A large number of advantages are specially relevant for retail investors that are far better with Crypto exchanges in comparison with traditional exchanges. So traditional exchanges should will move or face the fate of the dinosaurs. It certainly won’t be long until we start by getting to determine we have and concepts of crypto exchanges deployed for stock, bond, currency and options trading. This doesn’t suggest stocks need to become blockchain-based tokens, but instead that tokens may be used to represent stockholdings pretty easily and transacted blockchain style.

1. Fractional purchasing

With crypto exchanges, you can purchase whatever fraction you want of the asset. This implies if you want to invest $523 in bitcoins that can be done this. You should not purchase a whole bitcoin, you can get any fraction than it (e.g. 0.003 BTC). This permits small investors more flexibility plus makes it much easier to make balanced portfolios with anywhere.

With traditional exchanges, you have to buy a minumum of one stock and you will purchase only whole numbers. This might not a problem 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 not discuss about it the $325k Berkshire Hathaway stock.

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

2. 24×7 trading

With crypto exchanges, you can purchase and then sell on 24×7. Naturally, exceptionally sites are down or the blockchain is completely backed-up. This is very convenient for retail investors that are usually working or busy if the information mill open. It also levels the game regarding having the ability to answer news for example the China ICO crackdown.

With traditional exchanges, you’re limited by the “market hours”. Just like your neighborhood physical store vs. Amazon. Obviously, institutional traders get all sort of “pre-market” and “post-market” trading which isn’t open to retail investors.

Again, “market hours” created a large amount of sense when real everyone was buying and selling the pit. Nowadays there’s no reason to not allow 24h trading because “pre and post” markets show. Needless to say, if many are allowed inside the “pre and post” they have an unfair advantage over ordinary people and may wish to keep their own rules.

3. Instant Settling

With crypto exchanges, you should buy then sell instantly. The exchange takes choose to instantly settle according to their custody of crypto assets and formalize the change as quickly as the blockchain allows. This is extremely natural, whenever you hit the button you will find the asset.

With traditional exchanges, the transaction is processed and then there is a long settling process (currently T+2 or a couple of days from close). To find out normally not a problem with, it allows High Frequency Traders advantages over us common mortals.

There’s two problems to allow for instant settling with current stock market infrastructure. First, there’s a technology problem. Even though the blockchain allows instant settling, previous technologies need to go via a convoluted process of checking and rechecking. Second, the multilayered value chain which made sense in the ” old world ” takes necessary more hours compared to the direct model of crypto exchanges.

4. Transparent order-books

Crypto order books are totally transparent in several exchanges like Kraken or Poloniex. You will see the depth from the purchase and sell side of every market in each from the assets you happen to be trading. This means you can know how the marketplace looks along with what may happen if you convey a large order.

In traditional exchanges, that you do not see order books as a retail investor which can be proprietary towards the exchange and can be sold as being a useful. The matching of order books is definitely an important advantage for market makers. This can be the main purpose of the so-called “dark pools” that investment banks have created.

Transparent order books is a consequence of competition and consumer expectations on the either side. In addition they need better technology infrastructure that could manage the improved information volume.

5. Modern and secure interfaces

Crypto interfaces are viewed as on the internet and mobile perspective, with security as being a key feature. They’re light clients in browsers or smartphones. They can be accessed easily on the tool and use high tech technology. This gives simplicity, speed and intuitive customer experience.

The traditional interfaces We have experienced continue to be full applications within a desktop setting with clunky interfaces and long loading time. This probably is because of legacy applications that should be updated but need to be secured and evolved slowly.

Evolving completely to another application interface will be challenging because it will demand agile practices and frameworks which might be second-nature for new entrants but take courage and conviction from existing incumbents.

6. Direct-to-investor

Crypto exchanges deal directly with retail investors and have few other players inside the value chain beyond themselves. When you are within an exchange you might be directly speaking with your custodian, your marketplace, your agent, etc… This may cause sense inside a world in which decentralized trust cuts down on needs for intermediaries. There are some exchange mechanisms such as Shapeshift which might be even more direct and simply connect you to the other side from the trade.

Traditional exchanges possess a large list of players. They have got brokers, that connect to the exchange in your stead. They’ve custodians, who take good care of your assets. This made sense in the world without blockchain through which decentralized trust was complex. Now exchanges grapple using the question of going direct and bypassing their partners, much like consumer goods companies when eCommerce was starting.

In a Blockchain-enabled world there exists decentralized trust and therefore you do not need so many actors to make trades secure. This will likely probably take to a progressively leaner value chain model.

7. Variable and transparent fees

Crypto exchanges have transparent and frequently low fees. They are transparent because being direct there is certainly nowhere to cover, so it will be very obvious what’s the exchange charging. Crypto fees cover anything from 0,10-0,30% to the extremely expensive but convenient Coinbase with 1,5% to 4% fees.

Fees in traditional brokers take time and effort to be aware of as they normally have many different components. They could be low for larger trades, but sometimes typically add up to $1 to $7 per trade which is often pricey for a lot of transactions.

Fee schedules are due to cost and competition. With blockchain type infrastructure cost will be reduced very significantly. Concurrently, increased competition will represent a secular trend of shrinking fees for retail investors with ETF and crypto exchange fees is the defacto standard this agreement others converge.

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Overall, it appears as though an antique shift through the previous model wonderful its legacy limitations for the model a new technology enables. In the already digitized nature of exchanges and stocks, bonds and options we can expect movements to start out fast and the plunge to be swift. Much more classifieds from the newspaper industry compared to the slower shift to e-commerce. Regulation could be a hurdle, but financial authorities seem ready to accept more potent, fair and quick transaction methods. The exchange that moves quicker can probably take in the lunch of competitor exchanges. Comparable to the likes of Schibsted launched digital classifieds across Europe and dominated the course. So traditional exchanges should face a fresh reality and discover that they will placed their level to the new gold standard.

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