Exchanges have been a weak spot in bitcoin going back to the Mt. Gox days. It is a decentralized currency, so why do so many people store their coins in centralized depositories?
There are a lot of reasons, chief among them are ease of use and accessibility. Most of the time it is just laziness. But day traders have a legitimate reason: they need near instantaneous access to their coins. Constantly moving coins from local wallets to exchanges for the purpose of trading would be expensive with mining and exchange fees. Worse, it would take time to do the transfer, potentially costing traders significant amounts of money as the market moves. Day trading depends on speed, and waiting for the blockchain and exchange is simply not an option for a lot of them.
And so we have these central points of failure. We have our Mt. Goxes and and the dozen or so other exchanges that have failed over the years. But we still have them because a large portion of the bitcoin ecosystem needs them and needs to use them in a way that puts coins at risk.
That was underlined earlier this week when a fairly obscure South Korean exchange Coinrail was allegedly hacked for around $30M USD of different altcoins.
There have been attempts to fix this problem. There are decentralized exchanges out right now. But they aren’t popular for a host of reasons. They are slow. They have issues with pairing orders. It just isn’t easy or quick to trade without a trusted third-party.
Decred[1] has proposed a new decentralized exchange, one that will solve many of the problems associated with current attempts to decentralize how we trade decentralized currencies. Importantly: It goes far beyond the Atomic-Swap system utilized by today’s decentralized exchanges
There
