What was the need for the money exchange and how did this business emerge in the conventional economies? What will be the future of the Exchanges if they the Crypto Currencies take over the conventional money? These are some of the questions arising in every mind due to the wildfire-like the spread of BlockChain based Currency and the increase in their demand in our current economies.
Firstly, we need to understand the conventional money exchange services and their purpose of existence. As we quit Barter exchange and moved towards the currency denominations across the globe, the problem had arisen that the exchange between different states and countries which are dependent upon their own currency denominations became impossible. And we were once again required to exchange through barter when dealing in international trade.
The problem got resolved by the invention of currency exchange which used to translate one currency into another currency so that the international trade may run smoothly. But with the passage of time, it has been observed that the fraction of profit is covered by the exchanges, and this is justifiable as the Exchange either has operated through expensive shops/markets or by maintaining the IT infrastructure over the internet and therefore have to occur a lot of fixed cost to provide the exchange services.
With the Paradigm shift of world economies into the decentralized ledger or BlockChain and the widespread usage of crypto currencies in every type of business, the business of exchange was also required to pass through the Paradigm shift and is pretty different from the conventional exchanges. The Conventional Exchange networks were established to provide a platform of international trade, while on the other hand, the BlockChain Network and their currencies already operate at the international level.
Due to these reasons, BlockChain based exchanges are also explained as platforms to provide the exchange services to convert the conventional currencies into the crypto currencies and to withdraw back the crypto currencies into conventional currencies. Moreover, the Exchange services also operate as the currency converters between the alternate crypto environments, and therefore these international currencies have also been made exchangeable through these exchanges.
Moreover, the BlockChain based exchanges operate at low cost and therefore low margin because they are not required to operate through their own Infrastructure rather the BlockChain network nodes are themselves used to operate the exchange and therefore the risk of inefficient IT staff is also eradicated in these exchanges.
Similarly, due to the removal of brokers and decline in fixed costs, the margin of the exchange house is kept to the minimal level and therefore the cost borne by the clients is much lesser than the conventional exchanges. The existence of Exchange house over the BlockChain network also facilitates the currency exchange as one is not required to go to the exchange market physically due to the electronic money and electronic exchange services. This is thought to be just the beginning of a new world order!
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