Recently, Eitafang founder Vitalik Buterin bluntly at the TechCrunch blockchain theme salon, “I hope the central exchange will die.”
Obviously, Vitalik Buterin hates the centralized exchange. The reason is to talk about the basic logic of the blockchain – decentralization.
The key to decentralization is authentication
For Ethereum, Vitalik Buterin hopes to decentralize it as much as possible through the underlying architecture. In fact, the true decoupling of the Ethereum network, the series of problems that need to be overcome ultimately comes down to how to verify the identity of users. Taking a wallet as an example, establishing a dual verification of a public key and a private key is an effective solution for point-to-point trust transactions.
But what about the loss of the user key? Retrieving the key, Vitalik Buterin said that he is very interested in the method currently used by WeChat. For example, WeChat will verify the user’s identity by asking the user to identify the friend in a contact list. Based on this, a variety of lines can be expanded. The next verification method.
If all goes well, in a sense, the Ethereum network basically realizes the decentralized point-to-point connection and supports key retrieval at the same time. But at this stage, the middle structure of the network, including the centralized exchange, still exists.
Vitalik Buterin pointed out that the existence of a centralized exchange is because the gateway in the existing Internet architecture is centralized. In other words, the network itself is not absolutely distributed. Even though the blockchain technology is distributed on the architecture, it is more or less influenced by the centralization at the logical level.
For the private chain and the alliance chain, borrowing Vitalik Buterin’s original words, “These projects are mostly not far away, and some of them eventually fail to achieve decentralization.”
Decentralized network, centralized exchange
In the past, the world of digital assets only had bitcoin. The establishment of Ethereum made the blockchain network diversified. The birth of multiple network certificates gave birth to a digital asset exchange that connected different blockchain networks.
On the one hand, the newly added blockchain network (public chain) needs to issue the corresponding network certificate through the exchange. On the other hand, the user conducts transactions and management for different asset types through the exchange.
The existing exchange is an intermediary institution whose purpose is to match transactions, essentially a clearing center that aggregates various digital assets.
At present, most of the digital asset exchanges on the market are centralized and have a monopoly position in the industry. The project party will pay tens of millions of dollars in the local currency fee and only exchange the corresponding project token for the user.
In business logic, the user needs to host the asset on the exchange first, and the platform matches the transaction after receiving the user’s transaction instruction. After the transaction is completed, the platform will perform liquidation.
Traditional trading institutions, such as stock exchanges, carry out third-party bank custody of user assets, and the liquidation process is also referred to third-party agencies. In the centralized exchange, the entire transaction process is carried out on the platform, and the exchange covers the entire set of services.
That is to say, the existing centralized exchange not only does not continue the decentralization effect of the blockchain network, but strengthens the degree of its centralization.
At the same time, the user hands over the personal assets to the platform and needs to provide key information to the platform. Therefore, the centralized exchange stores a large amount of user information, and if the exchanges that gather huge digital assets are not guarded against security, they will suffer heavy losses if they encounter hacker attacks.
According to the BCSEC’s previously published Blockchain Security Research Report, between 2011 and 2018, 56.67% of security incidents occurred on the trading platform, and digital asset exchanges faced severe security challenges.
Or buy 55.com, Vitalik Buterin wants to layout the decentralized exchange?
According to CoinMarketCap, as of now, the number of digital assets circulating in the market is 1620, and the number of trading markets is as high as 11,597. The digital asset exchange has become a red sea.
Among them, the mainstream exchanges rely on the tens of millions of dollars in currency fees and high-volume transactions to generate huge fees to stay in the head of the industry, small and medium-sized exchanges have also entered the game because of the coveted profiteering, the development of the entire industry is increasingly deformed. Ethereum, founded by Vitalik Buterin, is a decentralized Ethereum that seems to have been broken.
In fact, some teams are trying to develop decentralized exchanges. As Vitalik Buterin said, although distributed trading is still in the early stages of development, the outlook is promising.
Indeed, decentralized trading is the trading model that best fits the spirit of the blockchain. In this model, users do not need to administer personal assets to the exchange, but instead keep the private key on their own, and asset security can be better protected.
In addition, the exchange completes transaction clearing in the blockchain network through smart contract matching transactions. Not all operations are performed by the exchange, reducing the reliance on intermediate structures throughout the transaction.
In fact, from the user’s point of view, distributed transactions have obvious advantages – safer, more transparent, and more decentralized. What the user needs is nothing more than the ability to manage the transaction autonomously, and it is convenient to operate while ensuring asset security.
Coincidentally, when Vitalik Buterin slammed the Centralization Exchange at the TechCrunch Salon, the digital domain name 55.com was changed to Vitalik Buterin. It is understood that the domain name is an autonomous digital asset exchange that is about to go online and is committed to full transparent value exchange.
So what is the truth? Will Vitalik Buterin’s expectation of the decentralized exchange be realized?