Centralized exchanges are the on/off-ramps for cashing out.
Bringing the DEX to into the physical world changes things.
Cover image made using MS Paint. Gradient line and circular LEO logo come from LeoDex.
Currently we cash out of cryptocurrency by using a centralized exchange and then moving money to our fiat-based bank accounts. We also deposit money from our fiat-based bank accounts to a CEX. Given that KYC is part of the process of using a CEX, we just shrug and deal with it. After all, this is what a significant percentage of cryptocurency buyers do (including, on occasion, many of us).
Meanwhile, whether it's within the Hive Ecosystem or on blockchains such as Binance Smart Chain and Polygon, we use decentralized exchanges to buy any Cryptocurrency B using any Cryptocurrency A. Many of our portfolios are made possible thanks to using the DEX. Sadly, there is one thing we cannot do at the DEX: cash out to legal tender currency.
Questions Needing Answers
What if...
- there was a way to accomplish this final step?
- we could bypass the CEX in order to cash out?
- we could find a way to incorporate DEX-type functionality into our brick-and-mortar, physical world?
Maybe the answers exist, and maybe it's possible to do this right now. Even so, how convenient is it to accomplish this task? If you remember what MP3 music players were like before the release of the Apple iPod, then you know where we are in the DEX-to-cash-out process today.
We Have the Technology
By now we've heard about "Bitcoin ATMs" where people can deposit or withdraw BTC. Some of these "ATMs" also support of a limited set of altcoins. Although they have been around for several years, worldwide they are not widely available.
I'm not saying we shouldn't repurpose this "ATM" technology as a way to cash out, although there are considerations beyond the scope of this article.
CryptEx: Using the Physical ForEx Model
More likely is the use of a physical space devoted for this purpose. It already happens for ForEx (foreign exchange). What we want is CryptEx (cryptocurrency exchange). Integral to CryptEx-- for us-- would be the DEX.
Most of us have used a ForEx bureau or outlet to swap from local currency to foreign currency or vice versa, especially before or after international travel. This is as easy as buying postage stamps from the post office (or reseller).
As I see it, the main problem will be liquidity, especially for the local currency. Enough needs to be available for daily operation. Space needs to be available for storing those pieces of paper.
(For our purposes, CryptEx will not deal with physical coinage.)
Whatever we do at a DEX, we should be able to do at a CryptEx bureau: market orders, limit orders, diesel pools, swaps of pooled currency pairs, automated market making, etc. In addition to this, cashing out from the DEX.
CryptEx: An Extension of ForEx
If the DEX can't be brought to the physical world, then perhaps we can extend ForEx to include cryptocurrencies. Like the cryptocurrency markets, the ForEx markets are 24/7/365. ForEx already has the physical and technological infrastructure for foreign exchange, so it's not a stretch to consider incorprating cryptocurrency into that infrastructure.
Whether we handle cryptocurrency using mobile phones, laptops, desktops, or workstations, there are still people who would prefer handling cryptocurrency in a more personal and high-touch manner. The ForEx model for CryptEx offers this human touch. After all, customer service and technical support are still best done in person.
"A network of Bitcoin exchange offices"
On 2021 August 13 I mentioned a business based in Poland named Quark Kantory Bitcoin. 16 months later I mention it again because it exemplifies the CryptEx concept. This is what I said then:
- Quark Kantory Bitcoin is exactly what the sub-heading says it is. Just as Travelex offers (or the defunct Thomas Cook offered) foreign exchange bureaus or stores for exchanging fiat currencies, Quark Kantory Bitcoin performs an analogous service for Bitcoin. If Travelex deals in ForEx, then Quark Kantory Bitcoin deals in CryptEx. Quark Kantory Bitcoin was founded in Warsaw, Poland in 2015, and has national offices in Warsaw, Opole, and Elbląg.
(The Polish-language web site is still online, which is a good sign.)
Offices set up for the purpose of dealing with Bitcoin; at first it seemed like there would be no need for it. However, it provided Proof of Concept for ways of handling cryptocurrency beyond P2P. This concept can be extended to a physical DEX and then taken to a higher level.
The Fly in the Soup
As with the stock markets, ForEx markets are highly regulated. We would want a physical DEX to maintain its decentralized nature. How this can be done is beyond the scope of this post, but there must be a way to sidestep the regulatory regimes in place worldwide. Building CryptEx as an extension of ForEx would be more prone to government regulation than building CryptEx from scratch. We can find a way to get it done, but we will need to think it through.
Just My Two Sats
We all want to hit the big time in cryptocurrency so we can cash out and live the good life (or at least better lives). Even if we do nearly everything using decentralized means, there is one chokepoint we cannot avoid: the bank account attached to the CEX. No matter how much we minimize KYC, KYC is there waiting for us.
On the physical ForEx side of things, we can visit a bureau with one currency and leave it with another. Nothing else is needed of us.
Using a DEX is similar to ForEx except for the act of cashing out to legal tender currency.
What if we can do with cryptocurrency what we already for with ForEx? What if we can build out CryptEx? We would have the convenience of the DEX with the ease of use of ForEx. An idea similar to this is brought to life in Poland in the form of Quark Kantory Bitcoin.
Bringing the DEX into the physical world would fill a large void in the cryptocurrency experience, and it would be be done in a decentralized manner. Besides doing normal DEX activities, the CryptEx can handle cashing out to local currency.
If the DEX can't be brought into the physical world, perhaps the ForEx infrastructure could be extended to handle cryptocurrency. With ForEx as highly regulated as it is, extending it to include cryptocurrency may not be what we want; however, it can be done faster than if we bult out CryptEx from scratch.
While I think this is possible, there are considerations I don't know about. I don't claim to have the solutions to the DEX-to-cash-out problem, but perhaps you may. Feel free to share considerations, solutions, or other thoughts in the Comments section.
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