What Would Crypto Look Like Without Centralized Exchanges Like FTX?

Whether the politicians currently talking tough about the latest crypto crisis agree or not on the matter, crypto isn’t dead (yet). Or at least the crypto that exists outside of a particular three-letter centralized crypto exchange isn’t dead yet.

Along with a harsh lesson for many, the collapse of FTX also presents an interesting question for DeFi (which some argue is the only real crypto thing that currently exists): What would crypto look like without exchanges?

Let’s first unpack the component parts, or rather the consumer services, that the average crypto exchange provides.

First and foremost, it lets folks swap their Bitcoin for Ethereum, their Cardano for Solana, and any multitude of non-compatible cryptocurrencies for one another. It does this for a very reasonable price.

Trades on exchanges are executed quickly, without too many concerns around congestion and so forth. It’s not perfect, though, with plenty of downtime throughout their histories.

Finally, and perhaps most importantly, they make it really easy to connect your bank account to the crypto markets, giving traders convenient on- and off-ramps to pull their chips off the table (or double down).

In a nutshell, we’re talking about interoperability, scalability, and onboarding. And don’t forget: they’re typically designed to be friendly to crypto newbies.

In the DeFi world, there are some green shoots, but the sector has to come a very long way before it can truly compete in the same arenas and in onboarding newcomers.

Swapping assets

Interoperability has had a brutal 2022. Some of the largest hacks that occurred this year were carried out on bridging services. Badger DAO suffered a $120 million exploit via its Bitcoin-to-DeFi bridge, Wormhole fell to a $326 million attack on its cross-chain bridge, and PolyNetwork lost $611 million for similar reasons.

Not all bridges are built alike, though, and so there’s certainly hope that a robust design will emerge. Hop Protocol is one such example, but it’s limited to Ethereum, Gnosis, and layer-2 solutions. Synapse is another popular…


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