Custodial trading requires users to make deposits through an on-blockchain transfer, usually from a user wallet to the exchange wallet. All transactions execute on a centralized database. Coinbase and Binance are good examples of centralized custodial exchanges.
The ability to secure funds is one of the essential features of an exchange. However, this comes at a cost that can be both beneficial and detrimental on occasion.
The advantage of a custodial system is that it allows exchanges to make decisions based on the needs and wants of their platform. User experience is easy and seamless compared to non-custodial exchanges. Users don’t have to worry about maintaining cold storage or feeling insecure trading on custodial exchanges because all transactions occur privately.
The disadvantage of custodial exchanges is they expose users to exploit dangers. If hackers compromise the database holding funds, they can take over the entire system with ease and access all user information.
Notable custodial exchange hacks include $40 million stolen from Coinrail, $500 million stolen from Coincheck, $45 million hacked from Binance, and the $195 million hacked from BitGrail. The stories are prevalent.
Cryptocurrency exchanges like Coinbase and Binance have broken through barriers that only a few years ago seemed impracticable. They’ve opened the possibilities for several other mainstream cryptocurrency brokerages to follow suit, providing users even more options when trading their coins online!
But with great power comes great responsibility meaning the top exchanges are always under constant scrutiny and regulation to deliver excellence.
Many crypto exchanges worldwide aren’t correctly regulated, meaning they can resort to unreliable and dishonest practices to cut corners on security. This can lead to many people who use these services to suffer the consequences of an insecure platform.
An ideal solution for custodial exchanges would be implementing hot wallets and cold storage for users’ funds.
Hot wallets allow funds to trade while cold storage stores funds away in secure accounts not connected to the internet and away from potential exploits.
Since most exchanges are not transparent with their transactions, it isn’t easy to recognize which ones are following best security practices.
In addition to the risks associated with exchanges having custody of user tokens, there are risks associated with these exchanges’ centralized networks and infrastructure.
A lower barrier to entry has made it almost impossible for investors to discern which exchanges abide by strict security standards.
Non-custodial exchanges are exchange platforms where users are 100% in control of their wallets and funds, i.e., they retain access to their private keys.
Whether mobile, hardware, or web-based, non-custodial exchanges allow users to store their assets in their wallets.
Assets are never transferred to the exchange’s wallet for safekeeping.
This allows every transaction to be reflected in real-time as opposed to their custodial counterparts.
One of the most important benefits of using a non-custodial exchange is that your tokens are safe. It also makes sense for many reasons: if a hack happens on custodial exchanges, users employing non-custodial methods of storage won’t lose anything because their funds belong with them.
Another benefit of using non-custodial exchanges is investors can buy unlisted coins with interest-bearing offerings. They can also participate in ICOs.
Users can also use liquidity aggregators like FLUID to analyze and collect orders from different exchanges and liquidity pools. These aggregators help deliver innumerable buying opportunities to traders.
Non-custodial exchanges have downsides too. If a non-custodial exchange wallet password or private keys are lost, the user will lose access to the wallet and any associated funds. Custodial exchanges systems employ recovery mechanisms for this purpose.
It’s important to note non-custodial trading systems can also be centralized exchanges. Most of the platforms supporting peer-to-peer trading also allow transfers between two different wallets. Others incorporate trades between users and exchange wallets as a way of fostering liquidity within the ecosystem.
FLUID aids in the removal of counterparty risk by using an off-blockchain trading approach of consolidating a master order book to facilitate cross-exchange liquidity.
FLUID unifies liquidity on custodial and non-custodial exchanges using a smart-order routing engine and multi-chain liquidity aggregator.
The goal is to establish interoperability between different exchanges and boost trading pairs across all chains.
FLUID is developing a bridge between centralized and decentralized networks helping both parties increase their trading volumes.
With zero cost, zero risk, and lighting fast transfers, FLUID’s cross-exchange liquidity aggregator is the solution to liquidity issues plaguing DeFi.
If users prefer an easy-to-use UI and simpler funds storage services, custodial exchanges are the ideal option. Acknowledging the security flaws and compliance clampdowns straining custodial exchanges, It makes sense to back non-custodial exchanges as the future.
Fortunately, FLUID has a way to integrate the best of both worlds.
FLUID is an institutional smart order routing engine and liquidity aggregator that brings high-throughput and cross-chain liquidity to the digital asset exchange space at zero cost and no counterparty risk. With every asset aimed to be tokenized in the future, FLUID is positioned to capitalize on penetrating cross markets, including spot, futures, derivatives, synthetics, STOs, and tokenized assets to provide the railways with interoperable liquidity markets.
FLUID is backed by a professional team consisting of ex Bankers of Bank of America, Merrill Lynch, Goldman Sachs, BNY Mellon, Citibank, Visa, and founders of leading regulated digital asset OTC trading desks, quantitative firms, and popular blockchain companies.
Korea's premier crypto and blockchain event, Korea Blockchain Week, saw crypto enthusiasts from around the world converge in Seoul for inspirational keynotes, panel discussions, pitch competitions, investor meet-ups, and world-class networking opportunities.
The year 2021 was unquestionably a turning point for the cryptocurrency industry, with Bitcoin repeatedly reaching its record high, albeit with some significant losses. Ethereum, the second-largest cryptocurrency by market capitalization, experienced some of this too, as it climbed to its highest price yet.
The crypto industry is constantly evolving, but there are still some challenges that it has to tackle for institutional adoption. Crypto exchanges do have issues, many of which can ultimately hurt users.
The recent decline in the cryptocurrency market has shocked many, including seasoned professionals. The phrase "DeFi Summer" is developing meaning in 2022, 180 degrees out of sync with the heady times that gave rise to the phrase just two years prior.
This week’s FLUID Live featured FLUID’s CEO and President, Ahmed Ismail, and Head of Marketing and Communication, Matias Jeldrez, who addressed our community’s queries regarding the TGE and FLUID Rewards.
A stablecoin is a cryptocurrency whose value is linked to another asset class, such as a fiat currency or gold, to stabilize its price.
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Liquidity aggregation is not a new concept in the financial industry. On the contrary, it has been used as a solution to tackle fragmented liquidity for many years across conventional financial systems.
Over the last decade, artificial intelligence has snowballed, and no business or industry today is immune to its influence and pervasiveness. This is more evident in the financial services industry, which is constantly evolving and realizing that AI is a transformational technology.
The DeFi industry has the potential to disrupt the TradFi industry by using blockchain-based applications and services to replicate banking, investing, and trading activities. Many TradFi services already have a DeFi counterpart, and more are on the way.
Blockchain-based technologies have surged in popularity over the years. Time and time again, efforts have been made to promote awareness of this relatively new phenomenon. The decentralized finance (DeFi) sector is undeniably thriving, with the total value rising from $700 million in December 2019 to over $200 billion at the beginning of 2022.
The internet that we know today has traversed a long way since its inception. Web1, the first internet, had a physical infrastructure of cables and servers that allowed people and computers to communicate with one another. The ARPANET Network of the United States government sent its first message in 1969, but the web that we know today didn't exist until 1991, HTML and URLs allowed people to browse between sites.
Over the past 48 hours, the FLUID team has been closely monitoring the current climate and the impact FLUID can play in helping to reduce huge volatility in the face of black swan events such as the UST downfall.
FLUID has compiled a list of the most important headlines from the past couple of months, including Kraken's new operating license in Abu Dhabi, Ukraine's cryptocurrency legalization, and New York's two-year crypto mining embargo.
Despite Dubai's popularity as a trading epicenter, the UAE government has sought to transform the city into a global hub for digital asset trading. According to Bloomberg, the Dubai Multi Commodities Centre (DMCC), the UAE's largest deregulation zone, had built up an administrative structure for crypto companies in March 2021 and had already recognized 22 crypto-blockchain entities.
FLUID, the ultra-low latency liquidity aggregator that uses AI quant-based models to tackle inefficient fragmented liquidity in virtual asset markets, has announced it will integrate the LERC20 standard of Lossless to power its $FLD token with hack mitigation capabilities of detecting fraud, freezing fraudulent transactions, and reversing stolen funds.
The term liquidity has various financial meanings that are often used interchangeably and can be very confusing; it could refer to the ease of how an asset is exchanged for another without affecting the market price, how much liquidity a company holds, aggregating liquidity from different sources, or providing access to liquidity.
FLUID LP – FLUID’s DeFi solution – will utilize Polygon as its commit-chain to provide ultra-low transaction fees at speed.
FLUID is a game-changer for the virtual assets industry in liquidity aggregation and provides high throughput, ultra-low latency and costs, and zero counterparty risk through AI quant-based solutions
Counterparty risk refers to the situation where one of the parties of the financial transaction fails to fulfill their commitments. In the traditional market, stocks, bonds, and derivatives carry counterparty risk.
Cryptocurrencies saw values soar in 2021 when some investors sought a haven from the inflationary pressures. Additionally, retail consumption spiked across the industry, with data revealing that global crypto use had increased by more than 880 percent last year.
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Trading technologies have evolved significantly over the years. The traditional finance trading technology evolved from a simple electronic order book to an ultra-fast, interconnected, AI-supported unified liquidity, allowing investors and institutions to facilitate advanced trading strategies.
Virtual assets are known for their volatility. Even though the virtual asset market is considered volatile, with the recent digital assets trading and investments boom, many institutional investors seek greater involvement.
As the DeFi industry exceeds growth forecasts, it has now significantly attracted more interest from financial institutions and regulatory bodies.
FLUID is the trading system that consists of an AI-based smart order routing protocol and cross-chain liquidity aggregator enabled by FLUID’s proprietary hedging pool providing high throughput at ultra-low costs, ultra-low latency, and zero counterparty risk.
Liquidity is the measure of ease to which a cryptocurrency asset can be exchanged/traded into another crypto asset or fiat currency.
Regulation of exchanges and more broadly the infrastructure enabling the trading and exchange exchange of virtual assets has been a widely discussed hot topic that has over 2021 and 2022 graced many government bills.
It’s no secret that the crypto-verse moves at blazing speed with many projects finding success in disrupting the disruptors. So while DeFi protocols like yield farms and DEX’s were at a high last year, the flood of multiple similar platforms have prompted the rise of DEX aggregators like 1inch and 0x.