I think the readers who opened this article have got the same experiences to spend time with the traditional exchanges. So it may be just more of a memory for us.
I tried some mining pools in 2016 when the concepts of Blockchain 2.0 just appeared in front of traders. Usually, I mined some cryptocurrencies and then deposited them to some centralized exchanges.
Not sold them, just kept HODL because I didn’t know how to use them. Ethereum was just established, e-commercial stores didn’t integrate with it yet.
We couldn’t use them as a payment gateway, so the cryptocurrencies were just nothing more than a string of numbers.
But even if I didn’t have any idea about how to use the coins(worth less than 100 dollars) as an instrument, I had a good experience with some famous exchanges.
When the crypto-industry was not regulated, to attract users, exchanges always provided very flexible features. I was free to dominate my own coins without limitations. No ID or address proof was required.
However just several months later, in 2017, the situation changed and the traditional exchanges became very rude.
Because the deposit was not that much and I had no idea to dispose of it, so I didn’t access the exchange often and it wasn’t urgent to withdraw as well.
Who would check an account worth less than 100 dollars everyday?
Not as expected, the policies changed gradually. Exchanges started to ask for the submission of KYC information.
Especially some exchanges that have vulnerabilities and had experiences to be hacked. It’s understandable.
I placed my account in the corner for 2 years without any visit. When I reopened it again, I found it was locked up.
To unlock it, I was requested to submit my ID card and the latest profile photo with my name. I needed to put the paper written my name with my face together.
I did as required. After several days, my account was finally unlocked.
I checked my account and found the deposit was still there. So I thought being locked was not that serious, my account was not affected. But soon I found I was too careless.
In 2019, I started to develop a smart contract associated project. To deploy the smart contract on the blockchain, I need to create some accounts with tokens to test.
After a surge in the price of Bitcoin, other cryptocurrencies’ prices went 3 times higher as well, so I thought it was a good time to withdraw.
In my account there were several coins left, then I opened it again and started to withdraw.
Unexpectedly, the exchange asked me for the submission of a photo written the date-time with my face together!
Just for withdrawing some coins worth 200 dollars, the owner was even asked to play as a clown!
That’s my coins, my funds. I’m the owner but have no authorization to dominate. You can imagine how angry I was then.
Additionally, it’s not a One-Time insult. I was told to submit a photo every time, as long as I needed to withdraw.
I think it’s necessary to check the identity at the beginning after not accessing the account for a long time, that’s correct.
But if the submission of the private information is required for every time to withdraw, that’s too much.
Without guarantee from the traditional exchanges, private information can be used to make forged documents. Then I have to take the risk on my own.
That’s definitely unfair!
I don’t care about the reason why they changed the policies? They can find me an excuse from the authorities that regulate them.
Centralized exchanges have an unequal position when they trade as a counterparty with the individual traders.
They can determine the price quote, reject the orders, and make the deals move forward to the trend that they can benefit from.
Especially, they can dispose of the assets not owned by them. They make the traders stay at their platform in a very rude manner.
The KYC verification didn’t regulate the market well. On the contrary, the weaker side was restricted under the name of KYC.
Blockchain is nothing more than a decentralized solution for bookkeeping. We have banks, stock exchanges to replace its position in a centralized way.
So, a centralized exchange is not the correct way to apply crypto-industry. If we exchange assets in a centralized institution, it has nothing to do with blockchain.
Then we wonder why we need blockchain?
Swap is a great invention for DeFi. It’s fully decentralized and provides a simple way to convert values. KYC can be easily bypassed.
But it still has weaknesses. Blockchains are independent of each other. Transferring or exchanging cross blockchains is not that easy.
We need to utilize a solution so-called Atomic Exchange and some time locks to help us exchange tokens cross chains.
During the period, generating hash keys is an inevitable way and really complex to normal traders who have no enough cryptography skills.
And, the Swap depends on a formula to calculate the price rate which actually is a dealer mode. The price calculated by the formula is not a market price.
The real market prices should be defined by order matching in a centralized institution, such as an order book.
To make the value closer to the market price, the cryptocurrencies’ issuers need to confirm the market prices between the centralized exchanges and Swap’s liquidity pools.
So, a liquidity pool and automated market maker are required to make this mode run smoothly.
That’s why we developed XCoinCH and make it our solution to facilitate the exchange of tokens cross chains. In our next posts, we will introduce the features of XCoinCH further.