South Korea Cryptocurrency Ban FUD Has Shown Importance of Decentralized Exchanges

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Bitcoin South Korea

Recently, the news of a South Korea cryptocurrency trading ban, which was ultimately refuted by the country’s government and the Blue House, the executive office of President Moon Jae-in, caused markets to rapidly decline. 

Cryptocurrency investors and enthusiasts were outraged to discover that government officials within the Financial Supervisory Commission (FSC) initiated insider trading, by selling bitcoin minutes before the Justice Minister’s statement, and buying bitcoin after the price had dropped.

The fundamental purpose of cryptocurrencies like bitcoin and Ethereum is to process transactions and settle data in a peer-to-peer manner, without the involvement of intermediaries and third party service providers. Thus, it makes sense to process trades of cryptocurrencies on decentralized exchanges, wherein regulators and authorities are not involved and can’t disrupt markets.

Due to the capacity of public blockchain networks, it is not possible to operate decentralized exchanges at the scale of centralized trading platforms such as Coinbase and Binance. But, with innovative technologies and off-chain settlement, in time, trading platforms will be able to process much larger volumes.

Most recently, decentralized exchange protocol 0x and exchange Radar Relay launched on top of the 0x Protocol, demonstrating that it’s possible to process large volumes in a decentralized manner through the use of off-chain settlement system.

While the Ethereum network, which supports decentralized exchange protocol, processes more transactions than all of the public blockchain networks in the market combined, it can only settle about 1.3 million transactions. Ethereum creator Vitalik Buterin and Lightning co-author Joseph Poon have introduced a solution called Plasma, that expands the capacity of the Ethereum network to a point in which many millions of transactions can be settled efficiently.

For Plasma and other scaling solutions like Sharding and Ethereum’s proof-of-stake (PoS) system Casper to be implemented fully, Buterin stated that it could take two to five years, in an interview with South Korean mainstream media outlet Joong Ang.

“I would say two to five [years to fully scale Ethereum], with early prototypes in one year. The various scaling solutions, including sharding, plasma and various state channel systems such as Raiden and Perun, are already quite well thought out, and development has already started. Raiden is the earliest, and its developer preview release is out already,”

Until these scaling solutions are implemented, decentralized applications need to find a method to process information efficiently. 0x Protocol’s off-chain settlement system has allowed decentralized cryptocurrency exchange Radar Relay to process millions of dollars worth of trades per day over the past week.

“I was skeptical of decentralized exchanges, but Radar Relay is starting to prove me wrong. $2 million traded in last 24 hours, all facilitated via 0x Protocol,” tweeted MIT professor and DIgital Currency Group vice president