Hybrid Cryptocurrency Exchanges: What Are They?

Overview

The advent of cryptocurrency gave rise to the launch of different exchanges to facilitate the selling and buying of cryptos. Since then, we have had centralized cryptocurrency exchanges, decentralized cryptocurrency exchanges, and now hybrid cryptocurrency exchanges. As a digital asset, cryptocurrencies were met with challenges in their exchange on existing physical networks. This was the reason for the creation of different exchanges. 

Trading of cryptocurrency is akin to forex trading in the sense that it involves the exchange of currencies. However, crypto trades deal with solely digital currencies. You can exchange Ethereum for Bitcoin, Ripple for Litecoin, etc, and vice versa. This is the same manner forex traders can exchange the United States Dollar for the British Pound. By levying the traders for a small fee on each transaction, the platforms are able to maintain themselves. 

With time, these cryptocurrency platforms, based on their fundamental architecture, were categorized into centralized or decentralized crypto exchange platform. Before we delve into the hybrid cryptocurrency exchange, let us refresh our minds on centralized and decentralized crypto exchanges. 

Centralized and Decentralized Cryptocurrency Exchanges 

Third-party providers that organize trades between buyers and sellers control centralized exchanges. On the other hand, decentralized exchanges stick to the ideals of Satoshi Nakamoto; thus, thus, they are not run by third-parties. While decentralized crypto exchanges are known for maintaining anonymity and being well secured, centralized exchanges are known for fast transactions and high liquidity. Both exchanges also have their peculiar challenges regarding crypto trading. 

The centralized exchanges charge transaction fees and are also in charge of traders' assets on the platform. They also hold the funds of users in the hot wallet (wallets connected to the internet), which are relatively easy to access. Most exchange hacks in the history of cryptocurrency have been on centralized exchanges. Some good examples include Mt.Gox, BitFloor, and Poloniex. 

On the other hand, decentralized crypto exchanges are quite slow when it comes to transaction speed. The platform is not ideal for users who want to exploit the volatility of the crypto market. Decentralize exchanges do not enforce an anti-money laundering (AML) and know your customer (KYC) laws, thus making it a hotspot for malicious activities. 

We now have an overview of the centralized and decentralized exchanges. Let us explore the hybrid cryptocurrency exchange and what it holds for crypto traders and investors. 

Hybrid Cryptocurrency Exchange

The limitations of both the centralized and decentralized crypto exchanges led to the creation of the hybrid cryptocurrency exchange. This specialized crypto exchange combines the positive features of centralized and decentralized exchanges. The hybrid crypto exchanges address all the shortcomings of centralized and decentralized exchanges. They adopt the usability and liquidity of centralized platforms and the anonymity and security of decentralized exchanges. 

Here, users have total control of their funds and do not have to hand them over to any custodian. You can trade digital assets directly from your wallets while depositing tokens into the robust smart contract. The hybrid cryptocurrency exchange is undoubtedly the next generation crypto trading marketplace. 

Examples of Hybrid Cryptocurrency Exchange

Here are some of the rising hybrid crypto trading platforms:

This is one of the hybrid crypto exchanges currently available in the market. It is ideal for brokers, high-frequency traders, corporate companies, and arbitrageurs. The platform uses both on-chain and off-chain protocols to process orders initiated by users through an electronic communication network. An electronic communication network (ECN) is a computerized system that automatically matches “buy” and “sell” orders.

Its features include institutional-grade security measures, enough liquidity, greater transparency, 24/7 technical support in multiple languages. Qurrex also has advanced API, fiat integration, an aggregated order book, and a trading facility for ERC-20 tokens. 

Eidoo is another rising hybrid exchange where you can trade cryptocurrency. Your account will link to a smart contract on the Ethereum blockchain; Therefore, no one except you can access or view the funds in your Eidoo account. A smart contract is a computer code that runs on blockchain. Blockchain processes all transactions that happen in a smart contract. The implication is that you can process your transactions without any third party. This hybrid crypto exchange has an in-built Atomic Swap feature that allows users to exchange hundreds of ERC-20 tokens. 

The Legolas hybrid exchange is ideal for institutional investors. Legolas incorporates a decentralized ledger within its proprietary platform. It aims to guarantee the order book's inalterability and transparency to ensure a fair trading environment for users. The protocol is a semi-decentralized order matching protocol. All incoming orders and transactions are encrypted and timestamped and stored on the blockchain. The order matching is done off-chain. 

The Benefits of Hybrid Cryptocurrency Exchange 

Generally, the hybrid crypto exchange platform is scalable. Therefore, it helps to position the platform as a potential crypto exchange hub in the future. Fraudulent practices like what we have experienced with decentralized exchange platforms will become obsolete. Therefore, in the hybrid crypto exchange, you can conduct smooth and safe crypto trading with anyone worldwide. 

Features of Hybrid Crypto Exchange

Here are some of the major features present in a hybrid cryptocurrency exchange platform:

The escrow mechanism will control the stability of crypto funds to ensure the satisfaction of buyers and sellers.

Hybrid exchange incorporates top-grade authentication to guarantee seamless transactions in a highly secure environment. 

Blockchain-based atomic swaps will allow traders to exchange digital currencies directly without the help of third parties. Atomic swap is a smart contract that allows users to exchange different cryptocurrencies peer-to-peer, hence eliminating intermediaries. Users can exchange large amounts of cryptocurrencies in this manner. 

Conclusion

The hybrid cryptocurrency exchange is the missing link that unites the advantages of both centralized and decentralized exchanges. Time will tell how these platforms will fair in the crypto market. However, the prospect is nothing short of positivity. 

Also read, IPFS: A Basic Guide To Store And Access Your Data

Xord is a Blockchain development company providing Blockchain solutions to your business processes. Connect with us for your projects and free Blockchain consultation at https://https://xord.solutions/contact/

Hybrid And Federated Blockchain Networks

This article will give you a detailed insight into the worlds of Hybrid and Federated Blockchain networks. Although the Blockchain market is expected to shrink in 2020 due to restrictive containment measures prompted by the outbreak of Covid-19, the market is expected to grow rapidly in the coming years. 

Blockchain technology has been the foundation of cryptocurrencies and has been of great use in financial services. As a decentralized database, Blockchain technology has made digital transactions secure, safe, and transparent. Some companies, like BitPesa, conduct their overseas payment using Blockchain technology. Currently, Blockchain has found its use in healthcare, supply chain, government, and other sectors. 

In this article, you will better understand the fundamentals of Federated and Hybrid Blockchain networks and how they function. Before we delve further into this topic, read more about Blockchain technology here.

What is Federated Blockchain?

A Federated or Consortium Blockchain is quite similar to a private Blockchain. However, there is a line of demarcation between both. In a Federated Blockchain network, there is no sole organization influence. This is unlike the private Blockchain that operates on a permissioned distributed ledger system. Some private Blockchain systems make use of public readability features, whereas others do not. 

In a Federated Blockchain network, multiple entities make use of the network, and they will create a decentralized system. Therefore, instead of having one organization take charge of the network, Federated Blockchain allows multiple organizations to use the network for their benefit. A good example of Federated/Consortium Blockchain is Enterprise Ethereum Alliance (EEA). Some of the leading organizations that are members of EEA include Microsoft, Accenture, J. P. Morgan Chase Bank, Vitro Technology Corporation, etc. 

These organizations come together to ensure the network works efficiently. That is why it is called Federated Blockchain or Blockchain Consortium. There are three basic types of Federated/Consortium Blockchain and they include:

How does it work?

Imagine twenty different organizations are working together in the same Blockchain network. From these twenty organizations, a node will be pre-selected to enable changes on the network. These nodes can do several things. The nodes have the authority to either read or write transactions. They have the power to restrict or allow participants on the network. However, these nodes don’t have the sole power to add a “block” in the database. Before a “block” can be added on the network, each of the nodes has to sign off the “block.” Even if one of the nodes disagrees, the “new block” will not be added. 

You cannot see such a feature in private Blockchain networks. This feature helps to ensure that no one can exploit their superior access to the network. Federated Blockchain uses the Proof of Vote mechanism to reach a decision. 

Benefits Of Federated Blockchain

Here are some benefits that you can expect from Federated Blockchain platforms.

Learn more about Federated Blockchain and its use cases here.

What is a Hybrid Blockchain network?

Now, let's talk about the Hybrid Blockchain network. It is a combination of the strength in both private and public Blockchain solutions. Ideally speaking, Hybrid Blockchain means having controlled access and freedom at the same time. Hybrid Blockchain solutions are completely customizable. The participants determine which transactions they will make public and who becomes a member. 

Before you can have a clear understanding of Hybrid Blockchain, you need to first understand private and public Blockchain. Like its name, public Blockchain is accessible and managed by the public. However, private Blockchain only grants access to a few entities involved in the development of private Blockchain. Private Blockchain networks have administrators who control the permission or addition of data. 

All transactions that take place in a Hybrid Blockchain system can be kept private. Although these transactions are private, they are still verified when needed. Once you can access the Hybrid Blockchain, you can fully take part in all activities of the network. However, the identity of each participant is hidden from others on the network. 

Hybrid Blockchain combines the speed of private Blockchain and the security of the public Blockchain. It uses the private Blockchain to generate a hash of transactions while employing the public Blockchain feature for verification. Some real-life applications of Hybrid Blockchain include the Ripple network and the XRP token and XinFin.

Use Cases of Hybrid Blockchain

Conclusion

Both Federated and Hybrid Blockchain are disruptive. Therefore, to answer the question that which one of the Hybrid and Federated Blockchain is the best, we can say that it depends on the use case. However, each of these two networks has its peculiarities in the industry. Blockchain Consortium cannot do the work of a Hybrid Blockchain system, and vice versa. 

Xord provides Blockchain services and solutions to your business. Connect with us for your Blockchain projects and free Blockchain consultation at https://xord.solutions/contact/