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While the Crypto Winter may be lingering with us into the spring, crypto exchanges are doing just fine. According to CoinMarketCap, there are now 255 major crypto exchanges. That’s a notable increase from a year ago, when there were 208.

A booming exchange industry sounds like a positive, but we can do with fewer exchanges for cryptocurrencies to establish themselves as a dominant force in the global financial system.

For crypto to truly thrive, the ecosystem needs only five or six exchanges — and certainly no more than a dozen — in the long run. Here’s why.

To get a sense of crypto’s exchange problem, consider the ratio of crypto exchanges / crypto market cap compared to equities exchanges / total equities market cap.

Today’s 255 major crypto exchanges are home to about $175 billion worth of cryptocurrencies (total market cap). Distributed evenly, this amounts to $686 million in cryptocurrencies per exchange. In equity markets, 60 major stock exchanges control $69 trillion in global equities, or roughly $1 trillion in equities per exchange. Thus, the average stock exchange is 1,457 times bigger (in market cap of listed assets) than its average crypto peer.

The last 200 years of economic progress shows us that investors, companies and the economy all benefit from there being a few regulated exchanges in each jurisdiction. Indeed, New York City became the financial capital of the world with just two exchanges: NYSE and Nasdaq.

The crypto ecosystem similarly needs recognized, name-brand exchanges that retail and institutional investors trust and feel comfortable transacting across. Today’s hodgepodge of exchanges fails to inspire confidence among the many people who are not yet sold on crypto’s long-term viability.

The traditional role of a crypto exchange is to provide liquidity. This function is and always will be vital, but for the crypto ecosystem to mature, exchanges must broaden their mandate beyond trade execution and into the world of payments and personal finance.

One possible catalyst for this shift can be crypto’s evolution from a store of value into a form of payment. The former’s domination of crypto’s first decade enabled the launch of countless exchanges, and the 2017 ICO bubble furthered this proliferation as entrepreneurial types realized they could quickly launch exchanges and profit handsomely from listing new tokens. Even if not, exchanges carry the responsibility to simplify, educate and bring consumers onboard the crypto bandwagon.

The crash in crypto prices was an important wake-up call for exchanges and other infrastructure developers. The industry started to realize that crypto’s continued growth will depend on broader usability and scalability. Exchanges with innovative, customer-centric services will be the ones thriving in 10 years’ time.

For example, Lightning Network payments is one form of innovation that crypto exchanges can harness to increase crypto’s everyday functionality. As a second-layer protocol that enables instantaneous settling of funds, Lightning Network represents the future of point-of-sale crypto payments. Exchanges that incorporate Lightning into their wallet infrastructure can gain access to a vast, untapped market. (We at Zebpay have prioritized Lightning integration).

Once a handful of exchanges develop and scale these next-gen features, there will be organic consolidation as consumers flock to the exchanges with the best services.

There’s a more foundational reason why we need fewer crypto exchanges: reducing market friction, i.e., lowering fees.

Many of today’s exchanges charge high fees for makers and takers. This business model benefits exchanges, but high fees risk stunting broader adoption of cryptocurrencies. Today’s consumers are accustomed to using technology platforms like Facebook and Google “free” of charge, and they won’t be lured into crypto if participation is costly.

In the current environment, high competition is causing some exchanges to lower fees, but ironically, this competition (and the fragmented nature of the exchange market) is compelling most exchanges to continue charging fees to meet revenue targets.

In a world with fewer exchanges, there are other ways for these businesses to make money. Mining fees are one option. So too are premium, subscription-based services. The tiered subscription model would allow exchanges to attract a wide range of consumers, but this will only be possible once a few exchanges establish themselves as the dominant players.

That said, I also believe that centralized exchanges are an interim solution to simplify the crypto world for consumers and, as technology evolves, we look forward to the emergence of decentralized exchanges. For crypto to meet its objective, it must empower the individual.

This is a guest post by Ajeet Khurana. Opinions expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Inc.

This article originally appeared on Bitcoin Magazine.

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