Several Features Of Crypto Exchanges Over Traditional Stock Exchanges

These types of advantages are especially relevant for retail investors which can be much better served by Crypto exchanges in comparison with traditional exchanges. So traditional exchanges should learn to move or face the fate in the dinosaurs. It will not be long until we start to find out the technology and concepts of crypto exchanges deployed for stock, bond, currency and options trading. This does not imply stocks must become blockchain-based tokens, but that tokens may be used to represent stockholdings pretty easily and transacted blockchain style.

1. Fractional purchasing
With crypto exchanges, you can get whatever fraction you would like associated with a asset. Therefore in order to invest $523 in bitcoins that can be done exactly that. You don't have to buy a whole bitcoin, you can purchase any fraction of it (e.g. 0.003 BTC). This gives small investors more flexibility as well as causes it to be simpler to produce balanced portfolios with any amount.

With traditional exchanges, you must buy no less than one stock and you'll purchase only whole numbers. This might not be a challenge for big-time traders but retail investors might find it too lumpy. A Google or Amazon stock is trading for north of $1.000 which makes it a huge commitment, to never bring the $325k Berkshire Hathaway stock.

There is really absolutely no reason with this except the fact once stock certificates were paper documents that couldn't be slashed into smaller pieces. Nowadays fractional stock trading is perfectly feasible and is implemented quickly through tokenization of stocks.

2. 24x7 trading
With crypto exchanges, you can purchase and then sell on 24x7. Obviously, exceptionally those sites are down or even the blockchain is totally backed-up. This is very convenient for retail investors who will be usually working or busy in the event the market is open. It also levels the stage when it comes to being able to react to news like the China ICO crackdown.

With traditional exchanges, you're restricted by the "market hours". Much like your neighborhood physical store vs. Amazon. Obviously, institutional traders get all kind of "pre-market" and "post-market" trading is not available to retail investors.

Again, "market hours" developed a large amount of sense when real individuals were trading the pit. Nowadays there isn't any reason to never allow 24h trading because "pre and post" markets show. Obviously, if some are allowed inside the "pre and post" they've an unfair advantage on ordinary people and can need to maintain their own rules.

3. Instant Settling
With crypto exchanges, you can get and then sell instantly. The exchange takes desire to instantly settle depending on their custody of crypto assets and formalize the change you'd like the blockchain allows. This really is natural, whenever you hit the button you have the asset.

With traditional exchanges, your order is processed and then there can be a long settling process (currently T+2 or two days from close). As there is normally no issue with, it allows High Frequency Traders advantages over us common mortals.

There's 2 problems allowing instant settling with current stock market infrastructure. First, you will find there's technology problem. Even though the blockchain allows instant settling, previous technologies need to go by having a convoluted procedure for checking and rechecking. Second, the multilayered value chain which made sense in the old school takes necessary more hours as opposed to direct type of crypto exchanges.

4. Transparent order-books
Crypto order books are totally transparent in several exchanges like Kraken or Poloniex. You can see the depth with the buy and sell side of each market in each in the assets you're trading. Which means you can discover how industry looks as well as what could happen in the event you place a large order.

In traditional exchanges, that you do not see order books being a retail investor which are proprietary towards the exchange and could be sold like a value added. The matching of order books can be an important advantage for market makers. This can be the main purpose of the so-called "dark pools" that investment banks are coming up with.

Transparent order books is a consequence of competition and consumer expectations on the the whites. But they also need today's technology infrastructure that will deal with the elevated information volume.

5. Modern and secure interfaces
Crypto interfaces are believed from the net and mobile perspective, with security being a key feature. They're light clients in browsers or smartphones. They may be accessed easily from any unit and use advanced technology. This gives convenience, speed and intuitive customer experience.

The standard interfaces I've experienced are nevertheless full applications in the desktop setting with clunky interfaces and long load times. This probably has to do with legacy applications that must be updated but should be secured and evolved slowly.

Evolving completely to another application interface will likely be challenging since it requires agile practices and frameworks which can be second-nature for brand spanking new entrants but take courage and conviction from existing incumbents.

6. Direct-to-investor
Crypto exchanges deal directly with retail investors and have hardly any other players in the value chain beyond themselves. When you're with an exchange you are directly talking to your custodian, your marketplace, your agent, etc... This may cause sense in the world by which decentralized trust decreases the needs for intermediaries. There are many exchange mechanisms for example Shapeshift that are more direct and simply connect you to another side from the trade.

Traditional exchanges have a very long list of players. They've brokers, that communicate with the exchange in your stead. They've custodians, taking care of your assets. This made sense within a world without blockchain through which decentralized trust was complex. Now exchanges grapple together with the question of going direct and bypassing their partners, just like consumer goods companies when eCommerce was starting.

Within a Blockchain-enabled world there exists decentralized trust thereby you do not need numerous actors to create trades secure. This will probably take to a progressively leaner value chain model.

7. Variable and transparent fees
Crypto exchanges have transparent and frequently low fees. These are transparent because being direct there exists nowhere to hide, so it will be very obvious is there a exchange charging. Crypto fees range between 0,10-0,30% to the expensive but convenient Coinbase with 1,5% to 4% fees.

Fees in traditional brokers are hard to comprehend while they normally have a variety of components. They can be low for larger trades, but can typically amount to $1 to $7 per trade which is often pricey for a lot of transactions.

Fee schedules are caused by cost and competition. With blockchain type infrastructure cost will disappear very significantly. Simultaneously, increased competition will represent a secular trend of shrinking fees for retail investors with ETF and crypto exchange fees being the defacto standard that others converge.

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Overall, it appears like a vintage shift from your previous model with all its legacy limitations for the model a new technology enables. In the already digitized nature of exchanges and stocks, bonds and options expect movements to get started on fast and also the change to be swift. More like classifieds within the newspaper industry compared to the slower shift to e-commerce. Regulation can be a hurdle, but financial authorities seem ready to accept far better, fair and quick transaction methods. The exchange that moves quicker often will eat the lunch of competitor exchanges. Just like manufacturers like Schibsted launched digital classifieds across Europe and dominated the course. So traditional exchanges should face a whole new reality and see the way they are likely to place their level to the new gold standard.


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