From Binance to Uniswap, trust and integrity will power cryptocurrencies in 2023

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Trust is a two-way sword for cryptocurrencies. Lack of trust is a fundamental principle in this domain. But cryptographic systems must also be trusted enough for users and investors to participate.

Can the two coexist? Yes, indeed, since lack of trust is a technical feature, while trustworthiness is a social one.

A system is not trusted if it can function efficiently without requiring users to trust each other. However, it is reliable if users can trust that it will work in a transparent, secure, and consistent manner.

Given the series of systemic failures and bad practices witnessed in 2022 – from Terra to FTX – Crypto innovators must commit to reliability in 2023. That is the only sustainable way forward for the industry to win back investor confidence and ensure adequate consumer protection.

Easier said than done, but fortunately, the tools to ensure systemic robustness and consistent performance are now available. The need of the hour is to use them with integrity and a forward-looking approach.

Crypto can’t afford the cost of distrust

Trust is easier to lose than to gain – pparticularly in a technology-driven nascent industry like crypto that already has its share of critics and detractors.

Believing in the future potential of cryptographic systems is key to your success. Some call it speculation, but it’s that belief that inspires early adopters to jump on the bandwagon.

Whether it’s HODLing despite market downturns or acquiring property in the metaverse, crypto thrives on the promise of a better future.

The beauty (and significance) of all of this is that it is actually possible and not just a myth. This is also why he rallied time and time again despite volatility, regulatory attacks and so on.

But all is in jeopardy when respected and revered faces end up on the wrong end of the speculation game.

Serious allegations and revelations rocked the industry’s core in 2022, with a massive ripple effect that may continue throughout 2023. Trust was significantly hampered. – if not completely lost.

Unfortunately, recent fiascoes have exacted a heavy toll on the hitherto flourishing cryptocurrency industry. Total financial losses across all protocols amounted to more than $3 billion in 2022.

And now the layoffs continue en masse, with more than 26,000 employees losing their jobs. That is essentially the price of mistrust. – something the industry cannot afford to pay for very long.

You have to look the devil in the eye

Establishing trust is neither rocket science nor child’s play. It is about prioritizing progressive standards such as transparency, integrity, accessibility and security.

But this can only be achieved by identifying the existing gaps (ie the roots of the crises). It is not possible to solve problems without understanding their causes. Unless, of course, they are content with ad hoc solutions.

The decline in investor confidence and mistrust in the cryptocurrency industry today has many reasons. Greed is perhaps one of them.

But what is more worrisome is due to the fragmentation of liquidity inherent in the current landscape. Crypto exchanges and protocols can rarely interact, let alone share liquidity – A recipe for the end of the world.

Several exciting avenues have emerged recently, from crypto-collateralized lending to high-frequency algorithmic trading and stablecoins. However, until now it has been impossible to harness their collective value, as crypto assets remain locked in isolated silos.

Although innovations to drive interoperability and composability are well advanced, there is still a long way to go in this direction.

inadequate liquidity – as well as flagrant misappropriation – it is currently among the biggest threats to systemic integrity in the crypto industry.

Therefore, it is necessary to implement smart systems for deep liquidity aggregation on centralized and decentralized exchanges.

Such solutions must also be intuitive and easy to use, minimizing friction to the greatest extent possible. And they must be transparent enough to discourage fraudulent activity.

Intelligent order routing can connect the dots

Liquidity spots in the crypto landscape are like stars in the night sky – scattered, almost distant. But it is possible to connect the dots and let the constellations emerge.

SOR (Intelligent Order Routing) is a potential method in this regard. Although it cannot stop bad intentions, it can ensure the best execution of cryptocurrency trades.

The most immediate and practical benefit of SOR is optimal price discovery for merchants. However, its implications extend well beyond this point. SOR systems improve the distribution of liquidity.

That too, without hindering healthy competition between exchanges and markets. Instead, SOR enables much-needed liquidity interactions between crypto platforms and ecosystems.

The combination of AI (artificial intelligence) makes SOR even smarter, making it easy to match and execute low-latency orders with minimal risk.

This can boost investor confidence and consumer protection by providing hedging exposures, increased liquidity, and reduced slippage. Fast trade execution also allows for quick exits when unavoidable, adding another buffer for crisis-hit investors.

Making AI and SOR driven systems the norm will allow the crypto industry to build systemic integrity from the ground up. This can also be a means to eradicate liquidity crises forever.

Of course, that will happen in the long run, step by step. But even right now, such progressive systems are crucial for cryptocurrencies to be trusted again.

Ultimately, setting the right standards and adhering to them is how cryptocurrencies regain lost trust. That’s why you need sustainable innovations from dedicated, no-nonsense innovators.

One should go into crypto for the long term rather than trying to make a quick profit.

Because actions that undermine trust and integrity are not good for anyone, the sooner you become part of the collective realization of the crypto community, the better for the future.

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Ahmed Ismail is the CEO and Chairman of FLUID, a liquidity aggregator that uses AI-based models to address fragmented liquidity in virtual asset markets. Ahmed has 18 years of experience at some of the world’s largest financial institutions, including Bank of America, Credit Suisse and Jefferies. Following his time at Jefferies as the US investment bank’s youngest regional CEO, he co-founded HAYVN.

Featured Image: Shutterstock/Modvector/Sergey Dzyuba