Bithumb, South Korea’s second-largest crypto trading venue, is launching its own global decentralized cryptocurrency exchange (DEX). The announcement comes in hot pursuit of similar initiatives by popular crypto exchanges over the last few months, including from Binance.
The new venture was developed in partnership with blockchain company One Root Network (RNT), which provides the Seoul-based exchange with its Ethereum-based decentralized token transaction protocol. The protocol separates order matching and order execution, which RNT claims improves security and matching efficiency.
As regulatory pressure increases on the cryptocurrency operators, Bithumb’s move toward a decentralized environment will be implemented through an overseas subsidiary to help avoid local restrictions. The biggest advantage offered by decentralized exchanges is the trustless functionality they offer, removing the threat presented by centralization.
Business Korea quoted an unnamed official from Bithumb as saying “Bithumb DEX will be operated by its overseas subsidiary. The company is working together with RNT only in the decentralized exchange sector.”
Decentralized exchanges differ from centralized platforms in that users do not need to entrust their cryptocurrency to third parties, and may instead trade them in a peer-to-peer system. While some exchanges are better guarded than others, decentralized systems are more secure and anonymous while having lower or no fees on transactions.
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With the rising limitations of the centralized crypto exchanges, many old blockchain players are now developing decentralized platforms to cope up with the market competition. Major players like Binance and Kyber Networks have earlier launched native decentralized platforms and were joined by many market counterparts.
However, the picture is not always rosy. One example was the launch of Waves DEX earlier in July when hackers hijacked both the exchange website and the company’s main site to phish for users’ personal wallet information.
In the third quarter, Bithumb recorded an estimated write-down of $40 million for the funds used to compensate customers on the losses they incurred due to the security breach occurred in June.
There are also other drawbacks to decentralized exchanges. Binance founder and CEO Changpeng Zhao told Bloomberg earlier this year that “on the decentralized exchange we’ll have less control. More likely anybody can list any coin. That’s the philosophy of the decentralized exchange; it’s freedom of choice, freedom of investments. But with freedom, there will be people who are scammers. That’s not something we can control.”
Finance Magnates last reported on Bithumb last week when a consortium led by a plastic surgeon and start-up investor has taken a majority shareholder position in the world’s third-largest cryptocurrency exchange.