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Could decentralized exchanges be the answer to crypto corruption?

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More and more major figures in the cryptocurrency world are pointing to decentralized exchanges as the solution to the industry’s problems with fake data, corruption and price manipulation.

CEO of blockchain platform Waves, Sasha Ivanov, told Forbes that decentralized exchanges would soon be able to compete with the more established centralized versions, and in doing so would eradicate fake volume data from the marketplace.

Of course, there is this problem of fake volumes,” Ivanov said, due to exchanges inflating figures, “mostly for marketing purposes.” One way to solve this is to follow the route taken by other markets, meaning that there would have “to be some regulation and control over exchanges.

However, there is another option. “Decentralized exchanges are going to become more and more important,” he said, which will make it “easier to filter out fake volumes” as “everyone can see all the trades” and it is “quite easy to see if some trades are suspicious.” According to Ivanov we will soon see “the total victory of decentralized exchanges,” though in the meantime they will coexist and interact with centralized exchanges.

Noticing the trend, even established crypto-exchanges are starting to develop their own decentralized platforms. Binance CEO Changpeng Zhao last week shared an early version of the company’s new blockchain, Binance Chain, integral to the development of its upcoming DEX decentralized exchange. Although he described the demo as “rough”, he marked it as “a big step” for Binance.

Industry corruption

Cryptocurrency research group CER last month shared an investigation which implied that BitForex, FCoin and CoinEx, three new exchanges which had quickly become listed among the top 10 exchanges by volume, were manipulating their volume figures. Each platform had much lower levels of traffic and user activity than would be expected given their reported trading. CER concluded that BitForex was “likely pumping its trade volume using wash trade,” most often achieved by using “large transactions/trading orders to reduce the risk of loss.

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