Decentralised Exchange Protocols

Despite the success of Crypto Kitties and the progress being made on the Ethereum network to allow for more innovative & natively-decentralised application to be developed, I feel like the “killer app” of 2018 will again be in the “finance” space.

When I say “again”, if you look back over the past few years as BTC adoption has increased, the applications of and on the blockchain that are commercially viable fall into the following categories:

• Exchanges
• Mining
• Trading Algo’s / Platforms
• Wallets (Hot & Cold)

Even crypto kitties kind of falls into the realm of “finance application” considering they’re collectibles of a perceived value…Although I would say they’re not strictly financial “tools” like the above 4 categories are.

So…what will 2018 bring?

I still think we have a while to go before more general purpose applications become viable on blockchains. There are scaling issues, adoption issues, volatility issues, etc that need to be overcome. That will happen, although it will take some time still.

Between now & then, you have the speculative run fueling the market and a wall of both consumer & institutional money looking to find a way in.

1. Applications that make this process of “getting in” easier, simpler & more user friendly will make a big impact. For example, simpler fiat → crypto exchanges, better user interfaces, better security, etc.
2. Custodial services will be big. Coinbase is already going down this route, and although it goes against the idea of the self-sovereignty of money that crypto represents, the fact that most humans are lazy & want someone else to look after / protect / store & secure their wealth means that custodial services will have a place in the new economy.
3. Decentralised exchanges (DEX), and more importantly, the protocols upon which they’re built will be the star of the show in 2018.

I’ll elaborate on this section because I think it’s important.

Wether a Mt Gox — like catalyst spurs people onto looking for ways to safely exchange, or wether decentralised exchanges just become faster, smarter & better than centralized ones, the movement toward decentralising the way we exchange & trade is a trend that will continue.

It may seem like it flies in the face of point #2 above, but it really doesn’t. I think custodial services will exist more for storage (storage of larger volumes/values of currency) whilst trading, day to day exchange, and the millions of people who will have enough crypto to exchange but not enough to bother with all the custodial security crap — they will all want a safer, smarter, better way to trade.

And lastly you have government intervention. They can stop & put holds on the centralized exchanges, but good luck trying that with a decentralised one! The more they censor one area, the more that pent up supply & demand will look for a new home.

The homes need a home

If decentralised exchanges will become the new home for alot of this money, then the protocol upon which these exchanges is to be built is even more important.

Just like people are building dApps on Ethereum, people will build DEX’s on decentralised exchange protocols. The demand for this infrastructure and architecture will drive further adoption via trust, scale and network effects — and over time we’ll find that, just like Ethereum, we have a leading platform upon which to build these things!

And that brings me to my conclusion for what I think 2018 holds in store for us in the crypto market.

Conclusion

If you take the line of logic above, and you extend it out to look at who is making waves in this space, you’ll find a list of good, medium term opportunities that could make for smart investments.

• 0x protocol. (This is by far at the top of my list. They’re like the “Ethereum for decentralised protocols”).
• Air Swap
• Komodo
• Leverj (new)
• Kyber

That’s not an exhaustive list, but it’s enough for you to go do some research, and quite frankly, your probably don’t need to be in 50 different options either way. 1 or 2 will be fine.

2018. The year of Decentralised Exchanges.

***Note***

This is not investment advice, nor is it some oracle prediction of what’s going to happen. It’s just a line of logic..which may have no basis in reality at all..

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Hope you got some value & feedback is always welcome!

Aleks

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Decentralised Exchange Protocols was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.