The current state of the financial market is close to a huge mess in many aspects. The unfortunate truth that we’re realizing slowly, but steadily, is that many of the models we’re used to working with are simply not appropriate for the current state of the market, let alone the future. Change is needed in many aspects, and it’s not something that can happen overnight.
One of the most important things to consider is the way exchanges work at the moment. Many of their specific implementation details are based on the way the market has worked in the past, and are not quite compatible with current models. In fact, in some cases, working with these outdated models is a huge detriment to the overall progress of the market.
Tracing Back Centralized Exchanges
The initial reason for the creation of centralized exchanges in the first place was that they were a convenient tool for providing good liquidity that could sustain the growth of the crypto market and promote active trade. And to that end, they’ve worked quite well for the most part. People have easy and streamlined access to all the tools they need to perform trades on a regular basis.
However, exchanges came with a risk that many people were simply willing to accept – the fact that they are a centralized service. This means that at any time, users are at risk of losing their funds if something happens with the exchange itself. And we’ve already seen several incidents of this type, in one case of quite the extreme proportions.
The Element Zero Approach
Element Zero is a new approach to P2P trading with their SmartSwap which removes the need to have any kind of wallet in the first place. The service does not issue any wallets, and as a result does not hold any investor tokens itself. There is no hot wallet or cold wallet involved – money is always locked to a specific smart contract. Once the conditions of the contract are fulfilled, the funds are released. This takes away control from the exchange and puts it in the hands of actual users, something which many have praised as a good step forward.
The only important detail here is to ensure that the contracts are developed in a sensible manner in the first place. Therefore, the network of Element Zero branded stablecoins are interoperable with an open-source software development kit. It is just as easy as a branded Visa.
Accountability and Other Issues
Of course, that raises certain concerns that are important to address. The most critical one in the eyes of many users is accountability. If something goes wrong when using a regular exchange, it’s easy to trace the incident back to a specific user and hold them accountable. Things are not so opaque when dealing with a decentralized smart contract, however, and a different approach must be taken here.
The way Element Zero handles trading is a good step forward from the way exchanges have traditionally worked in the past by removing the ability to hack a hot wallet in the first place. The current testnet is live and users can go through the protocol to test for themselves. It’s important to remember that this a long-term project that will evolve over multiple stages in the future including the upcoming release of SmartSwap.
Value for Adopters
But even those who adopt it early on stand to benefit a lot from that. In fact, they are among the ones who stand to gain the most from adopting Element Zero and its approach to the crypto exchange market. It’s becoming more and more clear as time goes by that P2P is the future of the market, and many exchanges have started to look in that direction for possible solutions to their problems.
And while it will take a while for these trends to become truly widespread and get adopted correctly, the system is in a good enough state to get started already. And as more and more exchanges continue to adopt the ideas behind Element Zero and integrate it successfully into their own systems, the market is going to shift towards a preference for this type of trading. Which, in turn, means that those who don’t put any effort into adopting it early on stand to lose a lot in the future once their own systems become incompatible with the general market.