The long-awaited bullish growth in Bitcoin and the recent wave of institutional and corporate investors who are sticking a large portion of their reserves to Bitcoin (BTC) are all signs that the pace of cryptocurrency adoption is accelerating rapidly: But is there a way to collectively adopt through privacy and decentralization?

Knowing your customers and money laundering laws forced most cryptocurrency exchanges to become more transparent about the identity of their users, and those who withdrew were forced to limit the jurisdictions where they could provide services.

In order to operate legally in many countries, many exchanges had no choice but to follow strict anti-money laundering measures, and apart from Monero (XMR), parts of private coins are excluded from most major exchanges.

Recently, regulators have started breaking the whip, and judicial authorities around the world continue to roll out more measures to ensure investors disclose their cryptocurrencies and pay taxes on profits.

And all of this happens when the US Department of Justice arrested the co-founder of BitMEX, and the CFTC accused its owners of organizing an illegal cryptocurrency exchange.

About a week later, the UK Financial Conduct Authority went so far as to ban investors from trading derivatives on all cryptocurrency exchanges.

All of these maneuvers are designed to compel crypto service providers to comply, and although they may ultimately lead to more mass adoption, many crypto theorists are looking for alternatives to insist on their financial supremacy.

Decentralized exchanges could be the solution
More and more investors believe that central cryptocurrency exchanges actually operate in the same way as traditional banks. In response, decentralized exchanges such as Uniswap, 1inch, Curve Finance, and Balancer became popular throughout 2020.

Decentralized exchanges offering derivatives trading have also become available to more experienced investors. Like traditional derivatives, the cryptocurrency exchanges that provide the service mainly act as brokers, but the process is slightly different on decentralized exchanges. This is because they use smart contracts instead of a broker, and derivative contracts are settled when the terms of the contract are met.

Synthetix is ​​currently one of the most popular decentralized derivatives exchanges, and the total closed value increased to $ 1 billion in 2020, before a sharp sector-wide correction pushed TVL and active daily users across most DEXs.

Total cost locked in Synthetix. Source: DeFi Pulse
The exchange allows users to create a tool called Synth, which is a synthetic asset that can track gold, paper money, and cryptocurrencies. It also allows you to create assets that track the asset’s value in the opposite direction.

Platform users can also use their SNX token as collateral to build new tuners, and as with Uniswap, those providing liquidity will be rewarded as a fraction of the exchange transaction fee.

People familiar with DEX, like Uniswap, know that literally anyone can insert a new asset, which for derivatives means any underlying asset can be converted into a derivative.

These platforms allow users to trade derivatives without having to deposit funds on any central platform and are not required to complete any know-your-client procedures.

While some investors avoid compliance with KYC and taxes, this is a major concern for crypto service providers. According to Molly Wintermouth, an anonymous developer who is credited with establishing Hegic DEX, compliance is more of an issue for centralized crypto service providers than DEX.

When asked how the DEX is complying with financial regulators, Wintermute explained simply in unique language:

“They can’t. It is a new level of financial infrastructure, not an addition to the existing financial system. It looks like TCP / IP or FTP, not a decentralized cryptocurrency exchange. You cannot disable the z-code or disable the Internet. If the public blockchain is not open and not Requiring permits, it is nearly impossible to block decentralized derivative protocols. ”
Wintermott further explained that decentralized derivatives are attractive to a certain group of investors for the following reasons:

Trading without Custody (Protocol / People do not store money as money earmarked for smart contracts) Confirmed settlement on the net (no possibility of two cheap manipulations 8 z derivatives, no trading algorithms that only exchange owners know how to work / manipulate 2). Higher liquidity (the new peer / peer pool contract model can provide lower margins and better terms for users). ”
According to Wintermute, the number of investors actually using DEX is very small.

Source: CoinTelegraph

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