The stock exchange was originally conceived for the public interest and had a clear purpose: 1. allow companies to raise equity from a large pool of investors 2. provide a market for investors to later sell their shares in those companies.

Settlement Between Tokenized Assets

Cryptocurrency exchanges, similar to stock exchanges, provide liquidity for investors in the blockchain space to sell and buy tokenized assets. However, tokenized assets on the blockchain can now hold properties far beyond simple equities and ownership. Enabled by smart contract technology, complex business logic and relationship models can be imbued into the token for automated execution and governance. These tokens are often referred to as utility tokens, and serve critical roles in various dapp ecosystems.

Exchanges currently dominate the transaction volumes of tokens where 99% of the current transactions for these tokens are performed on exchanges by traders. This is because trading-derived value is perceived to greatly exceed the value of using the token for its intended utility. The vast majority of applications in which these tokens are designed to be transacted within have yet to release production ready versions or provide value that is sufficient in replacing their centralized counterparts.

As more assets are created on the blockchain, and infrastructure and application matures in technology, we will see an increase in the amount of token transactions originating from dapps. In this new setting, exchanges will evolve to serve the settlement and conversion of tokenized assets in a manner that is deeply integrated with application lifecycles.

1. In a future of tokenized assets. Exchanges will not only serve investors and traders, but dapps and their end-users as points of settlement, conversion, and utility.

Decentralized Exchanges and Open Protocols

Centralized exchanges currently have significantly greater trading volume than their decentralized counterparts. And while the philosophy of centralized exchanges directly opposes the fundamental ideas behind cryptocurrency — with properties such as centralized control of user’s funds, identities, and opaque operations — users are willing to look past that as they are compensated with a better user experience, speed, and liquidity.

However, the dominance of centralized exchanges is only a transitional period until decentralized technology and ideology matures. A shift that has already begun. The development and adoption of decentralized exchanges has been drastic in the past year. As of now, there are more then 200 DEXs being developed, with even the largest centralized cryptocurrency exchange in the world stating that they will be migrating towards a decentralized system. Research and experimentation towards scaling blockchain performance has been an impactful contributor to this development. Breakthrough in solutions such as atomic-swaps, inter-blockchain operability, state channels, side-chains, sharding, and hybrid implementations have all been incorporated by decentralized exchanges in one form or another. The scale will continue to tip in favor of decentralized exchanges

2. As technology advances, decentralized exchanges will replace centralized exchanges with superior transparency, security, and censorship-resistance.

Adoption of Cryptocurrency in Traditional Industries

Another trend our team is witnessing is the tokenization of business value taking place within incumbents of traditional industries. Companies are heavily interested in incorporating blockchain technology into their business model in hopes of greater realizations of fundraising processes, incentive models, governance, transparency, accountability and the like. Unlike the recent batch of upstarts gunning for the beguiling successful ICO, these incumbents are rooted in established business models and client bases. Their interests are not aligned with the interests of traditional exchanges in that they are looking for a stable source of liquidity for their end-users as opposed to present-day exchanges that encourage price volatility and trading volume spikes. As more business incorporate tokens into their product and services, more people will adopt the utility of crypto tokens, resulting in the need for exchanges to focus creating user experiences that are catered to the general public and people without prior crypto experiences.