Retail demand for cryptocurrency goods is increasing, but there is a lack of knowledge on investor protection, according to a report from the World Federation of Exchanges.
According to a World Federation of Exchanges (WFE) research, 40% of cryptocurrency trading platforms use distributed ledger technology and are decentralized. On the other side, 60% of platforms, or the majority, employ Central Limit Order Books (CLOBs), which are quite similar to platforms used by regulated exchanges.
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There are 500 different cryptocurrency trading platforms that provide a range of cryptocurrency-related goods and services, according to the WFE survey. Numerous cryptocurrency platforms took part in the poll and contributed valuable information about consumer and business demand.
The study found that several cryptocurrency platforms choose to use an off-chain CLOB system for order execution, quotation display, and pricing oracles. The blockchain is only utilized by these businesses for settlement and custody purposes. Because of this, dealers do not deal directly with the DLT, which ultimately reduces transaction costs. This limits the application of transaction fees to orders that are resolved on the blockchain. Centralized platforms (CEX) are the name given to cryptocurrency trading platforms with this kind of configuration.
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The poll indicates that, with the exception of custodial services, retail demand for products and services associated to cryptocurrencies is stronger than institutional demand. Institutional behemoths have demonstrated a stronger need for cryptocurrency custody services, and demand is growing. The analysis indicates that retail customers are less aware of the significance of investor protection based on the different sorts of products demanded by the two investor sectors.
In terms of client demand and liquidity, the survey discovered that centralized exchanges have greater trading activity despite decentralized platforms’ reduced transaction costs. The paper also discussed the price variations for identical trading pairs on other platforms, which can present arbitrage opportunities. The WEF analysis claimed, however, that this kind of pricing fluctuation points to a potential inefficiency problem in the crypto market.
The survey also discovered that, despite the fact that know-your-customer standards are in place in the majority of nations, both centralized and decentralized crypto trading platforms have struggled to put them into practice due to a lack of uniform crypto legislation.
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