Notes

7 Aspects Of Crypto Exchanges Over Traditional Stock Exchanges




A large number of advantages are particularly relevant for retail investors that are greater served by Crypto exchanges in comparison to traditional exchanges. So traditional exchanges should start to move or face the fate from the dinosaurs. Clothing long until we start by getting to view we have and concepts of crypto exchanges deployed for stock, bond, currency and trading options. This doesn't suggest stocks ought to become blockchain-based tokens, but that tokens can be used to represent stockholdings pretty easily and transacted blockchain style.





1. Fractional purchasing
With crypto exchanges, you can buy whatever fraction you need of the asset. This implies if you want to invest $523 in bitcoins you can do this. You don't have to obtain a whole bitcoin, you can get any fraction from it (e.g. 0.003 BTC). This allows small investors more flexibility as well as can make it much easier to create balanced portfolios with anywhere.

With traditional exchanges, you will need to buy at least one stock and you'll buy only whole numbers. This may not be a problem for big-time traders but retail investors may find it too lumpy. A Google or Amazon stock is trading for north of $1.000 which makes it a major commitment, to not discuss about it the $325k Berkshire Hathaway stock.

There is really absolutely no reason for this except the fact once stock certificates were paper documents that couldn't be cut into smaller pieces. Nowadays fractional stock trading is perfectly feasible and is implemented quickly through tokenization of stocks.

2. 24x7 trading
With crypto exchanges, you can purchase then sell 24x7. Naturally, exceptionally those sites are down or blockchain is very backed-up. This is very convenient for retail investors who are usually working or busy if the information mill open. In addition, it levels the game with regards to having the ability to respond to news such as the China ICO crackdown.

With traditional exchanges, you happen to be restricted by the "market hours". Comparable to your neighborhood physical store vs. Amazon. Needless to say, institutional traders get all kind of "pre-market" and "post-market" trading that isn't offered to retail investors.

Again, "market hours" created a lot of sense when real everyone was buying and selling the pit. Nowadays there's no reason never to allow 24h trading because the "pre and post" markets show. Of course, if some are allowed inside the "pre and post" they've an unfair advantage over everyone else and can want to keep their own rules.

3. Instant Settling
With crypto exchanges, you should buy then sell instantly. The exchange takes want to instantly settle according to their custody of crypto assets and formalize the progres you'd like the blockchain allows. This really is natural, when you hit the button you will find the asset.

With traditional exchanges, the transaction is processed and then there is often a long settling process (currently T+2 or 2 days from close). Nevertheless there is normally not an issue with, it helps High Frequency Traders advantages over us common mortals.

There's two problems to permit instant settling with current stock market infrastructure. First, there exists a technology problem. While the blockchain allows instant settling, previous technologies require via a convoluted means of checking and rechecking. Second, the multilayered value chain which made sense within the old school takes necessary more hours than the direct type of crypto exchanges.

4. Transparent order-books
Crypto order books are totally transparent in many exchanges like Kraken or Poloniex. You will see the depth of the trade side of each one market in every in the assets you are trading. Which means you can discover how the market looks as well as what could happen should you place a large order.

In traditional exchanges, you never see order books as being a retail investor that are proprietary for the exchange and is sold as being a useful. The matching of order books can be an important advantage for market makers. This is actually the main objective with the so-called "dark pools" that investment banks have formulated.

Transparent order books might be a reaction of competition and consumer expectations around the one side. In addition, they need today's technology infrastructure that could handle the raised information volume.

5. Modern and secure interfaces
Crypto interfaces are thought from the net and mobile perspective, with security as a key feature. They're light clients in browsers or smartphones. They can be accessed easily from any device and use state of the art technology. This enables convenience, speed and intuitive customer experience.

The regular interfaces We have experienced continue to be full applications in the desktop setting with clunky interfaces and long load time. This probably is because of legacy applications that ought to be updated but should be secured and evolved slowly.

Evolving to an alternative application interface is going to be challenging since it will require agile practices and frameworks that are second-nature for new entrants but take courage and conviction from existing incumbents.

6. Direct-to-investor
Crypto exchanges deal directly with retail investors and still have few other players from the value chain beyond themselves. When you find yourself at an exchange you are directly speaking with your custodian, your marketplace, your agent, etc... This will make sense in the world in which decentralized trust cuts down on needs for intermediaries. There are some exchange mechanisms like Shapeshift which can be more direct and merely connect you to another side of the trade.

Traditional exchanges use a large list of players. They've got brokers, that communicate with the exchange for your benefit. They have custodians, taking proper care of your assets. This made sense within a world without blockchain where decentralized trust was complex. Now exchanges grapple using the question of going direct and bypassing their partners, just like consumer goods companies when eCommerce was starting.

Within a Blockchain-enabled world there exists decentralized trust and so you don't need countless actors to produce trades secure. This will likely probably take to a progressively leaner value chain model.

7. Variable and transparent fees
Crypto exchanges have transparent and typically low fees. These are transparent because being direct there is nowhere to cover up, so it will be very obvious what is the exchange charging. Crypto fees cover anything from 0,10-0,30% on the very expensive but convenient Coinbase with 1,5% to 4% fees.

Fees in traditional brokers take time and effort to be aware of as they normally have many different components. They can be low for larger trades, but can typically figure to $1 to $7 per trade which is often pricey for a lot of transactions.

Fee schedules are due to cost and competition. With blockchain type infrastructure cost will disappear very significantly. At the same time, increased competition will represent a secular trend of shrinking fees for retail investors with ETF and crypto exchange fees to be the defacto standard which others converge.

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Overall, it looks like a well used shift from the previous model with all its legacy limitations to the model which a new technology enables. Given the already digitized nature of exchanges and stocks, bonds and options we can expect movements to start out fast and the switch to be swift. Similar to classifieds within the newspaper industry compared to slower shift to e-commerce. Regulation can be a hurdle, but financial authorities seem open to more efficient, fair and quick transaction methods. The exchange that moves quicker often will take in the lunch of competitor exchanges. Just like the likes of Schibsted launched digital classifieds across Europe and dominated the course. So traditional exchanges should face a fresh reality to see that they are likely to get their level on the new gold standard.


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