Perhaps inspired by the world’s largest cryptocurrency exchange Binance to launch a decentralized exchange (DEX) by 2019, Bithumb, a major digital asset trading platform in South Korea, has announced its plans to operate a DEX in the months to come.
Bithumb DEX, which is expected to target the global cryptocurrency market, will be launched under an overseas subsidiary of the exchange outside of South Korea. The DEX is currently being developed with the assistance of One Root Network (RNT), which already has deployed a decentralized exchange in early 2018.
A source close to Bithumb DEX told local publications that to expand its user base internationally, the exchange established a mid-term plan to fully deploy a decentralized exchange in the upcoming months.
“Bithumb is one of the leading global exchanges in terms of transactions but it is true that most of its users are Korean. The latest decision seems to be the company’s strategy to compete with other leading exchanges in the global market by opening a decentralized exchange that receives attention in the global market,” said the source.
Binance Versus Bithumb
Centralized cryptocurrency exchanges including Bithumb and Binance generate massive profit margins from trading fees. Every time a user initiates a trade on an exchange, a fee has to be made to the exchange to process the order.
On a decentralized exchange, a third party service provider or mediator cannot exist, which limits the involvement of a central party in processing cryptocurrency trades and orders.
But, to incentivize developers and finance operations, it is possible to hardcode recurring transaction fees into smart contracts so that each trade provides the development team of the decentralized exchange with incentive to sustain development.
Previously, in an interview with Ran Neuner on CNBC’s Crypto Trader, Binance CEO Changpeng Zhao stated that he firmly believes decentralized exchange is the future of the crypto market.
“I believe that decentralized exchange is the future. I don’t know when that future will come yet. I think we’re at an early stage for that so I don’t know if it’s a year, two years, three years, or five years. I don’t know but we got to be ready for it,” he said.
Based on the strategy of Bithumb to secure international users through the launch of a decentralized exchange, it is fairly evident that the main competitor of Bithumb will be Binance, which already has dominance over the cryptocurrency exchange market.
Bithumb’s Decentralized Exchange Could Appeal to Local Investors
As CCN previously reported, US Securities and Exchange Commissioner (SEC) Hester Peirce stated that investing in the crypto market through digital asset trading platforms requires a specific know-how and knowledge on the market, which many investors lack.
“This complexity means that only a very particular type of investor can pursue the diversification opportunities such assets can provide. Entrepreneurs are developing new products through which people can access cryptocurrencies indirectly or hedge their cryptocurrency holdings. Bitcoin futures, for example, began to trade recently,” she explained.
Investing through a DEX is even more complex than investing through a crypto exchange because users have no service providers to rely on when potential issues emerge. But, for Bithumb users, the launch of Bithumb DEX could be positive given the company’s poor track record with security breaches and hacking attacks.