2018 may as well turn out to be the banner year for the much-hyped crypto markets. Cryptocurrencies and decentralized technologies are flourishing. The figures speak for themselves — market capitalizations has soared, transaction volume has gone through the ceiling, and mass adoption by individuals, companies, and governments has reached the global scale.
Thanks to Blockchain, we have moved towards a trustless economy, where we don’t need trusted third parties to trade. Yet today’s exchanges are still centralized. Centralized exchanges have turned out to be vulnerable to attacks, reacts poorly to atypical Blockchain events such as hard forks and are often comes with high regulatory risks.
These exchanges often keep their platforms off-chain, meaning they function as escrows for their clients, and transactions are not stored on the Blockchain. This can lead to massive security breaches and unsafe storage of funds, information, and private keys. Crypto trading is associated with risks. However, at CoVEX, we believe that but crypto traders shouldn’t face any other risks other than those they are ready to take.
Decentralized Exchanges — simply called DEXs — can help transfer crypto trading back to the hands of crypto traders and thereby minimizing risks. DEXs aims to tackle the hurdles associated with centralized structures by creating P2P (peer-to-peer) marketplaces directly on the Blockchain.
However, implementing a fully decentralized and efficient exchange remains a mirage even though DEXs have moved from the R&D phase. Most exchanges are centralized because it is the straightforward way to proceed. It’s either too technically complex or costly to implement a fully decentralized exchange for now, at least.
CoVEX is already exploring to build a fully decentralized exchange based on Ethereum ERC223. Some of the hurdles that the platform will solve include:
· How can users solve the challenge of pricing where a single ERC223 token is higher than it ought to be, on account of speculation?
· How can traders buy multiple ERC223 token in a single transaction?
· How can traders not lose money in cases where there is a fall in the value of a single ERC223 token?
· How can traders increase the liquidity of single ERC223 tokens?
Ultimately, the CoVEX Platform will enable the creation and trade of ERC223 tokens using smart contracts where:
· Crypto traders can trade in baskets of ERC223 tokens: Traders will be in a position to acquire multiple ERC223 tokens with a single transaction;
· Innovative solutions of selling ERC223 tokens are nurtured; and
· Tools that create ERC223 tokens backed by a digital assets like loyalty points are provided.
Smart Contracts
From a technology point of view, CoVEX’s future decentralized exchange will be built on the Ethereum because of its smart contract potentials, large network of users and miners, and a large number of ERC223 tokens that have already been issued on the Platform. Among the types of contracts that CoVEX will implement include:
· Data storage;
· Functionality enabler;
· Trade enabler;
· Rating enabler; and
· Analytics enabler.
Ultimately, the Platform will create a holistic ecosystem where crypto traders can create, trade, view, and settle the contracts. Issuers will create the ERC223 token instruments, market makers and buyers will buy these instruments, and sellers will close the trade. Using the functionality enabler smart contract, issuers will create the product, the data storage smart contract will store the product on the Blockchain, the trade enabler smart contract will be responsible for decentralized trade and the rating enabler smart contract will rate products.
Conclusion
More than 90% cryptocurrency transactions still take place through centralized exchanges. In the coming years, this trend is expected to be reversed. Transitioning to decentralized exchanges is necessary for crypto traders to exploit their full potential. It also aligns the decentralized nature of Blockchain to crypto trading.
Edit by : J. Mohan (Founder & CEO)
By :Peter Wanjala
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Last year, the largest cryptocurrency exchange from U.S., CoinBase, announced an investigation targeted by unusual trading activity that preceded the distribution of Bitcoin Cash. Even thought Coinbase decided to not support Bitcoin Cash, it changed its mind and announced that it will list BCH on the platform starting with January 1. However, almost one month before the listing, rumors started arising that there will be inside trading on Coinbase regarding Bitcoin Cash. Users started posting tweets accousing that Coinbase employees are engaged in inside trading.
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