Cryptocurrencies have numerous benefits over fiat currency concerning payments and value transfer:
· They are faster and cost-effective compared to legacy banking and payment system, making them ideal for cross-border and P2P transfers. You can send cryptocurrencies to people globally, regardless of their geographical location or social status, in seconds — no bank account is needed, just a mobile device and an internet connection.
· They are excellent for paying for goods and services. When stores accept the use of debit and credit cards, customers pay 3–5% in fees to card systems, and the transactions take up to 7 days to be completed. Cryptocurrencies eliminate intermediaries and make the payment process faster, cost-effective and friendlier for customers and merchants alike.
· They are suitable for Machine-to-Machine (M2M) payments. The world is moving into an era of extraordinary interconnectivity; there is a projection of 25 billion connected devices by the end of this year, and transactions between them will be inevitable. However, M2M transactions are not active through the traditional banking system, which is slow and expensive. Cryptocurrencies have the key — they are fast, scalable and available 24/7.
The advantages of digital assets are apparent, yet we do not embrace them in our daily life, and mass adoption is still a distant goal. In this article, we are going to explore the role Tokenizer is playing in the digital transformation of the payment industry. First, regarding the ‘Path to Mass Adoption’ is OTC/DEX currency conversion.
Currency exchange: traditional vs digital
While traditional and digital currencies share much in common (both are designed to be used as means of payments or value transfer), the way they are exchanged differs a lot.
The traditional currency exchange market, commonly known as Forex/FX, is the world’s biggest financial market, with a daily currency turnover of over $5 trillion. As an OTC (over-the-counter) market, there is no central authority that controls FX trading — unlike stocks, futures or crypto exchanges.
Crypto trading takes place on centralized exchanges (CEX); however, most of them are not adequately regulated and located in offshore zones, which makes it difficult for licensed firms and institutional investors to use them. The primary reason why digital currencies are traded on centralized exchanges (despite blockchain’s decentralized nature) is immaturity — the crypto world is still at its infancy stage.
As the crypto market matures and cryptocurrencies become more liquid, token trading is shifting toward a traditional OTC system. Because of this change, a good number of exchanges have launched their OTC desks. Some are building decentralized exchanges (DEX), which resemble OTC trading.
OTC & DEX vs Centralized Exchanges
Few people accept that the OTC market for cryptocurrencies is more significant than the exchange market. Exchanges may determine prices, but medium-to-large trades do not take place there. The OTC market has seen exponential growth over the last two years because of the following primary benefits:
The OTC market structure eradicates fees for exchanges and clearing, reducing transaction charges.
Costs are minimized even more because of the efficiencies of electronic markets. OTC traders