Bitfinex has launched Ethfinex Trustless, an hybrid cryptocurrency exchange for Ethereum, which also uses a decentralized trading model. Ethfinex DEX will let users to trade their cryptocurrencies while taking control of it because they will not need to hand over private keys to a centralized exchange. It will link centralized and off-chain orders and place "security, privacy and control in the hands of the user" according to their announcement on Monday.
Currently, Ethfinex supports trading of more than 57 Ethereum-based tokens. The trading DEX will initially support ETH/USDT, OMG/USDT, OMG/ETH, ZRX/USDT, and ZRX/ETH and then addition of 40 more tokens will follow including Dai pairs. Customers of Bitfinex can trade these directly against the Ethfinex and Bitfinex orders books. Linking the DEX to the Bitfinex order books that uses a centralized model will solve the liquidity issue. Furthermore, a user will need to hold only a minimum of one Ethfinex Nectar token in order to trade: Nectar is the token that powers the exchange and distributed to traders on a monthly basis. The platform will also support the 0x V2 smart contracts once they have thoroughly been tested.
Ethfinex will provide liquid, off-chain order book all without the user sacrificing the custody of their tokens or enduring withdrawal and deposit delays. Users can connect it with their Ledger and MetaMask wallets. For instance, they can connect the DEX with their wallets using Metamask browser extension. They can also choose to either open an account or go trustless. There will be no KYC requirements and "trustless" means you do not need to provide name, email, phone number, or address to begin trading.
The new DEX may be part of Bitfinex's goal to go decentralized and the company said that although centralized exchanges offer highly liquid order books, they require the trader to give up control of their cryptocurrency and personal data, thus increasing risks on security and privacy. Another problem with centralized exchanges currently is the longer duration it takes to do a withdrawal or deposit and the long waiting period sometimes subjects users to losses caused by hacks. The DEX will support instantaneous trading.
However, centralized exchanges, according to Bitfinex, do provide important services in the cryptocurrency ecosystem and at this point are unavoidable. Currently, many users and new entrants including people who want to buy large amount of cryptocurrencies at a go, use centralized exchanges because of liquidity issue and other benefits that centralized exchanges may present such as linkage to and with third party and institutions.
Again, centralized exchanges have been crucial for institutional investors entering the crypto space from the traditional financial world.