The Evolution of Crypto Exchanges: From Obscurity to Mainstream Adoption
Cryptocurrency has come a long way since Bitcoin was launched in 2009, with the market cap crossing a mind-blowing $2 trillion, according to the website CryptoNews.
Since then, the nature of crypto exchanges has evolved continuously, to the point where they are now unrecognisable from the form they took when the inaugural transactions were made back in the day—which took place through P2P (peer-to-peer) trades on forums like Bitcointalk.
Far from being just a platform to trade digital assets, the best exchanges these days need to have intuitive interfaces, offer a wide selection of coins, and top-notch security features. Additionally, they also must do this while presenting advanced trading options and offering competitive fees.
But how has it got to this?
In this post, we’ll explore how cryptocurrency exchanges have gone from the complete obscurity of 15 years ago to being so mainstream that one of them, FTX, ran a coveted half-time advertising spot during the 2022 Superbowl (which is reputed to have cost around $6.5 million!).
What are Cryptocurrency Exchanges?
To put it simply, crypto exchanges are sophisticated platforms that provide traders with a marketplace in which to purchase or sell any one of the 9000 cryptocurrencies that are currently available. The most well-known of these are Bitcoin, Ethereum, Tether, USD Coin, and Binance Coin.
At present, between 50 to 100 million people are believed to have owned, or currently own at least one unit of crypto, and around 50,000 Bitcoin transactions are said to take place every day.
Overall, there are around 1500 exchanges where you can trade this digital currency, although most are not active. Some of the most well-known and leading exchanges are Binance, Kraken, Bybit, Coinbase Exchange, and the Australian bitcoin exchange.
How Have Crypto Exchanges Evolved Over Time?
Bitcoin was introduced to the public in 2009 by a programmer or group of programmers that operated under the pseudonymous Satoshi Nakamoto.
While all new ventures have teething problems, it is fair to say that the first crypto transactions that took place at this time were fraught with risk.
Essentially, the only way to secure Bitcoin was to mine it yourself, which required you to have high technical knowledge and a personal computer (not everyone did in 2009!) or agree peer-to-peer trades on the Bitcointalk forum or early exchanges like Mt. Gox.
The latter usually involved a leap of faith as they were contingent upon a level of trust being established between both transactional parties. Sadly, as this process was unregulated, it often led to accounts being hacked and investors being scammed.
Thankfully, over the years, crypto exchanges have become a lot more robust. Today, there are two main ways you can purchase cryptos. Either via one of the aforementioned exchanges or a money app like PayPal or Venmo.
In an attempt to grow the digital asset sector while significantly reducing risk for investors, both are heavily regulated by federal governments in most countries around the world.
Current State of Cryptocurrency Exchanges
Cryptocurrencies are notoriously volatile, which is often reflected in the performance of exchanges. That said, in the last couple of years, the digital currency market has been enjoying some traction.
Currently, by far and away, the largest exchange is Binance, which trades around $10.84 billion in volume. Bybit ($2.17 billion) comes in second and Coinbase third at about $885 million.
All of these exchanges have good security, high order execution levels, and complex trading options.
Market Research Predictions
Several bodies of research, including a notable one performed by Technavio, have predicted that the cryptocurrency market size could increase by as much as USD $34.5 billion between now and 2028.
The general consensus is that the market is set to enjoy significant and continual growth. This is a result of several key trends, most notably, the increasing desire of people to embrace it as an investment option, as opposed to traditional options like real estate, the stock market, and private pension/superannuation.
Another key driver of this expected growth is that many companies, such as Starbucks, KFC, CheapAir, AT&T, and Microsoft, now accept it as a form of payment. Many other companies are expected to follow suit in the next few years.
Market research predictions also suggest that the global cryptocurrency market is likely to grow significantly in Africa, South East Asia, and Latin America in the coming years.
This will be due, in part, to businesses and people in these regions adopting and making innovative new technological advancements. It could also be likely as this type of digital currency may be more stable than the economies, limited banking systems and volatile local currencies.
What Does the Future Hold for Cryptocurrencies?
It is fair to say that no one knows what the future will hold for cryptocurrency, but it does seem like it is here to stay for a while.
Ultimately, you can choose to either see limitless potential for wealth generation and a way to conduct daily transactions or you can see major risk and mass confusion.
Either way, your future with cryptocurrency is in your own hands. The best thing you can do is educate yourself as to what the best course of action will be for your personal circumstances and investment goals.