The core of the issue. According to the Encrybit poll, 40% of cryptocurrency exchange traders view security as the critical issue preventing the exchange of digital assets. And this makes sense given that, according to Group-IB, the number of cyber assaults on bitcoin services rose by 700% in 2018 compared to the previous year.
These cryptocurrency exchanges have robust security measures, including a "security perimeter," multiple levels of authentication protection, and other safeguards. Considering the security state on p2p platforms and online exchangers is horrifying.
How to approach a challenge. According to a study conducted by the Mistertango payment platform, 55% of cryptocurrency exchange users are ready for the AML/KYC process and other forms of protection to be implemented to increase the security of cryptocurrency exchange operations.
Other security features include
· Using biometric data for authentication,
· Using advanced technologies like quantum entanglement and AI to increase security, and
· Switching to platforms built on decentralized blockchains.
What was carried out? A decentralized cryptocurrency exchange is a platform that connects cryptocurrency exchange buyers and sellers, allowing them to transact without needing to send money to a third-party account (talk). Therefore, you and your counterparty do not need to create an account on the exchange to make an exchange, such as buying bitcoin for dollars. Instead, you start a smart contract.
Using biometrics supports such cryptocurrency exchange wallets as BitGo, TronWallet, Spatium, Coinbase, and Hilltop. They all require identification, which may involve a fingerprint, facial ID, or retinal scan, before granting access to cash. The creators affirm that they will be engaged once the portable, reasonably priced DNA scanners are available.
They developed "atomic swaps"—special smart contracts that ensure the exchange of values between two blockchains without intermediaries or guarantors—for the secure sale of one cryptocurrency exchange for another. Atomic swaps support Bitcoin, Decred, Vertcoin, and Litecoin.
No one has yet been able to integrate quantum entanglement in cyber security, including banks and states (there are doubts here since the data can be classified). ANTONIO, AICoin, and Peculium will leverage artificial intelligence for security when conducting cryptocurrency exchange transactions.
The core of the issue. Because when a certain level of user activity is reached, system performance degrades sharply: the time it takes to complete transactions increases, and commission costs rise. Many cryptocurrencies, including Ethereum and Bitcoin, have a growth limit.
The restriction for Bitcoin is around seven transactions per second, whereas the limit for Ethereum is about 20 operations per second. A queue forms if users conduct more actions than the blockchain can handle. Due to their increased priority in the line, commissions rise due to their size.
This scenario states that during the summer and the end of 2017, the Bitcoin network experienced hundreds of queue formations that caused the transaction time to climb to several days and the commission to increase to $50.
How to approach a challenge. Experts suggest the following ideas
· Increase the block size or make it adjustable (based on miners' preferences or the system's load);
· Employ centralized blockchains; - substitute the PoW consensus technique with another one, like PoS; - process a portion of the transaction "offline."
What was carried out? Updating SegWit, which raised the blockchain bandwidth from 3 to 7 operations per second and added Lightning Network, the scalability issue in the Bitcoin network was partially resolved (LN).
Using Lightning Network, you can build payment gateways between users, allowing for meager commissions and nearly instantaneous transactions. Since all operations inside the gateway are done "offline," only the opening and closing of the channel are specified in the blockchain.
Ethereum intends to address the issue of scalability utilizing the Raiden Network technology (analogous to LN) and introduce State Channels, Sharding, and Plasma. It may also switch to the future PoS or Zk-Snarks consensus algorithm. Additionally, the idea of using eWASM in place of EVM is considered.
Acceptance by the market and usability
The core of the issue. Because they are excessively sophisticated, have a fluctuating exchange rate, and are only accepted at a small number of points of sale for goods and services, such as shops, airlines, hotels, and the like, cryptocurrencies cannot be used for regular payments.
How to approach a challenge. It's too complex to purchase a cup of coffee or a plane ticket using cryptocurrency exchange programs; you need to learn how this technology functions, download a cryptocurrency exchange wallet, register on the network, figure out how to perform transactions, and continually double-check everything.
Most of this step will be unneeded if you utilize a cryptocurrency exchange debit card and straightforward mobile applications. You can use their assistance to carry out financial and payment transactions as easily as a VISA card or the PayPal payment system.
You may raise technological expertise through marketing, educational initiatives, and extending the use of crypto exchange development companies. Few people knew how to operate online banking ten years ago.
As crypto exchange development companies become more commonplace, market acceptance will increase, making them easier to use and experiencing less volatility. The latter will happen automatically when cryptocurrency exchange capitalization rises, much as it did with the share price of Internet firms at the beginning of zero.
What was carried out? The majority of well-known bitcoin wallets now have smartphone versions. Debit cards use Coinkite, Cryptopay, and other services. Only debit cards double as some businesses issue bank cards.
The first significant online retailer to start taking bitcoins was Overstock. Xbox, Expedia, Newegg, Virgin Galactic, and thousands of other online retailers followed suit. In the world, there are 13,000 locations as of November 2018.
The core of the issue. Microtransactions are relatively small-scale transactions that typically involve purchasing and selling low-priced commodities. For instance, buying a pen, a cup of tea, or a box of matches. You need a payment system with great speed and meager commissions to support such operations.
Due to their slow speeds and expensive commissions for such transactions, prominent cryptocurrencies like Bitcoin, Bitcoin Cash, Ethereum, and others are not appropriate for handling microtransactions. For instance, it will take 30 to 60 minutes and cost $1.5 to purchase a pen for $1 using bitcoins ($1 for the cell plus $0.5 in fee).
How to approach a challenge. There are two ways to do this
By lowering the level of security, centralized crypto exchange development companies can boost transaction speed. Additionally, payment channels can be built on the blockchain network to enable "offline" transactions.
What was carried out? Due to its simplicity and low cost, the first route was taken by the majority of the new cryptocurrencies. However, because users demand high-speed security, many individuals dislike it.
The core of the issue. The two kinds of legal concerns relating to bitcoin transactions are:
· Restrictive measures - several nations decided to outlaw crypto exchange development companies due to concerns that they could be used to finance terrorism, money laundering, and tax evasion. Vietnam, Kyrgyzstan, Bangladesh, Ecuador, and Bolivia are a few.
· Jurisdiction and taxation - to yet, no nation has introduced regulations that would make it crystal obvious how cryptocurrency exchange-related operations and income are taxed and which procedures fall under which jurisdiction.
How to approach a challenge. According to the Mistertango study, 88% of cryptocurrency exchangers desire stronger industry regulation to boost the technology's reputation and prevent the upheaval caused by controversies, including hacker attacks, fraud, and other unfavorable situations.
Therefore, removing legal obstacles to the growth of a cryptocurrency exchange market is linked to advocating for laws that tighten up the call.
There are many ways to accomplish this, including hiring lobbyists, holding protests and activities, and meeting with politicians.
What was carried out? In Switzerland, where they are compared to international currencies, cryptocurrencies feel the most natural. Bitcoins and other digital currencies are accepted as a settlement currency in Germany. They are accepted as forms of payment in Japan. There are no limitations on the selling or purchasing cryptocurrency development in Belarus, Russia, Ukraine, and several other nations. However, there are issues with how these transactions are taxed.
Key lessons from the Challenges of Crypto Exchange Development company
· Acceptance by the market and usability
· Legal quirks
EnclaveFX Techno does professional platform development for cryptocurrency exchanges. Call us at +97144589826 for a free consultation if you have any questions.