How Centralized Exchanges Have Evolved in the Last Decade

The First Crypto Exchange

The first online crypto exchange where bitcoins could be traded, the New Liberty Standard, appeared back in October 2009 – almost a year after the launch of the bitcoin blockchain. Around the same time, the first purchase of BTC for dollars took place.

In 2009, few people knew about Bitcoin. Trading was carried out on amateur sites, which was the New Liberty Standard for experimental purposes. The exchange itself was launched six months before Laszlo Hanech bought two pizzas from Papa John’s pizzeria, which cost him 10,000 BTC.

At the time, no one knew how to determine the price of bitcoin relative to the dollar. New Liberty Standard proposed a pricing model – the site priced bitcoin in accordance with the cost of electricity spent on cryptocurrency mining, focusing on its own mining bills. Immediately after the creation of the site, one dollar could buy close to one thousand bitcoins.

The New Liberty Standard was hardly an exchange; rather, it was a simple service. Just a year later, cryptocurrency exchanges appeared in the forms familiar to us: Bitcoin Market, TradeHill, Mt. Gox, and others. The boom in the emergence of cryptocurrency exchanges came in June 2011, when the price of bitcoin first rose to $29. According to the laws of the market, an increase in the price of a product also entails an increase in supply.

A brief history of the development of crypto exchanges using the example of Kraken:

Kraken is a San Francisco-based cryptocurrency exchange founded by Jesse Powell in 2011; operating in Canada, Japan, the United States, and the European Union.

Kraken launched in September 2013 after two years of development and beta testing. At first, only Bitcoin, Litecoin, and Euro were available for trading this way. Later, other fiat and cryptocurrencies were added including Ethereum, Ethereum Classic, DASH, Monero, Ripple, Zcash, and Bitcoin Cash. Currently, there are 55 coins and 276 trading pairs on the exchange.

Stacking Function

With the development of functionality on crypto-exchanges, a staking function began to appear on some platforms. This option allows you to receive passive income for storing cryptocurrency. For example, if you keep Tezos and Atom tokens on the Binance exchange, the annual return will be 6-9%. In the case of other coins, this figure can vary from 1% to 16%. This service is also supported by the platforms Kraken, OKEx, KuCoin, Huobi, Bithumb, Poloniex, and a number of others.

However, staking is not a reliable way to make money. Even if the user gets a 6-9% increase for a year of storage of the Tezos token, there is no guarantee that its price will not fall.

Additional Options on Crypto Exchanges

Simply put, the market does not standstill. The competition encourages trading platform teams to come up with new options. Sometimes such innovations become market-wide trends.

There is also a trend towards the introduction of native tokens by crypto exchanges. Such tokens are used in collective project management mechanisms and as a unit of exchange within the internal economy.

An example of a successful implementation of an internal token on the BitXmi crypto exchange:

Singapore crypto exchange BitXmi, launched in January 2020, has already confidently established itself as a fast-growing and promising platform for trading cryptocurrencies. Released in August 2020, its own BXMI token showed +700% profit from starting values of $0.1 per token in less than half a year. The token can also be used to pay trading commissions and receive annual bonuses as staking.

The Future of Centralized Crypto Exchanges

In the long term, centralized cryptocurrency exchanges will have another task: to fully comply with the requirements of the regulator. Licenses will become the norm for exchanges as clients, especially those dealing with large amounts, will demand security for their operations. Nobody wants to work with an unknown company anymore, without an office, a license, or an open team. In the future, crypto exchanges will become like digital banks, and all operations with cryptocurrency and fiat money will be performed in a couple of clicks in a single interface.