Why We Need Decentralized Cryptocurrency Exchanges
Blockchain: The Future of Connectivity
Max Skibinsky is the Co-founder and CEO of Vault12, a service that provides decentralized custody for crypto holders.
We asked Max about the benefits and drawbacks of centralized exchanges and why crypto rests upon the concept of decentralization. Here are some of his answers.
Centralized Exchanges Are Outdated
“Centralized exchanges are fundamentally just re-creating the banking system, which has its roots in the 16th and 17th centuries.”
In other words, creating centralized exchanges defeats the entire purpose of cryptocurrency.
Max does note, however, that the use of centralized systems serves an important purpose during the “early bootstrap years” of crypto. It’s just that customers who keep cryptocurrency in centralized exchanges are missing out on the full potential of this new tech.
So why do people keep their coins in centralized exchanges? For the sake of convenience.
Convenience Comes at a Cost
Max puts it well when he says,
“Just like a regular bank, a centralized exchange brings a lot of convenience and ease of use for customers. Just like a bank, all these benefits come at the cost of huge hidden risks.”
Banks serve a useful purpose. They make it possible to keep your money in one central location, allowing you to withdraw some of it remotely as you need via checks, transfers, or cash. The system works well as long as the bank remains solvent.
But money in the bank isn’t really yours. It belongs to the bank, and they can do whatever they please with it. So, while you can use their checking system to cover your needs, you have to have full faith that your bank will always be honest and dependable.
And so it goes with centralized cryptocurrency exchanges. Too many banks and exchanges have had serious mishaps in the last several years alone to count. And when it comes to longer historical timeframes, well…let’s not get started down that rabbit hole.
It’s up to those who own digital assets to take full ownership of them.
Crypto Owners Must Take the Reigns
Decentralization can’t be accomplished by any one person or entity. That would make it centralized!
“Building decentralized self-ownership infrastructure is a big part of the future product stack for each individual crypto owner.”
In the end, we must “be the change” we want to see in the world like Mahatma Gandhi once said. When cryptocurrency users don’t own their private keys, their assets are under the control of a centralized entity. Decentralization is the only answer.