Their Goal: Make Cryptocurrency Less Scary

If you have a tough time with the idea of putting even a dollar of your net worth into a digital cryptocurrency — Bitcoin, Litecoin, Ethereum, and the like — no sensible person would blame you.

Aside from the price fluctuations, there’s the question of who’s protecting those digital assets. Is it an institution like QuadrigaCX, an exchange for cryptocurrency run from its founder’s laptop, which reportedly lost $140 million in customer funds after the founder died in India in December? Or one like Tokyo-based Coincheck, which had $532 million in cryptocurrency stolen by hackers in January 2018?

“Every time I see one of these exchanges get hacked, or the founder take off with money in some kind of scam, it’s another reminder of how immature this industry is,” says Matthew Walsh, a former Fidelity Investments vice president who helped launch a private fund that invested in cryptocurrency there. “It’s bordering on a joke how immature the infrastructure is — and how dangerous it is.”

But for a growing group of venture capital firms and startup companies in Boston, the dangerous and mostly unregulated realm of cryptocurrency represents an opportunity. They see these digital currencies — which can store value and operate independently of government-controlled monetary systems — eventually becoming as safe for investors as a Bank of America money market fund. That, however, is going to require a lot of new technology. Which they plan to build and sell.

Walsh’s new venture capital firm, Castle Island Ventures, is among them. After he and cofounder Nic Carter left Fidelity, they raised $30 million to invest in what Walsh says is a “whole new category of infrastructure” required to make cryptocurrency safer and more reliable.

Sharon Goldberg and Ethan Heilman cofounded Arwen, a Boston startup trying to make cryptocurrency exchanges more secure.

“The reason we launched the fund is we think a lot of these cryptocurrencies will be investible assets,” Walsh says — even if they don’t feel that way to most mainstream investors today.

Castle Island has already invested in six startup companies, Walsh says, and other local firms like General Catalyst, First Star Ventures, Highland Capital Partners, and Underscore VC have also been writing checks to fledgling cryptocurrency companies.

Highland and Underscore helped incubate a startup called Arwen, founded by a Boston University computer science professor and her doctoral student.

“We’re in the early days,” says Arwen CEO Sharon Goldberg. “But let’s go back to 1999 and using credit cards on the Internet. Nobody wanted to put their credit card number into a website. But you do today, because you trust the encryption. You see that little lock in your browser.”

Goldberg is taking a sabbatical from teaching to build the company, which has eight employees and earlier this month moved out of Underscore’s space into its own office.

She points out that cryptocurrency is designed to be a “decentralized” system — there’s no central bank regulating how much of it there is, just software code running on computers. Yet if you want to exchange one kind of cryptocurrency for another, or turn cryptocurrency into dollars or yen, you need to entrust that transaction to a centralized exchange. “Centralized exchanges are the way to trade this decentralized currency,” Goldberg says. “It’s strange.”

So Arwen is creating a layer of technology that would enable you to convert one currency into another securely, even if the exchange gets hacked or goes offline in the middle of a trade. Arwen’s technology is based on something called an “atomic swap,” which Goldberg explains using the metaphor of a briefcase full of cash. If two people intend to swap briefcases filled with two different kinds of currency, the risk is that you hand your briefcase to the other person and they run off. An atomic swap ensures that each person get the other person’s briefcase, even if the other person tries to split.

Late last month, Arwen launched a “sandbox” environment for demonstrating the technology, and Goldberg says the company is talking with prospective customers. “The majority of our customer calls are outside of the US,” Goldberg says. “In Japan, for instance, there are just a massive number of companies creating ways to buy cryptocurrencies.”

Why is the United States behind? “Regulation is stronger here, and other institutions are more trustworthy,” she says.

Arwen is working on “an important problem” and it could prove “a key missing piece needed to get wider adoption of crypto assets as a real investment asset class,” says Drew Volpe of Boston-based First Star Ventures.

Volpe’s firm last year put money into Everbloom, which is building its own cryptocurrency exchange that tries to solve the issues of trust and reliability “from the ground up.” Everbloom, he explains, is a decentralized exchange that never has to take ownership of the asset itself — similar to Arwen’s approach, the trades happen “trader to trader” using the same atomic swap idea.

Two things could happen to make holding and trading cryptocurrencies more trustworthy, observes Boris Revsin, managing director of Republic Labs, a firm that has made recent investments in the cryptocurrency sector.

One is that trusted financial services brands like Fidelity or Charles Schwab will launch cryptocurrency-related products and services and “offer recourse if something terrible happens” to your money, he says.

But the other is that non-brand name exchanges that today are not trustworthy could start to incorporate technology from Arwen or other companies like it, and begin to build trust with investors.

Either of those scenarios, Revsin says, could encourage more asset managers and investors to move some of their assets into cryptocurrency.

In case you haven’t been tracking it closely, the price of Bitcoin is down almost 60 percent from February 2018. But over two years, the price has risen 240 percent, and more than 800 percent over three years. It’s a risky place to keep your wealth today — but investors and entrepreneurs are betting that just as credit card transactions on the Internet became more trustworthy, that will change.


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Author: Scott Kirsner
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Basic Lessons in Arbitrage For New Cryptocurrency Traders

Those that buy into cryptocurrency normally fall into two camps: you’re either an investor, or a trader. Investors are all about the holding, making smart, long-term plays that they hope will pay off, eventually.

Traders are a slightly different breed. A little more fast-paced, a touch riskier. Traders tend to use a lot more tricks to generate profit in the short-term. One of the oldest techniques is arbitrage.

Arbitrage is super simple, and has been utilized for decades on the stock market. Let’s dive in an explore exactly what it is.

Buying on one exchange to sell for a profit somewhere else

There are hundreds of cryptocurrency exchanges operating in all parts of the world. All have varying infrastructure, user bases, markets, which makes for vastly different levels of liquidity across the markets they host.

This means prices for even the most widely traded cryptocurrencies like Bitcoin and Ethereum vary depending on where they’re being exchanged.

The most famous example is the “premium” paid by South Korean investors in the heat of 2017’s bull market, where Bitcoin was traded up to 50 percent more in South Korea than anywhere else in the world.

Arbitrage is the process of profiting from these price variations.

A hypothetical trader searches for a chosen cryptocurrency across a list of exchanges, finding it’s being sold cheaply on Kraken when compared to Binance.

They proceed to purchase it on Kraken with Bitcoin, transferring it to an account they control on Binance, then selling it again for Bitcoin – with a healthy profit. Rinse and repeat!

KYC/AML can hinder arbitrage

On paper, arbitrage is not all that complicated, but there are many things to consider before attempting to make a career as a cryptocurrency arbitrageur.

For one, world governments are bullying cryptocurrency exchanges and related services into adopting strict Know-Your-Customer and Anti-Money-Laundering rules. This means owning accounts for multiple exchanges in different countries is fast becoming a major hurdle.

After all, in order for a trader to make monetary profit on the price difference between the Bitcoin markets of South Korea and North America, they must pass identification checks in both countries. This includes providing proof of address and bank account information.

In fact, most major exchanges (that support fiat) now require their users to hold bank accounts in the country they’re based. It is simply not feasible for traders to do this for every exchange they want to operate on – putting a real dampener on things.

Slow transactions hurt potential profits

Another limiting factor is the slow transaction speeds of the major blockchains. Arbitrage is a very timely game – so one must execute trades when the targeted price differences are at their highest.

Any delay that comes as a result of slow confirmations has direct influence on potential profits, so some cryptocurrencies may be better suited for arbitrage than others.

Not to mention, harsh withdrawal fees are common on cryptocurrency exchanges, which eat into potential arbitrage profits, especially if you’re only playing with a small stack.

There you have it! A basic rundown of cryptocurrency arbitrage. As with all things cryptocurrency (and investing), do your own research, and never risk more than you are willing to lose.


Source
Author: David Canellis
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Bithumb Trading Booms after Sale, Outpacing Even Binance!

Trading in South Korean cryptocurrency exchange Bithumb shot up by some 25% over the weekend after the Singapore-based BK Global Consortium bought a controlling share in the platform late last week.

The BK Global Consortium is a blockchain investment company based in Singapore. It is fronted by a South Korean, Kim Byung-gun of BK Medical, one of South Korea’s leading plastic surgery clinics. BK last week bought a 38% share in Bithumb for in the region of USD 350 million – making Kim the company’s largest single shareholder. Per Newsway, the deal involved a purchase of 50% plus 1 share of Bithumb Holdings’ shares in the platform.
Bithumb also announced that it would reward its top 300 traders with some USD 88,500 worth of tokens as part of a forthcoming airdrop event.

South Korean media reports were quick to point out a spike in Bithumb trading following the news, with the company jumping in the exchange rankings by trading volume.

In comparison, in the beginning of October, the exchange was 9th with a trading volume of around USD 350 million.

Per media outlet Newsis, a Bithumb spokesperson stated, “It looks like the strategic alliance with BK, which has its own global blockchain network, has brought about a good response from the market.”

In an interview published by South Korea’s Maeil Kyungjae newspaper, Kim explained his reasoning behind the purchase, stating that Bithumb was “the Samsung of the blockchain industry.” He also hinted that Bithumb might look to invest in blockchain startups in the future, saying, “In the past, many blockchain projects have struggled to survive when it comes to funding. Bithumb could serve as an incubator to support these kinds of companies.”

Asked what sort of role he envisaged himself playing at Bithumb, Kim stated, “I will not be assuming the role of owner – rather I will be acting as the chairman of the Bithumb board.”
Many South Korean crypto enthusiasts have been angered by the move, however with some concerned that the company’s power base could now move away from the country. Commenters on news stories and Telegram groups criticized the government for perceived anti-blockchain development policies. The government talked up a possible blanket ban on trading earlier this year, and has implemented a nationwide initial coin offering (ICO) ban. Seoul also recently removed exchanges’ tax breaks, and has made direct investment in exchanges through South Korean venture capital companies all but impossible.

Bithumb will likely make use of BK’s Singaporean network, as the country has recently served as a destination for scores of South Korean companies wishing to launch ICOs. Bithumb was also rumored to have been on the verge of launching an initial coin offering (ICO) in Singapore though a subsidiary in April this year.

Cryptocurrency has found an unlikely ally in South Korea’s affluent beauty and plastic surgery industries, with scores of beauticians and cosmetic clinics across the country now accepting pay in digital tokens.


Source
Author: Tim Alper
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“Bitcoin Cash Jesus” Plans Own Crypto Exchange

Roger Ver, a controversial supporter of the Bitcoin Cash (BCH) cryptocurrency, plans to develop his own crypto exchange.

It would be an integrated part of the Bitcoin Cash-oriented website and wallet he joined in 2016 – Bitcoin.com – a website which has long faced criticism from the Bitcoin community for misleading new investors into buying BCH instead of Bitcoin (BTC).
His early advocacy for bitcoin earned him the moniker of Bitcoin Jesus, but now he’s the most prominent Bitcoin Cash evangelist.

The early bitcoin investor said during an interview with media in Malta on Tuesday that he is now considering whether to find a partner to create the exchange, or to “build one internally.”

“If we build it ourselves, we can do it really, really cheap, and we get exactly what we want, but we don’t have the security of a battle-tested exchange that’s been around for a while,” Ver said about his plans, while adding that the exchange “will be posted on Bitcoin.com, so we’ll have thousands or tens of thousands of new users every single day.”
Bitcoin Cash would reportedly serve as the base currency of the proposed exchange. However, few other details are known about the new initiative.

Only time will tell whether Ver’s prediction that the success of the new exchange would be guaranteed by the popularity of his domain holds true. What is certain, however, is that Bitcoin.com’s popularity has plummeted this year.


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Author: Fredrik Vold
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Mt. Gox Begins Taking Claims from Corporate Bitcoin Creditors

Defunct bitcoin exchange Mt. Gox has opened up its online rehabilitation claim filing system to corporate creditors who were holding cryptocurrency funds on the platform when it went belly up in 2014.

Mt. Gox rehabilitation trustee Nobuaki Kobayashi made the announcement in a document dated Sept. 12 and published on the Tokyo-based bitcoin exchange operator’s website. According to the document, creditors must file their claims by Oct. 22 to be eligible for compensation.

CCN reported last month that Mt. Gox had begun accepting claims from individual creditors, who — like corporate users — must submit claims even if they had already done so during the exchange operator’s bankruptcy proceedings.

The exchange, which once handled 70 percent of all bitcoin trades worldwide, went bust in 2014, shortly after losing as much as $450 million (850,000 BTC) in what was long the largest theft in pure dollar terms in cryptocurrency history, having now been surpassed by the Coincheck hack that occurred in Jan. 2018.

Insolvent following the theft, Mt. Gox entered bankruptcy, though CEO Mark Karpeles — who served jail time for embezzling funds from the exchange — later recovered approximately 200,000 BTC worth of company funds.

Prior to the exchange’s exit from bankruptcy, Kobayashi attracted criticism within cryptocurrency circles for his decision to cover the exchange’s outstanding liabilities by liquidating its cryptocurrency assets in large batches on spot trading markets, rather than through the over-the-counter (OTC) channels typically used by large-scale traders. Following the company’s entry into civil rehabilitation, Kobayashi pledged that there would be no more surprise sell-offs.

Creditors, moreover, have petitioned to receive their repayments directly in cryptocurrency, specifically in bitcoin and bitcoin cash. While not guaranteed, this is now possible, pending court approval, since the exchange will compensate creditors through civil rehabilitation rather than bankruptcy. Compensation will likely be paid in late 2019.

Bitcoin wallets belonging to Mt. Gox hold 137,891 BTC and BCH, according to the Mt. Gox Cold Wallet Monitor, collectively worth nearly $1 billion at the current exchange rate.


Source
Author: Josiah Wilmoth
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Binance, LCX Collaborate to Launch Fiat-to-Cryptocurrency Exchange in Liechtenstein

Binance, the world’s leading cryptocurrency exchange by volume, has partnered with Liechtenstein Cryptoassets Exchange (LCX) to create and launch a cryptocurrency trading platform that allows users to trade directly against fiat currencies such as the euro.

LIONBIT

The Malta company announced Binance LCX as the forefront of their trading operations in the Central European economy. This newly established joint venture will allow cryptocurrency users to trade their crypto-assets for Swiss francs (CHF) and euros (EUR). Binance will be overseeing operations and management of the technology platform, while its unification with LCX will be responsible for managing customer support and regulatory compliance.

Just over a year ago, Binance did not exist. It wasn’t until the end of July 2017 when the Binance ICO gave the firm its first presence in a competitive trading market. The company’s ability to handle larger volumes and its choice of being bankless had put it on the top ten crypto exchanges list at an early stage. Binance now leads the list and has recorded 85 percent ICO returns for its token sale participants already.

“I believe Binance LCX will create a sustainable and reliable fiat-crypto gateway for professional and regular investors alike,” said a confident Changpeng Zao, CEO and founder of Binance. “I hope Binance LCX will drive new standards for usability and compliance for the blockchain industry, and we are very excited to bring the relevant experience and best practices to grow our team at Liechtenstein.”

LCX, as an individual organization, is “an exchange made for professional investors offering crypto custody, an advanced trading platform for security tokens and other crypto assets.” The company hasn’t released its whitepaper, but it appears “well-backed,” should the sheer presence of some high-profile names, including Wikipedia’s Founder Jimmy Wales, in its advisory list be considered.

TIP

LCX is reportedly looking to obtain a MiFID II license in line with the Liechtenstein Banking Act. The exchange will also be applying for permits under the Liechtenstein Blockchain Act, a holistic initiative by the Government of Liechtenstein to build legal security for cryptocurrency and blockchain businesses.

The Binance LCX partnership has attracted support from Adrian Haslet, the Prime Minister of Liechtenstein, indicating strong political and regulatory backing for this initiative. Haslet said:

“We welcome Binance LCX to Liechtenstein. Blockchain technologies are laying the basis for an entirely new industry. We are confident that Liechtenstein’s existing and future legal framework and practice provide a robust foundation for the Binance LCX and other Blockchain companies to provide exceptional services here in Liechtenstein.”

The Binance token value (BNB/USD), as of the time of writing, had risen approximately four percent on the news.


IZX

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Yashu Gola 
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U.K. Exchange Crypto Facilities Launches Bitcoin Cash Futures

Bitcoin cash, the fourth-largest cryptocurrency, took another step into the big leagues on Friday when a European derivatives trading platform launched the first regulated, USD-denominated bitcoin cash futures.

LIONBIT

This product, which began trading on the U.K.-based Crypto Facilities on Friday at 4 p.m. local time, allows investors to bet on the future price movements of bitcoin cash, as well as hedge risk in their overall cryptocurrency portfolios.

“We are pleased to be expanding our cryptocurrency derivatives offering with the launch of Bitcoin Cash futures,” said Crypto Facilities CEO Timo Schlaefer in a statement. “BCH is a top five coin with a market capitalisation of around $10 billion and we expect our new contracts to spur the evolution of the crypto markets by bringing greater liquidity and transparency to the digital asset class.”

“This is another example of how Bitcoin Cash is proving itself to be one of the most innovative and useful cryptocurrencies in the world,” added BCH evangelist Roger Ver.

Tokyo-based trading and investment firm Profluent Japan says that it will make markets in the new bitcoin cash futures markets.

“Profluent Japan welcomes the opportunity to make markets in BCH derivatives on the Crypto Facilities platform. The institutional trading community was in great need of a proper BCH hedging mechanism at an FCA-registered exchange with a first class management team,” said Profluent Group CEO Bert Mouler. “Crypto Facilities is the first to provide such a service.”

TIP

In addition to BCH, Crypto Facilities has also launched futures products for bitcoin, ethereum, ripple, and litecoin. Earlier this year, Crypto Facilities CEO Tim Schlaefer told CCN that the platform has seen strong growth in 2018 despite the bear market. He said that volume had increased 84 percent between Q4 2017 and Q1 2018 and that he expected Q2 volume to double that of Q1.

Notably, Crypto Facilities is one of several cryptocurrency exchanges that provide pricing data used in Chicago-based derivatives exchange CME’s cryptocurrency reference rates. To date, CME has launched reference rates for bitcoin and ether, and the former has been used as the foundation for the platform’s bitcoin futures product. Consequently, the launch of BCH derivatives products on this platform could be the first step toward eventually seeing bitcoin cash futures listed on a major exchange.


IZX

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Josiah Wilmoth 
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Breaking – Stellar’s (XLM) Anticipated Trading Platform Frontend Announced for Release

The much-anticipated front-end development of the Stellar network’s underlying trading protocol (SDEX), hinted at in the Stellar Development Foundation’s January roadmap, has been announced as StellarX – the first fully-featured trading app for Stellar’s universal marketplace and back-end technology.



“Hello! I’m very happy to announce StellarX–a new trading platform built on the Stellar universal marketplace. We’re free–we’re refunding network fees and using lumenaut.net to get every user his/her inflation–and, of course, being on Stellar we’re super fast.”

 


Posting on r/Stellar, the StellarX developers revealed their project and reasons for choosing to develop on the network.

“We’ll list every token on Stellar (provided the issuers do stuff like complete their toml) so that means you’ll be trading crypto, fiat, commodities, whatever, once we launch.”

Features such as completely fee-free trading and the listing and trading of all asset types will be possible, whilst also taking advantage of the protocol’s super-fast settlement times. Users will be able to trade from their own wallet, and even collect the 1% weekly inflation from the Lumenaut’s inflation pool. Because the Stellar network’s fees are so small, StellarX can offer completely free trading – essentially absorbing the minimal transactional costs.

The third-party team behind the new complete trading app have previously developed industry blockbuster projects such as Headspace, Kickstarter and OkCupid, and worked with the Stellar Development Foundation to ‘ensure StellarX delivers the optimal Stellar Experience’.

As if that wasn’t enough, these industry developer veterans went on to sing Stellar’s technological praises in this medium post, waxing lyrical about their ‘fantastic settlement backend’, saying that they ‘…believe Stellar is actually underappreciated’. This news will come as a mixture of relief and excitement for proponents of Stellar and XLM, finally getting to hear about the ‘…world-class front-end that our underlying technology has long deserved.’ hinted at 6 months ago. Whatever the wider market reaction, this development promises to deliver a potentially world-beating decentralised cryptocurrency exchange on the Stellar network.

StellarX will be live this summer, with early beta signups available for keen cryptocurrency users.


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: George Naylor
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Bithumb will fully compensate investors after hack: ‘$450 million in company fund’

Bithumb has ensured customers that it will fully cover the loss of over $30 million worth of stolen cryptocurrencies during a hack earlier this week. The Korean exchange revealed more details in a statement today.


Bithumb states that immediately after the incident, it reported the hack to the KISA (Korea Internet & Security Agency) following the procedure. The exact amount of cryptocurrency stolen during the hack has not been confirmed yet.

The current expectation is that 35 billion Korean Won was stolen, but Bithumb says: ‘As we undergo the recovery process on each cryptocurrency, the overall scale of damage is getting reduced. Hence we expect that the overall damage will be less than the amount we initially expected’. Details on the exact scale of damage will be announced later.

Bithumb ensures that the damage will be fully covered by the company fund. According to the exchange, there is about 500 billion KRW ($450 million) in the company fund. Next to that, the exchange is considering a compensation for users because of the current withdrawal delays. All the cryptocurrencies of the company and customers are safely stored in the cold wallet, while KRW assets are stored on a bank account. Bithumb states that ‘all the assets of costumers are intact and fully secured’.


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: JELMER VAN DER DUSSEN
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The Next Generation of Crypto Exchanges Has One Big Missing Piece

2018 could end up being a banner year for a much-hyped cryptocurrency creation.

Heralded as a way to put true custody back into the hands of traders, decentralized exchanges have moved out of R&D phase and are enrolling early adopters. But before users can start rejoicing, there’s a serious chicken-and-egg problem, one that entrepreneurs believe is preventing the model from challenging the Coinbases and Krakens of the world.

In short, you need liquidity to get adoption, yet in order to get adoption, liquidity must be good, a fact acknowledged by even those who see the potential in more high-tech trading offerings.

But more broadly, it’s worth looking at how centralized exchanges solve this problem. Oftentimes, they make deals with market makers to incentivize them to create liquidity. These incentives usually come in the form of a rebate or reward that’s exchanged for the guarantee a certain amount of what traders call “order book depth” is maintained at all times.

Some centralized exchanges will even employ temporary strategies to solve the problem, such as market making themselves with their own capital, and will basically replicate order books from other more liquid exchanges (plus a spread) to try to attract traders.

There are some practical issues: decentralized exchanges are limited to trade in cryptos only. That means people can’t actually use regular US dollars to buy a token. They first have to go to a regulated exchange to put in US dollars (or other government-backed currencies) to buy bitcoin or ether.

Then, with bitcoin or ether, they can go to a decentralized exchange to buy the more tokens. As such, it’s perhaps no surprise that to those familiar with more user-friendly Wall Street solutions, this can all seem a bit much.

As Daniel Cawrey, CEO, Pactum Capital explains:

“Most investors/traders are already intimidated by bitcoin. So, to have them jump through hoops to trade on a decentralized exchange to trade a token with a tiny market cap causes a lot of people to give up.”

Cawrey characterizes it as a question of cost and benefit. Essentially, most tokens don’t do much in the way of volume, which makes the set-up hurdles even more pronounced.

That said, there have been early successes.

For example, AirSwap, the decentralised marketplace for ethereum tokens that launched last week, handled over $1 million worth of transactions on its first day of trading.

A Different Take

Still, those working to bring the business model to life see it differently.

AirSwap, co-founded by former Virtu Financial trader Michael Oved, goes so far as to use a bulletin board-style system that emulates the way traditional foreign exchange traders interact directly with each other, peer to peer.

The platform replaces the traditional order book with a kind of search engine called an “indexer,” whereby traders can announce their intent to trade, making them discoverable by their peers using smart contracts. It currently trades some 25 tokens and that number is growing.

In this way, AirSwap co-founder Don Mosites believes this selection is enough to overcome the issues Cawrey discussed, by offering a selection of markets that may be small today, but have been growing in volumes of late.

Mosites said: “There are people all over the world looking to make trades, often in large amounts, but may not have the tools.”

“The first-day volume was a testament to the global community we’ve built, our ‘peer discovery’ system and the smart contract used by peers to make trades. There is a ton of demand for a simple and secure OTC system like this,” he continued.

Other Approaches

Yet, this isn’t the only approach – smart developers are dropping IP all over the place with different ways to decentralize ethereum token trading, while attracting the necessary liquidity.

For example, KyberNetwork (launched in April), has also gotten rid of the order book, and maintains a reserve warehouse controlled by a Kyber smart contract.

In order to attract as much liquidity as possible from Singapore’s burgeoning token economy, Kyber operates an open model – anyone can be a market maker or taker by interacting with the smart contracts.

“We solve the liquidity problem by bringing the market makers to our platform – anyone with a substantial amount of idle assets or even the token issuers themselves,” said Loi Luu, the co-founder of KyberNetwork. “They can get more profits on their idle assets by market making on our platform.”

Also looking to leverage the explosion in ethereum tokens is the 0x protocol, which offers exchange operators (relayers) building on top of its smart contract system, the choice of being open or closed.

Using 0x in an entirely open and decentralised way, aspires to capture a networked liquidity effect. This means the smart contracts that essentially clear and execute trades are set so that the maker and taker of trades can be filled by any user.

But 0x can also be used to create a closed order book, or matching model, where the smart contract is set so the taker of any trade is always the relayer.

Trade-Offs

As with most things in a decentralized context, there are trade-offs.

While openness may solve liquidity issues over time, it opens up an easy way of front-running trades. This can happen on ethereum when users observe market-moving orders and set a gas price for their own transaction higher than the transaction they’re seeing.

Amir Bandeali, the CTO of 0x, pointed out this issue shouldn’t be put completely on decentralized exchanges.

“This is not a problem that’s specific to trading; front running is one of the larger issues of blockchains in general. If anyone submits a transaction to the blockchain, the entire transaction is public before it is mined,” he said, adding:

“But since decentralized exchanges are one of the first working use cases of blockchains, they have been getting a bad rap for this.”

To fortify the open approach, 0x is looking at introducing features like a trade execution coordinator, or an embeddable trade widget for open order books that can allow wallets and other applications to monetize by simply rebroadcasting orders from other relayers.

Kyber, which is also open, removes the incentive to front run by limiting the transaction value per trade. The trade size is currently capped at SGD 5000 ($3,800) per trade for non-KYC’d users and SGD 10000 SGD for KYC’d users.

Combining the 0x protocol with a closed order book model is Paradex, founded by trading platform veteran Ron Bernstein. In this design settlement of trades takes place on the ethereum blockchain, but a closed matching model seeks to retain features that professional traders require such as best-price guarantees and price/time priority.

“The matching model does come with trade-offs,” said Bandeali. “It makes your relayer much less accessible to smart contracts. One of the main benefits of the open order book model is that you can execute trades atomically with other transactions, including other trades. You can’t really benefit from this using the matching model.”

Bernstein acknowledged that matching prevents Paradex from participating in 0x’s aspiration for beneficial shared liquidity, but he insisted the trade-offs are incomparable.

“There’s a very small chance that aggregated or shared liquidity will be a mass adoption solution. It may be a temporary benefit while bootstrapping very new trading ecosystems like decentralized token trading,” said Bernstein, adding:

“Liquidity is solved by partnerships with professional liquidity providers, like those already operating on centralized exchanges – and we’re courting a bunch of them.” 


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Ian Allison
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