Blockchain and alternative cryptocurrencies have revolutionized the way the world works. First conceived as a transparent, private, secure, and tamper-proof way to execute and record transactions, blockchain is disrupting the way we approach everything from healthcare, finance, and transportation to entertainment, education, and even politics and governance.
What bridges the gap between projects and the users who actually use and benefit from them are the crypto tokens – also known as alternative currencies – that power each project. These tokens are used to trade real value and services between different parties participating in or using an individual blockchain project or service. And even though this market is still somewhat in its infancy, billions of dollars’ worth of crypto trades take place on exchanges all over the world on a daily basis. In this way, exchanges play an important role in facilitating the growth of the crypto space by helping new ideas and services reach a global audience.
To put things in some perspective, consider this: there are currently over 500 active exchanges in operation around the world. These exchanges list a combination of 2,000 different cryptocurrencies, and they have supported the growth of the crypto space from when it was valued at roughly $10 billion in 2014 to when it reached an overall market cap of over $700 billion by early 2018 – an increase of over 7000% over a period of hardly four short years.
What’s important to note about the development of exchanges, however, is that it has taken place in successive stages. The majority of high-volume exchanges today operate in a centralized fashion and run much like a private company. We can think of the first generation of exchanges as operators such as Binance. These are large and successful operations that take a straightforward cut from transactions as trading fees.