Right now, most people are buying and selling Bitcoin and other cryptocurrencies, like Ethereum or Dogecoin, mostly on centralized exchanges (CEX), with the rest preferring to use a decentralized exchange (DEX) for their trading, each having its pros and cons. But let’s think about the future and see how selling and buying on decentralized exchanges would be the preferred course in the future, specifically for Bitcoin and other valuable and scarce cryptocurrencies.
For example, let’s move one hundred years into the future. We see that Bitcoin’s value has increased to more than a million dollars of current purchasing power. For those who’d want to sell a Bitcoin or more, would they prioritize convenience over security, full control, and no third-party trust for those who’d want to sell a Bitcoin or more? They wouldn’t! Unless they don’t care about increasing the chances of having their coins stolen or confiscated for whatever reason.
Bitcoin won’t be the only coin on DEXs in the future. We’d see people with other valuable coins with a limited supply and have a high price tag, more so than others with no supply cap.
The future of decentralized trading will be to act as an auction house for the rich, to buy and sell their coins, and even now it can be considered that way.
As time passes on, Bitcoin and other valuable assets will be too much of a risk to keep on centralized exchanges, which results in a lot of withdrawals and keeping them in a non-custodial wallet, perhaps with a multisig setup to keep them even more secure.
This may result in an even higher demand to buy these coins, with the ones holding them only allowing a transaction to occur in the most secure way possible, and that would most likely be through a DEX, and those coins going to the highest bidder within a specific timeframe.
What would happen to centralized exchanges in the future?
They’ll most likely still be around and continue to be very popular amongst most people, where most cryptocurrencies would still be traded on there, and even have those valuable coins there too, but in very small amounts.
There’s also a strong possibility that second-layer technologies will be used on most centralized exchanges, as the current Bitcoin Lightning Network, to be paired with and traded for other coins on the same second layer.
Will this possible future be a good or a bad thing? Generally speaking, it would be neither, but the more people that use a decentralized exchange, for its safety, security, and trustlessness, and taking out their valuable assets outside of a centralized system, would be a good thing.
Though this is just thinking about what might happen in the future, and it would be fun to see others’ thoughts on this topic. What do you think the future of decentralized and centralized exchanges will be, as Bitcoin because increasingly more scarce and valuable, alongside other coins, and how will it affect people’s behaviour on those exchanges?