With the rapid rise of crypto, especially in 2017, there was an immense need for exchanges – and fast. During that exciting year, the total cryptocurrency market cap jumped from $17.7 billion to $612.9 billion. That’s quite a change.
With such rapid growth, companies can often find themselves unable to meet that level of demand. Scalability can be an issue in every industry, not just in crypto. Unfortunately, the ability to keep up with rising demands leads to failures such as closing your doors to new customers, weak or non-existent KYC, and security oversights that lead to hacks like that of Mt. Gox, the effects of which are arguably still being felt in the markets today.
Even the largest crypto exchange in the world, Binance, has had its share of problems with regulatory issues in Japan and Hong Kong, hacks, and a lack of fiat gateways. To solve some of these issues, Binance has announced they will open a new base of operations in Malta and, after successfully repelling a hack, have offered bounty programs to prevent any further attacks.
When there’s a hole in your bucket, you fix it. However, the repair is never as strong as the original material, and you may very well spring more leaks. Sometimes it’s better to start from scratch. Perhaps buy a new bucket that’s more suited to the job at hand.
This analogy is indeed applicable in the case of first-generation exchanges, and how second-generation exchanges, like ETERBASE or, perhaps, FairX, have learned lessons from this patchwork approach so they can create newer, more robust exchanges that can meet the challenges of today’s crypto markets.
Although there is little information about FairX on their website, the consensus is that the platform will offer fiat gateways, making it easier for people with little crypto experience to buy coins and tokens with fiat currencies.
Backed by IBM, FairX is creating a new transfer system based on the Stellar XLM protocol, and there are rumors abound that Deloitte, who provides audit, consulting, financial advisory, and tax services, are also involved in some way. Perhaps more importantly than backers and partnerships is that FairX will offer fiat gateways.
Fiat gateways are few and far between in the crypto space meaning that it can be difficult and expensive for people to access crypto markets. Furthermore, the current offering of coins and tokens available for purchase with fiat is limited, meaning that obtaining less well-known coins and tokens becomes a multi-step, arduous process. It is probable that current levels of difficulty and expense act as a barrier towards broader adoption.
Unfortunately, there is very little information available about FairX other than a few articles and group discussions, and there is a distinct lack of a white paper that would clarify the project to the crypto community. Additionally, the FairX website contains no information other than a strapline that reads: “We are working on something very interesting.” Appealing and mysterious as this is on a marketing level, such lack of transparency is one of the many problems suffered by first-generation exchanges.
The ETERBASE approach is in many ways defined by transparency. Many first-generation exchanges fail to list a CEO or a base of operations – it is impossible to tell who you are trusting with your assets – but the ETERBASE team and their registration details are displayed visibly on their website. Moreover, their white paper goes into great detail about their compliance with global financial regulations, including AML, KYC, CTF, and GDPR, the latter of which is causing enormous headaches for companies large and small. Such robust compliance is undoubtedly a vast leap forward regarding the trust that is currently lacking in many areas of crypto exchanges.
From their white paper, ETERBASE also plans to become an e-money institution that will allow them to issue individual IBAN accounts. Among other services, becoming an e-money institution will give the company the ability to offer fiat gateways, lowering entry barriers to crypto markets.
While these features are fascinating, at ETERBASE’s heart lies a robust digital asset exchange that offers many features, like multiple portfolio management, that many first-generation exchanges can’t or don’t provide. Their comprehensive white paper reveals all that the platform offers in detail.
Whether second-generation exchanges replace first-generation exchanges or not is anyone’s guess. One scenario is a complete replacement of existing exchanges, and FairX and ETERBASE look to be in a prime position to do just that. Another outcome is that first-generation exchanges will have to up their game – they’ll have to increase their transparency, offer a wider range of services, and develop more robust, more accessible platforms. No matter what the outcome is, second-generation exchanges are nearly here, and they are only going to improve the current exchange landscape.
Chronic crypto nut and freelance writer/editor for longer than I care to remember. Have finally found a home here at Crypto Disrupt.