The world has turned just a few pages in the history of cryptocurrencies. It has happened very quickly compared to other adoptions or changes in finance. In 2009 Bitcoin was established. Before that, other digital currencies were created, but their ideas did not stick. After the first bitcoin transaction was made between Satoshi Nakamoto and Hal Finney on January 12th, 2009, nothing extraordinary happened, but the roads of finance changed. The opportunity for power and control split onto an off-ramp from the conventional financial system that we have seen for decades.
Outside of peer to peer and wallet to wallet transactions with Bitcoin or cryptocurrency, the need for digital exchanges was realised quickly. People needed and wanted platforms to trade their crypto just like stocks and commodities. The large-scale trading made possible in exchanges also made available an increased supply and demand in crypto. A large prospect for speculation grew in crypto leaving increased value and loss of value. The highly volatile nature of Bitcoin and other cryptocurrencies is no surprise as this occurs in any newly traded product. Crypto traders thrive off of volatility! This is the backbone of making profits with successful traders. As the demand or Bitcoin erupted in past years, 2012 and 2017 at noticeable peaks of value, so did the need for digital exchanges. They often became the doorway to the market through direct sales of Bitcoin and this still exists today.
Mt. Gox is known as a digital exchange which has one of the most prolific histories in crypto. At one point it carried 80-90% of all trading volume in the industry. Due to hackers who infiltrated Mt. Gox changed the price of Bitcoin down to 1 cent and listed asks (exchange orders to sell) for the purchase of the cryptocurrency. A total of 850,000 Bitcoin were lost and the exchange ultimately shut down. To this day, the Bitcoin lost in Mt. Gox are lost, but being sold, transferred and profits being enjoyed by anonymous owners.
Wired magazine did a study in 2013 that showed 45% of Bitcoin exchanges end up closing. This is likely due to the developing standards, software, security and regulation surrounding cryptocurrency. What exchanges have now is the advantage of learning from previous exchanges and their difficulties to overcome. It has been said that the shortcut to success is to learn from the accurate simulation of events. History is a great lesson when it comes to digital exchanges. There is a short list of exchanges that had events reach front page news, such as Mt. Gox being hacked. Users lost their investments being held in Bitcoin, but the industry learned from this story. The good news about from this history is that a strong foundation was poured for the emerging crypto industry. Despite these flaws in systems allowing loss, the value of Bitcoin and other crypto currencies survived and has continued to flourish. Just in the last 12 months, new systems have been designed that are more detailed with many layers of security. It’s an ongoing battle between those who want to provide services for customers and those who want to exploit those services. The strongest defence against this problem is the education of the public, which is happening at an exponential level. See our other article about “The Battle of Cold Crypto Storage”. This article details safe methods of storing cryptocurrency so that users can prevent theft or loss of their investments.
One very exciting prospect in the world of digital exchanges is happening right here in my own city of Calgary, Alberta. A new digital exchange is on the verge of launching. NDAX.io will be launching their platform in the very near future. The most exciting thing that I noticed was in their whitepaper which details the levels of security that they have, instant verification of users identities, and high liquidity available to investors. See our interview portion of our website for a 1 on 1 interview with one of their founders. As you can imagine, digital exchanges over time have the opportunity to refine every aspect of what they provide, and NDAX is no stranger to fine-tuning what is needed in the crypto industry. We are eagerly anticipating the launch of their exchange!
It’s a pivotal time for us to live in this world, especially in the finance industry. There are many other stories just like this one of loss and the infiltration of the investments of investors. From the ashes of these times of loss, rises many positive things. It can be said that if you want to make an omelette, you’re going to have to break some eggs. The correct mindset is to not attest negative situations as failures but to list them as learning experiences which have extremely high value. This is evident in the crypto industry right now. If it wasn’t the case, or if our innovators did not push through these circumstances, we would not see the successes today with Bitcoin, Ethereum and many of the top cryptocurrencies developing in the world.
An interesting thing to note is that people often panic when they hear about anything negative in the crypto industry involving an exchange being hacked, crypto scamming or loss in value. Even more surprising is when the same people hear of governments losing or misplacing trillions of dollars, banks manipulating their customers, or deep-rooted corruption being exposed in politics and business, there is little reaction. Our minds have been conditioned to accept certain things. We are not surprised to hear about things going wrong with the current financial system, but many are shocked and fearful of a new system such as cryptocurrency because they don’t know anything about it. The best case situation for this emerging industry is that enough people on the planet learn about it and use it so that it will be adopted by the whole world. This has already happened. Yes, it may only be a small percentage of the population, but cryptocurrency is here to stay along with digital exchanges.
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Ross Macdonald – 2018 CryptoCulture Magazine Inc.