With over 900 online digital asset exchanges out there [1], the conundrum of which one to select, either for trading activities or as an example of a great exchange, arises. Security, liquidity, scalability, user interface, and many other subjects must be taken into account in order to be as successful as one can be. Naturally, every exchange out there has an inherent bias to present itself as the most accomplished, but we know better than to trust blindly. Because of its complexity, the digital asset space will not simply point to the best direction, but it requires a do-your-own-research (DYOR) mentality. At Scalable we want to help every new (and established) actor carry out this process in the most efficient and comprehensive manner.
This month we will be developing a series of articles about exchanges, analyzing the challenges that current exchanges are facing and how Scalable can help you navigate through them [2].
The first one will be focused on digital asset exchange scalability issues, due to their inherent limitations; many are simply not built to scale.
Blockchain and scalability
While decentralization consensus mechanisms offer some critical benefits such as fault tolerance, a strong guarantee of security, political neutrality, and authenticity, it comes at the cost of scalability. The number of transactions any given blockchain can process can never exceed that of a single node that is participating in the network.
Because digital asset exchanges are composed of a variety of technical, business, support, and other aspects, it would be a fallacy to pinpoint the scalability issue to just one. Most alternate coins take pride in having low commissions, even though they are not yet of scale, but face the same inherent obstacles bitcoin is facing.
Why do exchanges need to scale?
As the digital asset space gains adoption in an exponential manner, exchanges that aim to be industry flagships must be able to cater for an increasing number of users. Experiencing scalability issues such as outages [3], trading, sending, and receiving along with API connectivity issues showcase the difficulties born out of unpreparedness. Thus, minimizing the operational constraints caused by magnified activity must be a major concern for exchanges. Consequently, it should be noted that, if not taken seriously, scalability issues will not only impact unrealized potential profits, but can actually unfold on serious *actual* losses through diminishing clients, security threats, and more.
Our solution for scalability obstacles
Unmatched speed. Our high-octane matching engine is one of the fastest, taking under 500 microseconds from receiving the notification of an incoming price movement to processing the order (tick-to-trade) for colocated traders [3].
Connectivity – Information. Having fast access to any needed information smoothens activity and mitigates scalability issues. Our platform features multiple, full-featured trading APIs across key trading functions, providing familiar access points for different trading styles such as FIX 4.4, FIX 5.0, WS, REST and Binary.
Support team. Even though some issues regarding scalability are recurrent, sometimes new ones arise, which require a constant, dedicated and capable support team to handle them. We provide 24x7x365 technical & business support.
Adaptability. As your exchange grows and your users demand more improvements and features, having compatibility with third-party services and distributed ledger products will prove to be more of a necessity than an extra. We already have a range of industry leading partners in the space and can add more third-party services according to client needs.
No outages. Our resilient, fault-tolerant architecture supports round-the-clock trading; a true 24/7 trading venue. Redundancy is hardwired into the system so our uptime exceeds 99.99 per cent. Our Software-as-a-Service exchange SLA’s offer proven and time-tested stability [4].
Conclusion
We are one of the few companies in the field that provide engines for multiple major digital asset exchanges. Among the venues partnered with us, such as Bitcoin.com, are in CoinMarketCap’s top 50 exchanges by volume.
Stay tuned as we’ll soon delve into other constraints that exchanges often face, such as liquidity, regulation, security, and usability, among others.
Request a demo to see the technology for yourself.
References
[1] “List of All Crypto Exchanges: 1000+ Exchanges Listed.” Blockspot.io, 2020, blockspot.io/exchange/. Accessed January 9th, 2021.
[2] For an introduction to what is a white-label exchange, take a look at our previous blog entry:
“What Is a White Label Exchange?” Resources, Scalable Solutions, 7 Jan. 2021, scalablesolutions.io/news/what-is-a-white-label-exchange/.
[3] Wilson, Tom. Crypto Exchange Coinbase Hit by Connection, Latency Problems as Bitcoin Plummets. Thomson Reuters, 26 Nov. 2020, www.reuters.com/article/us-crypto-currencies-idUSKBN2861Y1.
[4] For more information on outages and how they impact the performance and trustworthiness of an exchange, please visit our previous entry “The other side of Bitcoin’s ATH: Outages”.