Why does digital currency need an exchange?
As we all know, digital currency is a technology and platform based on blockchain, and it is also the most typical application of blockchain.
Take Bitcoin as an example, its platform provides the function of transferring money between users, but it does not provide the function of transaction and payment, which makes Bitcoin unable to communicate with the outside world, let alone really circulate, and thus cannot become a real currency.
In order to solve this problem, the exchange was born.
The role of the exchange:
Including the above-mentioned transactions and payments, the specific functions of the exchange are roughly asset management, matchmaking transactions and asset liquidation. To put it bluntly, it is equivalent to a bank in digital currency. The matchmaking transaction here is actually to exchange bitcoin for other currencies, such as Litecoin. Of course, there are basic functions such as recharging and withdrawing cash. In principle, it is actually a centralized account book, not a chain.
On the other hand, the exchange also plays the role of a stock exchange, which makes the ICO (Initial Token Issuance) project possible.
All kinds of tokens (tokens or certificates) can be raised and issued through exchanges.
Having said that, some people must think that the exchange is a combination of banking and securities trading.
But not only that, the exchange also has the functions of futures and financial management, that is to say, it also has the attributes of financial institutions such as futures exchanges, brokers and fund companies.
Not enough. In fact, the exchange also has the function of supervision because there is no supervision. Therefore, digital currency Stock Exchange can be regarded as a super financial center.
Centralized exchange plays an important role, which will obviously bring many security risks and trust crises.
These are closely related to the "decentralization" advocated by the blockchain.
Fortunately, some "decentralized" exchanges have begun to appear. They are based on the blockchain platform and rely on smart contracts to achieve automation, distrust and transparency.
Let's talk briefly about how to set up an exchange. Generally, a subject is registered first, such as the Singapore Foundation, because the Singapore government encourages the development of blockchain, and high-quality projects are registered in Singapore, which is relatively recognized in the industry.
Singapore Foundation can register by providing a company name and director identity information, and then it can do something legal and compliant, which is also the advantage of Singapore Foundation. Be able to issue effective legal opinions to make the project conform to the regulations.