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Arthur Hayes Discusses Centralized vs. Decentralized Exchanges at Distributed 2018


Experts and entrepreneurs from across the blockchain industry addressed many topics at Distributed 2018, the brand’s inaugural flagship conference held in San Francisco, using panel discussions and keynote addresses to take on the most pressing issues in the decentralized world.

At one such keynote address, the CEO of BitMEX, Arthur Hayes, offered an extremely informative look at the pros and cons of centralized and decentralized cryptocurrency exchanges.  

As the CEO of a centralized exchange himself, Hayes prefaced his talk with a disclaimer that he would be far less bullish on the topic of decentralized exchanges (DEX) than many others, but that he would try to give a nuanced portrayal of what problems these exchanges try to solve and what cryptocurrency traders are actually interested in.

Hayes declared that liquidity and leverage trading are the two most important things that a prospective trader will take into account in choosing specific exchanges to use, and that potential security concerns have to take a back seat to these basic logistical questions. Even though decentralized exchanges record their transactions on public blockchains, and allow customers to hold their own tokens in their own wallets, these business practices also make the system more cumbersome and inconvenient for casual users, which most traders invariably are.

Hayes also contested the notion that decentralized exchanges are immune to government shutdown over crimes like securities fraud, as an autonomous protocol cannot commit a crime, claiming that it would be easy for governments to simply punish the developers of these protocols where criminal activity takes place. The precedent exists, after all, in Ross Ulbricht’s life sentence for enabling the Silk Road.

Although he acknowledged that DEX exchanges may have their place in the sun five to 10 years from now, Hayes firmly stated that centralized exchanges are the best for the concerns traders actually have. In his experience, most traders are people who want to make some money by dealing with assets that are cheaper than property or equities, and that can fluctuate in value more in an hour than traditional stocks can in a month. The possibilities of distributed ledger technology are wholly irrelevant to their interests.

Hayes’ provocative speech is one of the many pieces of content from Distributed 2018 that are now available online. For more insightful discussion on topics across the industry, visit Distributed’s YouTube channel.


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