Blockchain exchanges and traditional exchanges have been seen as polar opposites. That’s because blockchain exchanges are seen as a more open, community-focused option, but traditional exchanges are seen as relics of the old financial system, stuffy and opposed to blockchain technology and crypto.
It seems that this relation is going to change, as blockchain exchanges have finally begun to be strategic partners with traditional stock exchanges, which allow the blockchain exchanges to utilize their technology in their operations. Is it the future of blockchain exchanges?
There are a lot of disadvantages with traditional exchange platforms that blockchain technology and exchanges can fix. First of all, traditional exchanges are open at market hours, which can limit the trading activity of retail investors who might be busy during that.
Additionally, traditional exchanges usually have expensive and complex fee schemes for trading. This can also put off investors with less money from trading altogether.
Many traditional exchanges are still slightly out of reach for the more small-time retail investors who still want to get involved in trading. This is because many traditional exchanges don’t offer fractional purchasing, that is the act of purchasing a fraction of an asset. Rather, the user will be required to buy a certain amount of the asset or a single value of the asset.
Despite the innate advantages of blockchain-operated exchange platforms, there are still many benefits that can be gained through blockchain exchanges utilizing technology created by traditional exchanges.
Some traditional exchanges have developed trading systems that can be easily scaled as trading volume rises; with the exponential rise in the popularity of cryptocurrencies, ensuring scalability is essential to a cryptocurrency exchange’s operations. Additionally, these trading systems experience low down-time and have high resilience, that ensure a seamless trading experience.
additionally, there has been a widespread belief by many detractors that crypto exchanges are unregulated. By forming partnerships with traditional exchanges, crypto exchanges display legitimacy, and traditional exchanges would not agree to work with the specific crypto exchanges otherwise.
Finally, many cryptocurrency exchanges have faced issues of unethical trading. Meanwhile, traditional stock exchanges have systems in place that automatically survey any and all trading activity on their platforms. To compare, cryptocurrency exchanges have only recently begun to make use of these technologies to ensure ethical trading and to decrease the cost of surveillance operations, making crypto exchanges safer for traders.
The partnerships between traditional stock and asset exchanges and crypto trading platforms can help to continue a growing trend whereby cryptocurrencies are seen as a valuable, safe and valid asset for trading.