orders open on the orderbook for longer when counterparty risk is gone,” Ehrsam wrote.

After several hacking attacks on cryptocurrency exchanges including South Korea’s largest trading platform Bithumb and leading Japanese exchange Coincheck occured, the demand for decentralized exchanges has increased. In the long-term, as cryptocurrency users develop more awareness of security and privacy, the adoption of decentralized exchanges like the Waves DEX will inevitably increase exponentially.

Subscribe to our newsletter

According to security-focused researcher Kim In-soon at South Korea’s ETNews, the demand for bitcoin hardware wallets is increasing rapidly in South Korea, as users have started to avoid local cryptocurrency exchanges to store their funds.

Exchanges Are Not Secure

Over the past two years, even the largest cryptocurrency trading platforms in South Korea including Bithumb have suffered several data breaches and hacking attacks. In other regions like the US and Europe, only a handful of exchanges have not experienced major hacks to date.

Centralized cryptocurrency exchanges and wallet platforms are vulnerable to hacking attacks and many kinds of cyber attack methods because of their reliance on a single point of failure. Since cryptocurrency exchanges are managed by a group of administrators or a company, their servers, databases, and infrastructures are all managed centrally.

The centralization of various components of trading platforms provide an opportunity for hackers to break into the system and potentially steal user data, sensitive financial information, and in the worst scenario, reallocate user funds.

An easy alternative to cryptocurrency exchanges is non-custodial cryptocurrency wallet that allows users to remain in full control of their funds. Non-custodial wallets do not store or protect private keys and back up codes on behalf of users. Users are provided with their private keys and 12-word passphrases that can be utilized to backup or recover their funds, in case users cannot access their accounts of the platform is compromised by hackers.

Web-based wallets can be a target of DDoS attacks or server outages, that may significantly slow down the process of checking balance, withdrawing funds, and sending transactions. Last year, in November 2017, Blockchain, the second most widely utilized cryptocurrency wallet behind Coinbase, experienced a server outage that briefly disabled customers from viewing their balance on the wallet.

Non-custodial wallets like Blockchain do not store or manage user funds and private keys but provide full access to funds to their users. But, because of their reliance on centralized servers, occasionally, server outages could cause inconveniences.

Hardware Wallets

Due to the limitations and weaknesses of centralized wallets and cryptocurrency exchanges, many users in South Korea have started to prefer hardware wallets and cold wallets over centralized hot wallets.

Over the past year, at least three major cryptocurrency hardware wallets targeting the local market have launched, including Penta Cryptowallet, KeyPair, and TouchxWallet. In acknowledgement of the rising demand for hardware wallets, Ledger, the largest cryptocurrency hardware wallet manufacturer based in France, has decided to enter the South Korean market.

In a highly volatile and rapidly growing market in cryptocurrency, the shift in trend from easy-to-use centralized wallets to secure hardware wallets can be considered as an optimistic indicator, as it demonstrates the willingness of users to develop awareness of security.

Over the past few months, several countries including Iran, Venezuela, and China have either announced their plans to launch national cryptocurrencies or already conducted initial coin offerings (ICOs) to introduce a state-backed digital currency.

In late February, Venezuelan president Nicolas Maduro claimed that Petro, the oil-backed cryptocurrency operated by the country’s government, raised $735 million from investors. A few weeks later, in an interview with a local mainstream media outlet Telesur, President Maduro stated that Petro generated $5 billion from 186,000 certified purchases.

Inspired by the success of Venezuela’s Petro ICO, the Iranian government, which is currently dealing with heavy international sanctions, revealed that it has begun the development of a cloud-backed cryptocurrency. Iranian Information and Communications Technology Minister MJ Azari Jahromi said that the country will “implement the country’s first cloud-based digital currency using the capacity of the country’s elite.”

However, all national cryptocurrencies including Petro and the digital currency of Iran, are not decentralized by nature unlike public blockchains and cryptocurrencies like bitcoin. Vitalik Buterin, the creator of Ethereum, previously expressed his concerns in regards to the centralization in ICOs, which are launched on top of a decentralized blockchain in Ethereum.

“I think many of these flaws arise from the fact that even though the ICOs are happening on a decentralized platform, the ICOs themselves are hardly centralized; they inherently involve many people trusting a single development team with potentially over $200 million of funding,” Buterin said in an interview with South Korean mainstream media outlet JoongAng.

Hence, even the Venezuelan Petro, which is supposedly an ERC 20 token launched on top of the Ethereum protocol, is centralized to a certain extent.

At the Genesis London conference held in the UK, bitcoin developer and applied cryptography consultant Peter Todd stated:

“Basically all currencies are digital currencies — the ultimate ledger of truth in currency systems is nearly always digital. Maybe some terrible backwards country like North Korea might be keeping it all on paper but if you go to most places in the world, it’s going to be digital records. So most places have digital currencies already. Equally, most places you can transfer money digitally. Cryptocurrency is not about being able to move money digitally, it’s about auditing. In the case of decentralised cryptocurrency, it’s about the ability to move money and audit it without permission. But when you’re talking about a government currency, obviously there’s permission, a central authority and control — end of story.”

Public blockchains or cryptocurrencies can be easily audited, primarily because transaction data and financial information are stored on a public ledger that can be accessed transparently by anyone within the network.

As such, while national digital currencies are branded as cryptocurrencies and decentralized networks, structurally and fundamentally, they do not have any significant difference with existing systems based on fiat currency.

“So the cryptocurrency part of it is about giving people better ability to audit what happened, audit what the supply is and audit what the transactions are. I think, in reality, a lot places don’t really care about that. Does even the government of Canada care about giving people the ability to audit the money supply? Probably not as much as you’d think,” Todd explained.

It’s the last chance to get a massive 58% bonus by participating in the ZeroEdge pre-ICO. Not only are they offering huge discounts to their first contributors, they’re hoping to shake up the entire online casino industry too!

Zero House Edge Means You’re More Likely to Win

ZeroEdge isn’t just a cool sounding name. They’re trying to build an online casino with literally zero house edge whatsoever. You’ve probably heard the phrase “the house always wins before”. Well, with ZeroEdge, they don’t anymore.

Traditionally, casinos make their money without the need for fees. Instead, they rig the games in their favour. It’s not exactly cheating because somewhere in the small print all the maths is all explained. It does guarantee the casino makes profits and punters lose over time though.

ZeroEdge hope to change this. Their business model is simple. When presented with a choice between a casino that takes a 1-10% edge on all games and one that has absolutely no house edge, the customer will always pick the latter.

The company plan to reward holders of their tokens by making sure that the supply of them is fixed at 686,940,000. With such high demand for fair gambling games, the value of these will naturally increase and reward the platform’s earliest contributors.

On the ZeroEdge platform will be sports betting without a commission, casino games without a house edge, and poker without the rake. With other blockchain casinos such as Edgeless getting legal recognition lately, it could be a great time to get involved with gambling ICOs!

ICO Details

As mentioned, the pre-sale of the ICO will end on 15/03/18. This only gives you a few more hours to take part. In terms of contributions, the initial funding round is already 80% complete.

The pre-sale will give contributors a massive 58% discount on final rate of the ICO. During this phase 60,040 ZERO tokens will be given for every 1 ETH sent to ZeroEdge. This will decrease to 24,000 ZERO tokens in the final phase of funding.

After the pre-sale is over, contributors will still be eligible for discounts. These will be divided into two-week blocks until the end of the sale on August 1. The discounts for each sale period will be 15%, 10%, and 5%. During final two weeks, the rate will be 24,000 tokens for every 1 ETH contributed.

If the idea of zero percent house edges appeals to you, why not head over to ZeroEdge’s website and have a look at their whitepaper. Be quick if you want to take advantage of the great pre-sale savings though.

The most recent news update on the Coincheck heist is better than expected for the 260,000 traders who lost money in the theft. The Japanese cryptocurrency exchange has promised to reimburse its customers $260 million more than the current market value of the stolen coins.

Coincheck Customers Get $230 Million Extra

Yusuke Otsuka, Chief Operating Officer at Coincheck Inc., announced the company will now start reimbursing customers at a rate of about 88 yen (US$ 84) for each NEM coin that was stolen from their accounts, which comes to a total of approximately $440 million.

Stolen on January 26, the 500 million NEM coins were worth a total of $534 million at that time. Since then, however, the price of NEM has slumped amid a broad retreat in cryptocurrencies. Priced at $0.36 each at the moment of writing, the 500 million coins are now worth a total of $180 million. So, for a regular fiat-currency kind of investor, it would seem like customers have hit the jackpot, with the extra $260 million. But of course, Coincheck is obliged to repay NEM for the stolen NEM.

The cryptocurrency exchange will be using its own funds to start the payouts as soon as next week. Otsuka added that the company has bolstered its security measures. Since the hack, customers have withdrawn about 60 billion yen ($566 million) in cash.

The company’s first statement regarding the reimbursement came less than 48 hours after the hack: “The timing of the reimbursement and the application process are currently under consideration. The source of the refunded money is being carried out using our own capital.”

After the infamous Mt. Gox hack, Japanese policymakers introduced new legislation, which became law in April 2017, to prevent new hacks. Japan’s financial watchdog, FSA, allowed 16 exchanges, including Coincheck, to operate while awaiting a decision on their applications.

As a part of Japan’s new legislature to vet and audit cryptocurrency exchanges, the exchange was four months past its deadline for receiving a license necessary to operate when the attack took place. After the hack, FSA told Coincheck to revise its management structure, improve anti-money laundering procedures and submit a report by March 22.

In the wake of the Coincheck hack, Japan Cryptocurrency Business Association and Japan Blockchain Association, representing Japan’s sixteen FSA-regulated crypto exchanges, have merged into a new self-regulatory organization, following a request by the FSA. The new body will aim to improve security measures and develop standards for activities around initial coin offerings.

Over the past six months, the vast majority of South Korea’s youth and millennials have invested thousands of dollars in the cryptocurrency market, with hopes to make big returns in the short-term.

However, the massive market correction that occurred in January led most of the investments of South Korean millennials to decline by half, especially those that have invested in cryptocurrencies like Ripple, which is down 3x since its all-time high.

Glimmer of Hope

Former Google intern 24-year-old Juwon Park told NBC News in an interview that she didn’t expect or want a fortune from her $2,500 investment in the market, but seeked for a glimmer of hope which the strict South Korean society fails to offer to most young adults.

In South Korea, many teenages are forced to a single system called the College Scholastic Ability Test, which is similar to the SAT of the US, to enter prestigious colleges. But, the lack of demand for university graduates and increase in demand for experienced individuals by companies have left millennials confounded and astray.

Consequently, many millennials have entered the cryptocurrency market, not necessarily to make a quick buck, but as a glimmer of hope.

“I didn’t want a fortune. I just wanted enough to give me that glimmer of hope. Now it’s gone,” said Park, adding that she had convinced her mother to invest another $25,000 in the market, which has decreased by more than 50 percent since January. “I wasn’t expecting 100 million won to fall from the sky. For me, because prices were rising so quickly, I thought they’d keep rising once I bought in. Then I realized I’d been too greedy.”

Park noted that she hopes the market will recover after it stabilizes, especially that the South Korean government and the US have demonstrated their willingness to efficiently regulate the global cryptocurrency market. “I am hoping that [after] this whole government regulation, once it gets sorted out, the price will normalize,” Park said.

As shown in the decline of the “Kimchi Premium,” which spiked to 30 percent at one point for most major cryptocurrencies, the speculative mania in South Korea, specifically amongst millennials, has settled down since the major correction.

Market Stabilization

Elaine Ramirez, a tech analyst based in Seoul, told NBC that the correction will allow the cryptocurrency market to gain greater opportunities, and ensure that weak hands or speculators do not lead to massive short-term bubbles.

“Its a global trend, and South Koreans are indulging in being at the forefront of it. On a macroeconomic level, it’s a way to gain greater opportunities when economic growth has been sluggish, and young adults see it as an escape from chronically high youth unemployment rates.”

The majority of speculators have also invested in many cryptocurrencies or tokens they do not have knowledge in, and solely due to FOMO, or Fear of Missing Out. Long-term corrections–as in the cryptocurrency market, a few months are a relatively long period of time–prevent speculators from taking over the market and inflating the valuations of cryptocurrencies.

This is an optimistic trend for the entire cryptocurrency market, and it will allow major cryptocurrencies to regain momentum for more robust mid-term and long-term growth.

Chosun, South Korea’s largest business-focused mainstream media outlet, reported that one the country’s largest banks Woori trialed Ripple payments for remittances.

Ripple Trials

Woori’s digital strategy department successfully processed payments on the Ripple blockchain network and according to the company, Woori might be able to process large-scale remittance transactions on the Ripple network within 2018.

The South Korean bank already completed phase two of its Ripple trials, having completed phase one of Ripple payment settlement in January. Woori spokesperson told Chosun that the bank remains highly optimistic in using the Ripple network to process remittance in the long-term.

The bank further emphasized that Ripple is far more efficient than Swift, which normally takes 2 to 3 days to process transactions between banks whereas Ripple is capable of processing transactions instantaneously. Many banks in South Korea along with 61 banks in Japan have already started to trial Ripple payments, with an intent to use Ripple commercially within this year.

Woori and Shinhan, two of the biggest banks in South Korea, initially joined the Ripple consortium in December 2017, when the Ripple team wrote, “the Japan Bank Consortium — a coalition of 61 banks in Japan, organized by SBI Ripple Asia — has announced the launch of a new Ripple pilot with Woori Bank and Shinhan Bank, two of South Korea’s largest banks with a collective market capitalization of more than $30 billion.”

Kookmin’s Cryptocurrency Exchange Rejection

Earlier this year, the South Korean government clarified its stance on cryptocurrencies, and strongly emphasized that it will not ban or prohibit the trading or usage of cryptocurrencies, but instead regulate the space to protect both businesses and investors.

South Korean banks were requested by the government to ensure traders cannot open accounts on cryptocurrency exchanges without anonymous identities or bank accounts, and stricten the process of opening bank accounts for the purpose of trading cryptocurrencies.

Consequently, Kookmin Bank, the largest bank in the country, decided to not provide banking services to cryptocurrency exchanges, likely due to its connections to the government.

Shinhan Bank, the second biggest bank in South Korea, along with six other banks stepped up, and announced their intent to provide services to cryptocurrency exchanges, offering millions of virtual bank accounts to cryptocurrency traders.

Korbit, Bithumb, and other major cryptocurrency trading platforms stated that Kookmin bank users will no longer be able to trade cryptocurrencies with the bank’s accounts, and will have to migrate to banks that support cryptocurrency exchanges.

“In order to comply with the identification and anti-money laundering regulations being enforced by the government, the current KRW deposit method will be terminated by the end of January 2018,” the Korbit team said.

Woori, Shinhan, and several other banks that still remain highly optimistic in regards to the potential of cryptocurrencies and blockchain technology are expected to continue the development of their individual projects while conducting trials of public cryptocurrencies.

Some of the largest cryptocurrency exchanges in the global market including Binance and Kraken have halved bitcoin withdrawal fees due to the rising adoption of scaling solution and transaction malleability fix Segregated Witness (SegWit).

SegWit Adoption

Last week, Coinbase, a major bitcoin brokerage and wallet platform with over 12 million users, along with leading cryptocurrency exchange Bitfinex enabled SegWit and transaction batching, to significantly reduce bitcoin transaction fees and relieve congestion on the bitcoin blockchain network.

On February 23, Coinbase Vice President Dan Romero stated that the company will also focus on the development and integration of emerging technologies and second-layer solutions like Lightning.

“New technologies which require SegWit, like the Lightning Network, have the potential to significantly increase the usefulness of Bitcoin as a payment network and benefit customers. We currently have a dedicated full-time software engineer working on open source contributions to the Lightning Network,” said Romero.

Since then, the adoption of SegWit has risen from 13 percent to around 30 percent, by nearly 3-fold within a period of several days. As the largest bitcoin wallet platform in the world, Coinbase accounts for a large portion of bitcoin’s daily transaction volume. The integration of SegWit by Blockchain, the second largest bitcoin wallet platform in the market, is expected to increase SegWit adoption further, in the short-term.

Kraken and Binance

Binance, the biggest cryptocurrency exchange in the global market with a $1.9 billion daily trading volume, along with a major San Francisco-based cryptocurrency trading platform Kraken halved bitcoin withdrawal fees, due to the rapid adoption of SegWit and decreasing transaction fees.

On March 1, Kraken stated, “effective immediately, withdrawal fees on Bitcoin (XBT) are reduced to 0.0005, and withdrawal fees on Bitcoin Cash (BCH) are reduced to 0.0001.”

On March 2, following the path of Kraken, Binance announced, “Binance is happy to announce a 50 percent reduction in $BTC withdrawal fees. Effective immediately, BTC withdrawal fees are only 0.0005 BTC.”

If more cryptocurrency exchanges processing billions of dollars worth of trades on a daily basis continue to integrate SegWit and transaction batching, in the short-term, bitcoin transaction fees could drop substantially.

Although the fees of bitcoin could rise again as its price spikes after a long recovery and its transaction volume surges to its previous levels, SegWit and transaction batching are expected to work as short-term solutions, while developers and businesses seek towards integrating second-layer scaling solutions.

Peter Todd, a bitcoin developer and respected cryptography consultant, stated that the integration of Lightning could turn out to be too complex, and the current implementation of Lightning could be vulnerable to DoS attacks.

“As for the Lightning protocol, I’m willing to predict it’ll prove to be vulnerable to DoS attacks in its current incarnation, both at the P2P and blockchain level. While bad politics, focusing on centralized hub-and-spoke payment channels first would have been much simpler,” Todd wrote.

Hence, if developers and businesses continue to go down the path of Lightning to scale the Bitcoin network, it will require significant work by both the businesses and developers in the open-source community of bitcoin to practically implement Lightning.

Paxful, the peer-to-peer bitcoin marketplace that enables its users to purchase and sell bitcoin instantly, has funded the construction of a school for young students in Rwanda.

Located in Kasebigege Village in the Bugesera District of Rwanda, Paxful’s bitcoin-funded school will serve children aged from 3 to 6 in a town with over 7,500 residents. The school has three classrooms, four restrooms, irrigation system, and a 35,000-liter water tank, providing a stable source of water supply for both the students and local residents.

By contributing $50,000 in bitcoin, Paxful contributed to the Education is Life project and Water Well project, building schools and providing a better ecosystem in partnership with Zam Zam, a non-profit organization that focuses on helping students and families in Afghanistan, Gaza, and Rwanda.

“Paxful cares about corporate responsibility, and they believe that positive things can happen through Bitcoin. The Education is Life project is not only a model for what can be built with Bitcoin, but is a model for how we create and sustain successful corporate partnerships,” said the Zam Zam team.

Last month, CNBC featured a documentary covering the efforts of the Paxful team building a school in Rwanda using bitcoin as the primary source of funds. The Paxful team intends to fund more schools and infrastructures in Africa in the future, with donations raised from the cryptocurrency community with bitcoin.

“One of our key goals is to bring financial inclusion to the underbanked, via bitcoin. #BuiltwithBitcoin is the next logical step. Now we are not only helping those in emerging economies meet their day-to-day financial needs; through our work with Zam Zam, we are also making a real and lasting difference in their communities. We hope that others in the cryptocurrency scene will join this important venture,” said Ray Youssef, Paxful CEO and co-founder.

Last year, in December 2017, Ethereum co-founder Vitalik Buterin expressed his concerns over the valuation of the cryptocurrency market and whether the community has done enough to support the global financial system, bank the unbanked, and assist individuals in third world economies with blockchain technology.

“How many unbanked people have we banked? How much censorship-resistant commerce for the common people have we enabled? How many Venezuelans have actually been protected by us from hyperinflation? The answer to all of these questions is definitely not zero, and in some cases it’s quite significant. But not enough to say it’s $0.5T levels of significant. Not enough,” said Buterin.

In regions like Rwanda, wherein the majority of individuals struggle to obtain stable banking services due to poor financial infrastructure, decentralized cryptocurrencies like bitcoin allows anyone to freely transact and settle payments on a peer to peer basis.

As such, with bitcoin donations, even without the existence of an intermediary, projects led by non-profit organizations such as Zam Zam in partnership with Paxful can be funded.

Arthur Schaback, the co-founder and CTO at Paxful, emphasized that the company plans to continue demonstrating the impact a decentralized financial network can have on the entire world.

“We will continue to build and perfect this model so that the entire world can see what a real difference can be made with bitcoin. We take the same philosophy with our product and are building the Paxful wallet as the model financial services application for the entire world,” Schaback said.

Kim Dong-yeon, the Finance Minister of South Korea, firmly stated that cryptocurrencies as incentive systems are necessary for public blockchain networks to operate.

“Blockchain technology can disrupt and revolutionize the world. But, for open-source blockchain networks, cryptocurrencies are necessary as incentives for individuals to participate in the network.”

Yeon’s statement was released this week, following the official decision of the government to not ban cryptocurrency trading both in the short and long-term. During a government hearing held on February 1, Yeon further emphasized his stance on cryptocurrencies, when he stated that the South Korean Finance Ministry has no intentions to eliminate cryptocurrencies or strictly restrict them to the point in which cryptocurrencies can no longer be used in the local market.

“The Finance Ministry has no plans or intentions to eliminate or prohibit cryptocurrencies. Blockchain technology is an important technological breakthrough to fuel the fourth industrial revolution and as such, the ministry will take a cautious approach in regulating the cryptocurrency market. For negative use cases of cryptocurrencies, the ministry will impose strict regulations,” added Yeon.

Previously, several government officials and self-proclaimed influential economists in South Korea claimed that blockchain networks can function without cryptocurrencies, and that cryptocurrencies like bitcoin and Ethereum are not necessary. Yoo Shi-min, a popular author and former government official, criticized bitcoin as a gambling tool, stating that the blockchain is a disruptive technology but cryptocurrencies are not.

Jang Jae-seung, a professor at Korea Advanced Institute of Science and Technology (KAIST), the most prestigious technology-focused university in the country, directly refuted the claim of Yoo, noting that without cryptocurrencies serving as incentive systems, public blockchain networks cannot function. Centralized blockchains are not an option as they lack strong security measures, transparency, and most importantly, decentralization.

Minister Kim echoed a similar sentiment to professor Jang, as he explained that mining is a necessary and a crucial system of open-source and public blockchain networks. Without incentives, individuals do not have the motive to contribute to the network and inevitably, the public blockchain will disintegrate.

“It doesn’t apply for centralized or permissioned blockchains but for public blockchain networks, mining is necessary to create blocks and provide incentive to individuals within the network,” said Kim.

Although the South Korean government and the Blue House, the executive office of President Moon Jae-in, reaffirmed on several occasions that the government will not ban cryptocurrency trading, the statement of Finance Minister Kim strongly reasserted the South Korean government’s intention to regulate and foster the market, to protect investors and help businesses grow.

Cryptocurrency exchanges remain optimistic in the long-term growth of the market and their enthusiasm is demonstrated in the entrance of new cryptocurrency trading platforms into the market. Huobi, formerly the largest cryptocurrency exchange in China, has already obtained 150,000 users on its waiting list and it plans to launch its exchange in the first quarter of 2018.