Cryptocurrency is heading into its second decade now after Bitcoin made its debut in 2009. In the last 10 years, Bitcoin and its underlying Blockchain technology have triggered a disruption of epic proportions across the global financial services industry. Despite the potential of cryptocurrencies to replace (or at the very least, coexist with) fiat currencies as a means of transferring value, cryptocurrencies are still seen as speculative assets. In fact, the bulk of cryptocurrency users are mostly tech enthusiasts, curious explorers, and risk-tolerant investors.
However, for cryptocurrency to take its please as an acceptable means of exchange, it must unlock mass-market adoption. ChangeNOW, a Binance Launchpad alumni has built a non-custodial service aimed as simple and fast cryptocurrency exchange for everyday usage. ChangeNow’s service is a true “exchange” service that provides users with an opportunity to swap any cryptocurrency into another cryptocurrency without going through the conventional trading route offered on most traditional exchanges.
ChangeNOW allows people to swap more than 170 tokens for exchange, it doesn’t impose any limits and you can swap as much cryptocurrencies as you want. The best part is that ChangeNOW doesn’t require any sort of signup, account creation or registration before you can use its service.
Atomic Wallet provides a similar service that allows it users to exchange their assets via non-custodial Atomic Swap over a decentralized order book. Atomic swaps are inherently peer-to-peer and require that at least two parties who own different coins and agree to exchange those coins without the intermediary of a third party.
This piece provides insight into 3 ways through which crypto swaps could facilitate mass-market usage cryptocurrencies by engendering increased liquidity, simplicity, and trust.
1. Increased liquidity
Cryptocurrencies are finding it hard to breakout into the mass-market because of a structural lack of liquidity across board. To begin with, there are more than 2,160 different cryptocurrencies, coins, and tokens in the market. Some of them are built on the same blockchain while others are built on different blockchains.
The decentralized individual nature of many coins creates a siloed environment where it is somewhat difficult to trade any random token for another random token even when they are built on the same blockchain. In fact, many of the most popular exchanges only allow trading against 3 major pairs of BTC, ETH, XRP.
Hence, most of the funds in the market are held in the top coins while many new projects that could take cryptocurrency to the lack mass market suffer from a fundamental chicken and egg problem. Bitcoin still has more than 58% dominance of the market capitalization of the entire cryptocurrency market, Ethereum has a market dominance of 10.88%, and Ripple (XRP) has a market dominance of about 6.83%.
Cryptocurrency swaps that allows you to exchange any random token for another random token without pandering to the market capitalization, volumes, and market dominance of such tokens will unleash a new era of liquidity in the market. The increased liquidity could potentially attract more funds into the market while breaking down the market dominance of some coins to create for a truly fair ecosystem where any one coin can’t determine the fate of the whole market.
In addition, many Blockchain projects that have been struggling in relative obscurity would start seeing increased interest from the market once investors are confident that they can easily swap the tokens for another preferred token whenever they want to exit.
2. Cheaper trading
Cryptocurrency swaps will ensure that any cryptocurrency tokens or assets can be interchangeable with another asset in real time in a seamless process. The runoff effect of such seamless cryptocurrency swap is that it unlocks cheaper trading options for market participants.
Seamless cryptocurrency swapping eliminates the need to conduct trading transaction on custodial exchanges especially for trades that are not motivated by a need to make profits. Without the need for a custodial service when swapping cryptocurrencies, users won’t need to pay deposit fees or withdrawal fees because they won’t be depositing or withdrawing their tokens.
Of course, people swapping cryptocurrencies would still need to pay on-chain transaction fees and a facilitation rate might be baked into the trade, but traders will definitely benefit from an absence of taker, maker, deposit and withdrawal fees.
3. Improved security and trust
Cryptocurrency exchanges tend to be magnets for hacks, security breaches, and heists. Hackers have been exploiting vulnerabilities in cryptocurrency exchanges from as far back as 2011 in the infamous Mt.Gox hack. However, 2018 was a record breaking year in the annals of hacks on crypto exchanges in terms of the number of attempted and successful hacks, amount of assets that were stolen and the largest crypto hack of all time. The Coincheck exchange hack that happened in January 2018 saw about 500 million NEM tokens stolen from the exchange’s digital wallets.
Cryptocurrency exchanges that facilitate crypto swaps can essentially run a non-custodial service that doesn’t run the risk of being a subject of a hack or heist. An increase in the number of cryptocurrency exchanges offering crypto swaps would reduce the need for exchanges to hold user funds in custody and thereby reducing the incentive for criminals to hack such exchanges.
Demotivating criminals to hack exchanges could then reduce the instances of security breaches in the crypto market. Fewer instances of security breaches would in turn engender trust and confidence and make it easier for other people on the sidelines to join the cryptocurrency market.