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The introduction and creation of cryptocurrency has basically blown the mind of many I know it blew my own mind when I heard of a digital currency that operates on decentralization and has prices that can rise so high or even go very low, basically the introduction and creation of cryptocurrency has also done more than blow minds, it has also changed and revolutionized the way people view and think of money and the financial systems, financial transactions with cryptocurrency offers transparency, decentralization, and efficiency.

The features I just mentioned such as transparency, and decentralization which I have listed above are some of the fundamental, important and basic features of cryptocurrency and the cryptocurrency ecosystem however not all aspects of this ecosystem keep to these basic and fundamental features one of such part of the cryptocurrency ecosystem is what is called the Dark pool, the dark pool is a term which was basically borrowed from traditional financial system and they have become a significant part of the crypto space and market.

The dark pool can be described as being private trading platforms where large volumes of assets are traded in secret in the sense that the records of transactions or the assets bought and sold there are not immediately made in known to the public, dark pools offer many benefits such as reducing market impact for large trades, their presence in the crypto space also introduces numerous disadvantages and that is why in this post I am going to be explaining some of the many disadvantages of dark pools in the cryptocurrency ecosystem.

DARKPOOLS UNDERMINES TRANSPARENCY

One of the significant disadvantages of the creation and introduction of dark pools is that their existence and the way they function basically undermines the principle and fundamental feature of transparency, which is a concept that should be clearly seen and exercised by all aspects and parts of the cryptocurrency ecosystem also, the dark pools do not conform to the method of operation of the blockchain technology, which was basically designed to serve as transparent immutable and tamper proof ledger where all transactions can be recorded.

So as to ensure that everyone of the public including other users of the cryptocurrency ecosystem can have access to these records and transactions however like I slightly mentioned the dark pools do not operate in this way rather it operates in contrast to this ideal in the sense that it conceals transaction details from the public as a result undermining transparency this lack of transparency in turn makes it very difficult for traders to understand the cryptocurrency market and the activities and transactions that really go on in the market and its true participants.

Furthermore, transparency is crucial in building and creating and fostering trust and confidence among the users and participants of the cryptocurrency market, and the lack of this transparency that is found in dark pools poses the risk of destroying this trust and eroding yhe credibility and integrity of the cryptocurrency market, in the dark pools when large trades are carried out it is hidden and kept private as a result smaller traders and investors are left at a disadvantage, as they cannot assess the market accurately so as to make informed decisions.

INCREASES RISK OF MARKET MANIPULATION

Another significant disadvantage of the introduction and creation of dark pools to the cryptocurrency ecosystem is that the existence of dark pools basically increases the risk and make it easier for big time investors to censor and successfully manipulate the cryptocurrency market, the lack of transparency of dark pools transaction records makes it hard to prevent or stop the different forms of market manipulation such as insider trading, spoofing, and front-running, what are these you may wonder.

Insider trading is described as a type of an unethical trading that basically occurs when individuals with privileged access to market moving information exploit it so as to make profit, spoofing is another wrong and unethical practice that involves placing large orders to buy or sell cryptocurrency with the aim of manipulating prices and then canceling them before execution, front-running is another form of market manipulation that occurs when a trader executes orders to buy or sell cryptocurrency tokens as a result of information about impending large trades.

All these practices are unethical and a form of market manipulation, they not only distort market behavior but also undermine fair competition, as they only work in the favour of those with have access to dark pool transaction records and their activities, also the decentralized nature of cryptocurrencies is meant to democratize the access to financial opportunities, but dark pools does the opposite introducing centralization and opportunities for market manipulation.

IT OFFERS UNEQUAL TRADING OPPORTUNITIES AND ACCESS

Another disadvantage of the creation and introduction of dark pools to the cryptocurrency ecosystem is that they facilitate the concept of inequality when it comes to trading opportunities, they do this by offering an unequal access to trading opportunities, dark pools were created and typically designed for big time investors, and those market participants who tends to execute and carry out very large trades, it was not created to favour retail investors and smaller traders as a result these smaller traders are often excluded from these dark pool platforms.

This feature of exclusivity that the dark pools facilitate basically undermines the inclusivity that the blockchain network as well as the cryptocurrency ecosystem is trying so hard to attain and achieve movement aspires to achieve, moreover, the lack of access to dark pools deprives smaller investors of the potential benefits, such as reduced market impact and improved execution prices this basically contradicts and go against the decentralized nature of the blockchain and cryptocurrency ecosystem.

REGULATORY CONCERNS

Another disadvantage of the creation and introduction of dark pools, the last for this post of mine is that basically pose very significant regulatory concerns in the field and world of cryptocurrency, the government and different regulatory bodies have found it very hard and too difficult to accept cryptocurrency with their decentralized and transparency imagine how much more difficult it will be to deal with a part of the cryptocurrency system that does not facilitate transparency like the traditional cryptocurrency, I don't think they will stand for it.

I say this because the lack of transparency prevents these regulatory bodies from monitoring the activities of investors and as a result they can't tell what illegal, illicit and unethical activities are being propagated there, therefore, the lack of oversight in dark pools transactions and activities might make it a breeding ground for activities such as terrorism funding, tax evasion, money laundering and so on as a result undermining the efforts to establish and attain a cryptocurrency ecosystem with regulatory certainty.

CONCLUSION

In conclusion, the creation and introduction of dark pools have both advantages and disadvantages today in this post of mine I have considered the disadvantages of the creation and existence of dark pools to the cryptocurrency ecosystem and they basically include; undermining transparency, facilitates and increases risk of market manipulation, offers unequal trading opportunities and access to traders and lastly it poses some regulatory concerns in my next post I will be writing about the advantages of dark pool.