What Bitcoin principles are actually needed for platforms like instant exchanges?
As a Bitcoin enthusiast, I really believe in sticking to core principles like decentralization, self-custody, trustlessness, permissionlessness, censorship resistance, transparency, immutability, and anonymity across all crypto platforms. These principles seem to work together to create a safer environment for everyone involved, not just a select few.
When I can’t find well-decentralized platforms to suggest, I usually look at Instant Exchanges. They don’t hold users' funds like centralized exchanges do, which is a plus. But honestly, most of these instant exchanges aren't truly trustless. It's tough to have faith that a swap will go through without the risk of funds getting frozen, seized, or stolen. One way to tackle this issue could be by using decentralized smart escrow or contract addresses that receive the funds before delivering them to the final recipients. Alternatively, having some sort of insurance from a third-party could help guarantee that funds are safely delivered. Plus, how do we prevent these platforms from censoring users?
In my view, decentralization, self-custody, and trustlessness should be the main principles applied, even by centralized platforms, to boost security. While some Instant Exchanges might be acceptable, they should rank low on the list of standards, whereas Bitcoin-level decentralization should aim for the highest standards in the Bitcoin ecosystem.
Some people still see decentralized exchanges to be good if they have many ads on the platform, not not all countries have this benefit. Some people that do not have the luck prefer the centralized exchanges for P2P.
For decentralized exchange, some people prefer the decentralized one like THORChain. Some people also prefer the ones that you are talking about. You can see some of them on Unstoppable wallet which are centralized but requiring no KYC.
Scams are every where and in any industry, any exchange types from centralized to decentralized, or instant swap exchanges, you always can see scammers.
So don't only see if an exchange advertises itself as "Decentralized" or "Instant Swap", "Instant Exchange", then automatically believe that it is a good exchange, and it won't scam you.
ChangeNow.io (Evercode Lab) - Scam. Illegally holding of 100 BCH (11 bitcoins).
Yeah, instant exchanges are convenient but still require some trust. Self-custody and minimizing reliance on middlemen matter most. Same with things like bitcoin betting, less trust needed is always better.
The whole point of cryptocurrency is freedom. I personally don't buy the idea of centralised platform. So therefore the adoption of decentralisation is very crucial in the crypto industry.
As someone who doesn't trust anybody. I wouldn't leave my funds to be trusted by another person. Let alone my hard earned money. I prefer to be in full control of my money.
If you can recall the hack that happened to BYBIT and how they controlled the whole situation was commendable. Now imagine that happens to another platform that don't have the capacity to withstand that kind of hit. What do you think will happen to people's fund? It will be a full scale loss for everybody.
I bought bitcoin and Ethereum on luno a long time ago. After some years back, I decided to login and cash out my money. Would you believe I couldn't. Imagine this people telling me some ridiculous story about a certain country and their history of scam activities and how it affects me too. knowing fully well I had simply bought the coin and kept it there innocently. That's why I don't trust centralised platforms.
The only benefit of centralised platform is the ease of exchanging crypto. That comes with a very high price that will cost people later.
I wouldn't recommend anyone using instant exchange. Decentralisation is the power driven principle guiding bitcoin and throwing that away is still the same thing as using your local currency, except this time it is digital.
Decentralization is really the main idea of crypto, and self-custody gives full control, thats true but for me, centralized platforms still have some use, especially for beginners or quick exchange. They are easier to use, even if there is risk. Best is balance, use exchanges when needed, but don't leave funds there long term. Maybe not fully trusting them, but also not completely avoid them.
Self custodial gives people full control with their bitcoins but it's not true with altcoins. These altcoin projects are centralized, and with smart contract altcoins, their founders or developers can use smart contracts to freeze user funds. They can do it by their own reason or can do it with legal request from governments and if you don't believe me, let's check stablecoins and stable coin blacklists.
PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets
Stablecoin Blacklists: How They Work and Who Controls Them.
Stablecoins and Blacklists
I agree with you here, and no doubt you are correct here because crypto space users are more concerned about their privacy and asset security.
That is why they prefer more to use decentralized wallets and exchanges. Such kind of users move only their funds on the centralized platform whenever they need to withdraw their money using the P2P feature on centralized exchanges.
But sadly, governments around different edges of the world are tightening the rules and regulations for the crypto space so that they can make the whole ecosystem of the crypto space centralized, and they can become able to easily track every activity of the crypto users, and this will surely help them to earn taxes from every trader, every crypto holder, and investors on their capital gain.
Aren't there different types of swaps that would help you have that trustlessness that you want? I think, in essence, atomic swaps could address it because they're instant and require no trust.
The important thing is that instant exchanges should have verifiable liquidity to ensure you receive the swap.
So long as its a centralized exchange, whether it requires KYC registration or not, its still a risky game to deal with because it doesnt change the fact that you arent in total control of your holding and a third party has the key to you wallet. If you ask me Ill say centralized exchange are actually taking bitcoin away from what its supposed to be.
I like it when they at least try to provide some proofs to ensure trust.
For example, if they sign the deposit and withdrawal addresses with their keys and this can be verified. Exch did that, but I have still not seen it on other swap exchanges.
Freezes/seizures unfortunately happen due to regulations. But a feature I haven't seen still but would be neat to minimize freeze risk is a separate AML check for the UTXO you would like to use for a swap, on a different onion address (to avoid them to collect your data) but recommended by the exchange.
No-log is nice but can not be controlled (only by external "centralized" audits). No-javascript and onion addresses are also features which are a plus for me.
They do, only for a shorter amount of time.
The difference to a standard CEX is that many people are lazy and store their coins on the CEX without withdrawing them to their own self-custodial wallet.
Your first point is possible with atomic swaps which already were mentioned. Their main problem is that they are slow and relatively expensive if you just happen to swap on blocks with high fees.
Insurance would add a second single point of failure, and an additional fee.
Real censorship resistance for centralized platforms is impossible, because anybody can operate a hidden blacklist. Even in the case of atomic swaps, one of the parties can always abandon the swap.
There is no actually negotiation for being your own bank, but thats not the case here, the question is how to get your bitcoin either through decentralized exchanges or centralized exchanges. There are some countries that sadly they can not find swaps from their local currencies to bitcoin or any other cryptocurrencies rather they actually have to do with centralized exchanges and I think thats what Charles typed. In that regard I think centralized exchanges that do not require your KYC stands out over the one that requires but in both occasions the funds shouldnt be left there but should be moved to your personal wallet.
They are many instant swaps now for this kind of transactions, my go to exchange for that now is the SageSwap exchange, its almost and instant swap with at usual 10 - 15 minutes for it to get in your recipient address.
In this case in particular, it is your fault to use the platform for other purposes than exchange/swap/buy/sell cryptocurrencies. The user should realize that it is risky to trust those applications with fast transactions, but it is even more riskier when fully trust them to be used as a store wallet for long term. This is a commun mistake that almost the majority of crypto users fall into.
During my journey in the crypto space, i came to the conclusion that decentralized exchanges are great to use for users carring about their privacy as long as the service is running smoothly. But once problems begin, there are no garantees for anything. Many examples can be mentioned.
At the same time, centralized exchanges are the worst option for those same type of users, but once problems start, there are few options to recover their rights. Also many examples can be mentioned.
If instant exchanges still implement centralized principles like AML terms, which have been proven to mislead users, there are no Bitcoin principles they can adopt.
"Instant" exchanges actually violate their own processing time principles, given that the Bitcoin protocol sets an average block confirmation time, and any service is forced to comply with that.
It would be great to find everything we want in one place, but unfortunately, technology isn't yet in a position to give us a 100% decentralized, anonymous, and secure site. However, as some users have pointed out, it's better to find a middle ground where our needs are met; that is, without losing our money but also without losing our privacy by providing KYC information. And it seems that, for the time being, the only sacrifice will always be time.