As any student of ecology quickly learns, a stable, healthy ecosystem consists of many different organisms. From plants and animals to fungi and bacteria, the plethora of life forms in a thriving environment is nearly bewildering. Each of these different actors has their own unique role to play in the whirling dance that we call the environment. What often gets overlooked however, are the roles that interactions between different species play in the overall health of the system. No one species can exist purely on their own. They need each other, but perhaps more specifically, they need to interact with each other. Destroy one species’ ability to interact with members of different species and the environment as a whole suffers.
The Cryptocurrency Ecosystem
The basic principles that make the natural world such a beautiful and vibrant place have influence on the world of cryptocurrencies as well. Even a brief investigation into some of the more popular currencies shows the fascinating diversity that has already taken hold on these practical applications of blockchain technology. There has also begun to arise a type of classification system and jargon for comparing these coins to each other. A primary classification has begun to emerge between currency coins, such as Bitcoin (Crypto: BTC), and operating system coins, such as Ethereum (Crypto: ETH). Within the currency coins, there are projects that focus on privacy, others that specialize in distributed governance and a few that strive for both in the same package. Among the operating system coins, the diversity is every bit as varied. There are platform projects, single use projects, and a number of projects that are not even currencies at all. Supply chain tracking, food supply verification, and future prediction projects seem to have little in common with cryptocurrencies, but they are genuinely part of the blockchain ecological system.
Just as in the physical world where vastly different species need to interact with each other in a stable environment, it is even more vital in the relatively new world of blockchain technology. A large part of this interaction is done through cryptocurrency exchanges. The role that these institutions play in keeping the blockchain ecosphere healthy is often vastly underrated. However, these institutions often do not keep the trust that we place in them. All conventional centralized exchanges hold the private keys of each user’s cryptocurrency. This situation defeats the original purpose of cryptocurrency and many users lost their coins to outside thefts or simple greed on the part of the exchange owners. Exchanges are also subject to authority of whichever political jurisdiction that they find themselves in. While this is not necessarily bad, it does go against the spirit of global equality that pervades decentralized blockchain-based technology.
Some Good, Some Bad
When the MtGox exchange dissolved into bankruptcy, the world of bitcoin had a significant shock. The exchange Cryptsy went into bankruptcy as its CEO disappeared; fleeing charges of theft. Perhaps worse than outright failure and disappearance is the constant threat of theft. There have been numerous instances of outside theft in the form of hacks. One of the most biggest of these was in January of 2015 when Bitstamp was hacked with a loss of about 19,000 BTC. Another instance, albeit much smaller, was in March 2014 when Poloniex was hacked resulting in the loss of around 97 BTC. Both of these exchanges have recovered and are still serving their customers, but cryptocurrency holders are becoming more and more skittish about keeping their currency on an exchange. This is not to say that all exchanges are unreliable. Poloniex successfully repaid all its users that had lost coins. These exchanges and other are providing a valuable service by helping their customers switch between cryptocurrencies and conventional currencies.
Should the Hybrids Rule?
These exchanges, however, are odd hybrids. They are fundamentally institutions based in the world of conventional currencies and are structured according to those rules. Conventional cryptocurrency exchanges have a centralized business structure. Each one is also tethered to a particular political jurisdiction. They therefore lack the self-policing benefit of true blockchain-based technology and are subject to restrictions or even closing by their respective political authorities. Unfortunately, for all cryptocurrency users, the main way of interacting between different cryptocurrencies is through these exchanges.
Progress is Coming
Progress is hard to stop however, and nowhere is that more true than in the world of blockchain technology. A new type of blockchain animal has emerged into the ecosystem, the decentralized exchange, or DEX. These projects are beginning to enable the tokens and currencies of various blockchain projects to be traded back and forth with each other using a framework built on blockchain technology. The mechanics of each individual application varies a little from project to project, but the decentralized exchanges are using the power of blockchain technology to connect one cryptocurrency to another.
One of the biggest benefits of a decentralized exchange is that it can take full advantage of the self-policing nature of blockchain-based systems. Because the blockchain protocol only validates legitimate transactions, double spending, counterfeiting, and other breaches of the protocol are simply not carried out. This feature enables a decentralized exchange to be trusted even if it does not have a political government looking over its shoulder. Another big plus of a DEX is the greater security it offers. The exchange *is* the blockchain, and each user maintains control over the private keys of each token that they own. No longer can a single hack gain access to multiple users’ coins, making it much less vulnerable and attractive to hackers.
Introducing CryptoBridge and BridgeCoin
A very promising DEX project is CryptoBridge. It is a decentralized exchange that runs on the Bitshares network. CryptoBridge was launched in July of 2017 and by January of 2018 had a 24-hour trading volume that hovered around 160 BTC with over 70 trading pairs. CryptoBridge offers some definite advantages over conventional exchanges. Users maintain ownership of their coins; the private keys remain with them and can be accessed if need be. Trading is very fast on the Bitshares Graphene network, which boasts speeds rivaling that of the NASDAQ. Another very unique feature of CryptoBridge is their profit staking coin BridgeCoin (Crypto: BCO). Users who hold BCO can use the exchange interface to create a staking position. Every week the profits from trading are tallied up and on a bi-weekly basis 50% of them are distributed to the stake holders. Another advantage is that due to the security advantages compared to conventional exchanges, the CryptoBridge interface can function as both an exchange and a wallet, allowing easy access to funds for more convenient and faster trades.
The blockchain community continues to grow rapidly, and as the number of projects increase, their diversity does as well. A diverse network of blockchains will be able to meet the world’s needs much better than a single large one, but only if there is good communication and exchange between these blockchain projects. Projects like CryptoBridge are an enormously helpful step in establishing these interactions.
How to Follow for Updates
One of the best ways to stay engaged is following via Twitter: CryptoBridge Twitter
Contributed by: Josh Justice Follow @josh0mattoc
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