Major Bitcoin and cryptocurrency trading platforms within the global market have been adding more than 100,000 users per day.
Many of the leading cryptocurrency exchanges such as Coinbase (GDAX), Binance, Bittrex, Bitstamp and Kraken have struggled in dealing with the abrupt surge in demand for cryptocurrencies. Some exchanges have overhauled their systems to improve their scalability, while others have temporarily stopped opening new user accounts.
Unexpected growth rate
This week, Changpeng Zhao, the founder and CEO of Binance, the global market’s largest cryptocurrency exchange with a staggering $9.5 bln daily trading volume, revealed that it has added more than 250,000 users on a single day.
“Sorry guys, servicing existing members is higher priority at this point. Full team working around the clock. Both tech and support. Just too much demand. Added 250,000 new users in the last 24 hours,” said Zhao, referencing the official statement released by the company.
On Jan. 4, Binance stated, “due to the overwhelming surge in popularity, Binance will have to temporarily disable new user registrations to allow for an infrastructure upgrade. We apologize for any inconvenience caused.”
In December, both Kraken and Coinbase allocated a significant portion of their resources and capital in improving customer support and the scalability of their platforms. On Dec. 23, Kraken, which has found difficulty in processing account verifications, disclosed that it has implemented major system upgrades and improvements in performance and will continue to develop its trading platform to support new users.
The Kraken development team admitted that its current infrastructure is “degraded and unreliable,” and vowed to improve it throughout January. The company said:
“We have made significant progress in the last week with the system upgrades and have realized moderate improvement in performance. Unfortunately, we were not able to complete all of the upgrades and the most impactful measures are yet to come. For the time being, systems should still be considered degraded and unreliable.”
Regional exchanges such as South Korea’s Bithumb, the world’s second largest cryptocurrency exchange in terms of daily trading volume, have also stopped accepting new users.
Why are large exchanges struggling?
In late 2017, South Korea’s third-largest cryptocurrency exchange Korbit was acquired at a valuation of $140 mln by a $10 bln gaming giant in Nexon. Given the size and the market valuation of Korbit, major exchanges like Bithumb, Bitstamp, Kraken and Binance could be worth more than $1 bln, as Coinbase was valued at $1.6 bln in its latest funding round.
Even with such large market valuation, high-profit margins, and many resources, cryptocurrency exchanges are struggling to address the exponentially increasing demand from investors because of the strict Know Your Customer (KYC) and Anti-Money Laundering (AML) systems the companies were forced to implement by the authorities.
Each user application must be manually approved and verified. The failure to segregate fraudulent accounts from legitimate users could result in large fines and lawsuits for exchanges. Consequently, the vetting process of users is rigorous and requires significant efforts from the employees of exchanges.
Given that exchanges are adding more than 100,000 users per day, it is likely that exchanges are also receiving more than one mln trading account approval requests per month, at least.
That is, if the approval process of accounts take around 10 minutes per account, 166,666 hours on a monthly basis that employees have to cover manually.
In the next few months, global cryptocurrency exchanges will make drastic changes to their systems. Until then, users, especially newcomers, will find it difficult to open approved trading accounts.
Source: https://cointelegraph.com/news/exponential-growth-cryptocurrency-exchanges-are-adding-100000-users-per-day