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These 10 crypto exchanges passed Bitwise’s anti-money laundering trading test

In a recent analysis by crypto investment company Bitwise Asset Management, only 10 exchanges out of a total of 83 cryptocurrency exchanges, analyzed passed the test, which was intended to show whether exchanges were consistently reporting inflated bitcoin trading volumes.

According to the order of its average daily volume during April 2019, these are the exchanges in order from highest to lowest:

Exchange (daily volume in millions of USD):

  • Binance (218)
  • Bitfinex (78)
  • Coinbase Pro (73)
  • Kraken (61)
  • Bitstamp (59)
  • bitFlyer (27)
  • Gemini (15)
  • itBit (12)
  • Bittrex (8)
  • Poloniex (4)
  • Total volume of operations: USD $ 554 million

The study criteria
Once again, South Korean exchanges were excluded from the analysis. According to the Bitwise report, that’s because their volumes were isolated from the global bitcoin market due to capital controls.

The authors of the analysis tried to identify exchanges that were reporting systematically inflated volumes – that is, any reported trading volume that did not reflect the legitimate cryptocurrency list price found in the market. To do this, they subjected the exchanges to three tests:

The time period of the visualized data (one week in this case was found to be the most suitable for visualizing the data in order to detect anomalous or artificial patterns).
Trade size histograms (a data visualization technique that allows people to see the percentage of trade volume on an exchange that occurs at certain trade sizes during a specific period, as defined in the document).
The peak volume alignment (given the global nature of The name of the currency unit (the currency ), the network, and software created by the individual or team of Satoshi Nakamoto in 2009. Bitcoin is the first digital currency that is characterized by being decentralized, that is, it is not backed by any government nor does it depend on a central issuer. On the contrary, it makes use of a proof of work (PoW) system with which it prevents double expenses and thus achieves consensus among all the nodes that make up the network. Transactions made with digital currency do not require intermediaries and the protocol is open source. Bitcoin, all exchanges should respond to the same developments, and the charts should show similar patterns).

95% of the volume is fake

What is an Exchange?
A cryptocurrency exchange or digital currency exchange (Digital Currency Exchange – DCE) known by its name in English as “Exchange” is a business that allows customers to exchange cryptocurrencies or digital currencies for other assets, such as fiat money or other digital currencies. A cryptocurrency exchange can be a market maker that typically takes bid and ask spreads and charges a transaction fee for its service or a platform that matches and simply charges a fee.

Operations:
Exchanges can operate with traditional payment methods and digital currencies. As an online business, exchanges exchange money and digital currencies transferred electronically. Cryptocurrency exchanges often operate outside of Western countries to evade regulations and avoid prosecution. However, they handle Western fiat currencies and maintain bank accounts in many countries to facilitate deposits in the currency of different nations. They usually accept payments with credit cards and bank transfers among other methods.
Until the beginning of 2019, regulations for cryptocurrencies and digital exchanges are quite uncertain in many of the developed countries and regulators are still considering how to deal with this type of business that, although they exist, have not been evaluated enough for their full validation.
Exchanges allow cryptocurrencies to be sent to users’ wallets. Some may convert digital currency balances into anonymous prepaid cards that can be used to withdraw funds from ATMs around the world while other digital currencies are backed by real-world commodities such as gold.
The creators of digital currencies are usually independent of the exchange where the cryptocurrency is exchanged.

Types of exchange systems:
Although exchanges continue to evolve rapidly along with blockchain technology, so far two main types of exchanges can be distinguished: Centralized and Decentralized.
Centralized exchange systems (Centralized Crypto Exchange – CCE) are exchange platforms that function like traditional stock brokers or stock markets. A CCE is owned by the company that operates it and maintains full control over all transactions. The users of these exchanges do not have access to the private keys of their wallets in their exchange account, which puts all the trust of the users in the hands of the exchange operators since transactions can only be carried out through the mechanisms provided and approved. by a central authority.
Some of the most popular centralized exchanges are:


On the other hand, decentralized exchange systems (DEX – Decentralized Cryptocurrency Exchange) like cryptocurrencies, are not operated by any company since they use blockchain technology (distributed ledger or distributed ledger). A DEX does not retain funds, location or customer information and only serves as a routing and matching layer to trade orders.
Among the most popular decentralized exchanges are:

  • WavesDex
  • Bancor Protocol
  • Kyber Network
  • EtherDelta
  • AirSwap
  • Exchange comparison: Centralized vs Decentralized

Transaction volume: CCEs have a higher transaction volume than DEX. Experts indicate that about 99% of cryptocurrency transactions occur on centralized exchanges
Liquidity: Centralized exchanges have greater liquidity
Fiat and Cryptocurrencies: Some CCEs allow transactions with fiat money and cryptocurrencies accepting payments with credit cards and bank transactions while DEX exchange cryptocurrencies exclusively.
Security: Thanks to its distributed nodes, DEXs have less risk of being attacked (hacked) compared to CCEs.
Infrastructure risks: The hosting of decentralized exchanges is distributed across nodes so there is virtually no risk of systems going down. In a centralized exchange the risk depends on the operator and the robustness of the infrastructure.
Risk of closure: Governments of at least three countries have already banned centralized exchanges while decentralized exchanges, thanks to their hosting distributed around the world, cannot be intervened.
Privacy: Decentralized exchanges offer high levels of privacy and all their transactions are anonymous while in centralized exchanges privacy is limited and the risk of identity theft is greater since the user must provide a large amount of personal information, bank accounts, addresses physical, etc.
Transparency: Most centralized exchanges publish the details of transaction.