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Institutional investors and large holders within the general financial ecosystem are naturally more concerned about the details of operation and the security of their investments
The reason for such concern is simply logical as it relates to the level of risk that they might be exposed to in the event of any negative event, considering the volume of assets that they usually control at any given time.
Bystanders in a growing ecosystem
Despite how much the cryptocurrency trading and investment industry has grown, there is still a lot of potential assets waiting to find their way into the industry as soon as their holders feel that the coast it clear, and the market secure enough.
Most existing exchanges are plagued with numerous unreliable characteristics and suspected discrepancies. These are the major concerns of the above mentioned institutional investors and has kept them on the brink, waiting for the right wind to sail.
The cryptocurrency industry is growing at a very fast rate, and more growth is still expected in the near future.
In his prediction, Kay Van-Petersen, an analyst at Saxo Bank, projects that within 10 years cryptocurrencies will account for 10% of the average daily volume of fiat currency trades, with Bitcoin alone accounting for a 35% share. This translates into 175 billion dollars of bitcoins being traded daily.
Apparently, it is these institutional investors and some others who are waiting for a conducive trading environment that will be responsible for this anticipated industrial growth.
A hybrid exchange
To achieve an environment that is ideal for large fund holders, Legolas is creating an exchange that will be both centralized and decentralized at the same time. This exchange will cater for the overall needs of all classes of investors by offering the much needed security of investment, while remaining very transparent and publicly auditable at the same time.
Existing exchanges have been plagued by a number of flaws and limitations which include:
No guarantees
Lacking guarantees and insurance, hacked crypto exchanges decline responsibility for stolen bitcoins. An example of this is the Mt. Gox case in which the company said it had lost almost 750,000 of its customers' bitcoins and around 100,000 of its own bitcoins, totaling around 7% of all bitcoins and worth around $473 million at the time. Mt. Gox released a statement saying,
"The company believes there is a high possibility that the bitcoins were stolen,” blamed hackers, and began a search for the missing bitcoins. Chief Executive Karpelès said technical issues left an opening for fraudulent withdrawals. After he was interrogated, Japanese prosecutors accused him of misappropriating Y315m ($2.6m) in bitcoins deposited into trading accounts by investors at Mt. Gox and moving it into an account he controlled approximately six months before Mt. Gox failed in early 2014.
Weak authentication
Existing exchanges operate in a login/password paradigm. Even though some “verified account” solutions exist, many traders have been confronted with locked accounts, credential problems and even incorrect balances on their account. Furthermore, most financial institutions are set up in such a way that money managers serve as investment advisors to their investors and are required to follow dual signature rules whereby administrator are signatory to all outside transactions. Existing 2 factor authorization 5 policies are a step in the right direction but do not satisfy institutional compliance and security needs.
No deposit security
An obvious limitation to most existing exchanges is that they create their own rules and require a large degree of trust from investors and traders. Running contrary to many principles of “trust-less” applications, traders who deposit cryptocurrencies and digital assets on exchanges may have no recourse should the exchanges choose to change the rules, keep some bitcoins locked for one reason or another, or even disappear altogether.
A solution by Legolas
The robust system created by Legolas involves backing by the bank, in this case Luxembourg based BanQix. This enables the security of deposits in both fiat and cryptocurrencies. Therefore, in parallel to the expected fiat accounts that European banks can offer, Legolas Exchange customers will have access to accounts in Bitcoin, Ether, and other digital assets.
Also, Legolas Exchange customers will be able to deposit and withdraw both fiat currencies and cryptocurrencies. Legolas Exchange and BankQix will create a reliable, scalable and secure deposit and withdrawal system.
The blockchain technology that is built on top of the centralized platform introduces the intrinsic properties of the blockchain to achieve a secure, transparent, publicly auditable and an immutable exchange.
The novel Legolas creation is a tool that will restore the confidence of investors and consequently convince the by-standing institutional investors whose actions will significantly move the crypto world closer to el dorado.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.