Decentralized decentralized currency trading
Brutal irony: those who enjoy the benefits of the first decentralized currency are forced to use centralized stock exchanges for trading. Centralization - the curse of the fiat monetary system - still remains not the most pleasant feature of the bitcoin and cryptocurrency environment. And yet it is time to say goodbye to her.
MtGox. This is not just the name of a dead business. The word "Gox" entered the colloquial language of the bitcoin world in a way that no other concept could manage. You may not know what Zhou Tonging is . You are likely to raise an eyebrow inquiring if you are advised by HODL . But, undoubtedly, if you even rotated a bit in a bitcoin environment, you know what a first bitcoin exchange casts a huge and cold shadow on the entire cryptocurrency community. Parents use it as a scare for little children to convince them to keep track of their private keys. Grown men cry out in fear when this word appears in the same sentence as their chosen exchange.
Zagoksit . From goksit (ch., Nepl. View): to be robbed, literally or figuratively, without the possibility of a refund due to the stupidity or dishonesty of someone who in all respects gives the impression of a person who is unable to find his own ass with both hands with mirrors and a copy Anatomical Atlas of Gray. "I was stumped," "Do not believe them, you will be stoned." An integral part of this goxing is an existential experience about how such a thing could have happened, as well as undermining trust in centralized institutions such as cryptocurrency exchanges. In particular - to MtGox.
')
The main symbol of trust in the bitcoin environment is decentralization. Anyone who likes low-cost, fast, bitcoin-transferring without external intervention, certainly appreciates that these advantages are not a common standard in a centralized fiat environment. It is also attractive and predictable offer, which is one of the reasons for the formation of Bitcoin's own niche as a store of value. While commercial and central banks have one-sided control over the money supply and can block or reverse any transaction on their own, Bitcoin offers a unique alternative.
For the same reason, it is also a source of frustration: after all, the main opportunities for exchanging Bitcoin for Fiats and other cryptocurrencies are concentrated on centralized exchanges. From this arise all sorts of problems. They are hacked (“hacking” is arbitrarily understood as an attack of a technically savvy thief, and emptying accounts by dishonest owners or employees). They can put a DDoS-attack, often at the most crucial moment in the bidding cycle. They can be investigated by the People’s Bank of China, which decides to introduce new rules. Favorable for traders or not - it is never impossible to know in advance. A request may be received for the transfer of information about customers in the course of tightening the fight against tax evasion. High installments on bitcoin listings can be made. The exchange may begin to ignore requests for listing, to conduct delisting of its own accord - to act in relation to the community with non-market methods. All these and other problems are well known to every average bitcoin veteran.
By definition, any kind of centralization is due to both the concentration of power and the emergence of a point of potential failure, technical or organizational. In the early years of Bitcoin, MtGox was in many ways the “center” of Bitcoin trading. It was the only real exchange: if you wanted to trade bitcoin, you had only one option to choose from. In the world of altcoins, such a monopoly still exists today - there is only a small handful of trading platforms with more or less sufficient liquidity to make trading in various cryptocurrencies viable.
MtGox was also a concentration point and an excellent target for attacks. Because of the protocol that allowed to make currency-based p2p transactions , Gox concentrated risks by collecting customer money. The protocol, as it turned out, was protected by a rather unstable code. We probably will never know how many of the 650,000 BTC were lost due to uncleanliness, incompetence, or malicious hacker actions. With the Bitcoin protocol, everything is fine, but the strength of the chain is determined by the strength of the weakest link. Gox was a very sad illustration of this principle.
There were several decentralized cryptocurrency trading platforms, not the last of which - CounterParty and NXT. All of these sites had serious flaws. Often, poor usability is poor quality or unjustified congestion of the interface. Moreover, many exchanges allow trading only in the native currency (Bitcoin in the case of CounterParty, NXT on the Nxt Asset Exchange). They are slow, clumsy because of their blocking intervals: it could have been more than 10 minutes before you knew that the transaction was made. And of course, they were not suitable for exchanging for USD or any other fiat currency, as there were very few or no trusted providers of blockchain USD-tokens. In other words, being innovators in their own fields, they hardly corresponded to their goals.
Here are the minimum qualities that a truly useful decentralized exchange should have:
A fully decentralized exchange engine has long been considered the holy grail of bitcoin trading, but it is difficult to put it into practice. How exactly to move fiat money centralized by nature without even more centralization? There have been several attempts to do this. Coinffeine is an intriguing and innovative approach to the problem. He breaks down both bitcoin and fiat currency transfers into small parts, and sends them one by one. Deposit insures against non-payment when attempting to cheat. This is a beautiful solution when trading without trust. Like BitTorrent, it works on a p2p network, but it has its limitations. It is not at all like an ordinary stock exchange. First of all, this option requires registration through a provider of fiat payments that supports non-refundable transfers. And this in itself entails additional costs and difficulties.
Our Waves platform arose from the understanding that existing cryptocurrency platforms are not ready for implementation into the masses. User experience, speed, and scalability were limited, and business development — a vital condition for launching a platform to the market — was at best at the amateur level. And not a single decentralized trading platform would have gained the momentum necessary for traders without the key points described above.
Waves is a custom tokens platform. It is based on the idea that at the forefront of cryptocurrency implementation there should be a relatively simple blockchain functionality for creating and sending simple tokens. These tokens can impersonate everything that you want and can support them with. In order to trade bitcoin, say, for USD on the Waves blockchain, you will need gateways for both bitcoin and USD.
In the case of bitcoin, you need a “multi-lock” option: a group of three or more reliable servers that allow users to store bitcoins and keep them under a multi-identifier address (multisignature address). The corresponding token is automatically released into circulation in the Waves blockchain. This process is similar to the process of depositing funds on a traditional exchange, but much more reliable. It is not fully decentralized, but distributed - this is a significant increase in the level of trust that was required at the very first sites and at many of the existing ones.
For USD, the only way is to go through Tether: keep the fiat currency on the insured and verified account and issue a token for every dollar on it - a 100% reservation system instead of a partial reservation adopted in banks. The level of trust is embedded in the approach itself and simply reflects the nature of the fiat system itself.
Tokens are traded on the decentralized Waves Exchange (DEX). This is implemented by allowing miners to collect transaction fees in any currency in which they want. They can add to the black or white list the currencies that wish to include / exclude. Thus, the assets declared useless are transferred to other nodes. All trades are carried out using the blockchain, but orders are linked in pairs by individual nodes that act as Comparators. This ensures speed at the centralized exchange level and security of the decentralized protocol. If the Comparator fails, the exchange will not take place, but the funds will not be lost.
Add to this version of Tidex , a new exchange platform (currently in beta testing), which will be integrated with Waves DEX at the backend level. Tidex will provide a familiar trading environment with several variants of fiat and cryptocurrency. It will also act as a Mapping node, providing the service directly to DEX.
Long-term problems within Bitcoin ecosystems associated with centralization cannot be solved by one participant. Decentralized trading protocols, many new exchanges, tools for aggregating lists of orders and arbitration actions between them are needed. DEX and Tidex provide one direction for a much-needed solution. In time, new ones will appear, and it is possible that the days of centralized trade with decentralized currency will come to an end.
MtGox. This is not just the name of a dead business. The word "Gox" entered the colloquial language of the bitcoin world in a way that no other concept could manage. You may not know what Zhou Tonging is . You are likely to raise an eyebrow inquiring if you are advised by HODL . But, undoubtedly, if you even rotated a bit in a bitcoin environment, you know what a first bitcoin exchange casts a huge and cold shadow on the entire cryptocurrency community. Parents use it as a scare for little children to convince them to keep track of their private keys. Grown men cry out in fear when this word appears in the same sentence as their chosen exchange.
Zagoksit . From goksit (ch., Nepl. View): to be robbed, literally or figuratively, without the possibility of a refund due to the stupidity or dishonesty of someone who in all respects gives the impression of a person who is unable to find his own ass with both hands with mirrors and a copy Anatomical Atlas of Gray. "I was stumped," "Do not believe them, you will be stoned." An integral part of this goxing is an existential experience about how such a thing could have happened, as well as undermining trust in centralized institutions such as cryptocurrency exchanges. In particular - to MtGox.
')
Decentralization
The main symbol of trust in the bitcoin environment is decentralization. Anyone who likes low-cost, fast, bitcoin-transferring without external intervention, certainly appreciates that these advantages are not a common standard in a centralized fiat environment. It is also attractive and predictable offer, which is one of the reasons for the formation of Bitcoin's own niche as a store of value. While commercial and central banks have one-sided control over the money supply and can block or reverse any transaction on their own, Bitcoin offers a unique alternative.
For the same reason, it is also a source of frustration: after all, the main opportunities for exchanging Bitcoin for Fiats and other cryptocurrencies are concentrated on centralized exchanges. From this arise all sorts of problems. They are hacked (“hacking” is arbitrarily understood as an attack of a technically savvy thief, and emptying accounts by dishonest owners or employees). They can put a DDoS-attack, often at the most crucial moment in the bidding cycle. They can be investigated by the People’s Bank of China, which decides to introduce new rules. Favorable for traders or not - it is never impossible to know in advance. A request may be received for the transfer of information about customers in the course of tightening the fight against tax evasion. High installments on bitcoin listings can be made. The exchange may begin to ignore requests for listing, to conduct delisting of its own accord - to act in relation to the community with non-market methods. All these and other problems are well known to every average bitcoin veteran.
Types of centralization
By definition, any kind of centralization is due to both the concentration of power and the emergence of a point of potential failure, technical or organizational. In the early years of Bitcoin, MtGox was in many ways the “center” of Bitcoin trading. It was the only real exchange: if you wanted to trade bitcoin, you had only one option to choose from. In the world of altcoins, such a monopoly still exists today - there is only a small handful of trading platforms with more or less sufficient liquidity to make trading in various cryptocurrencies viable.
MtGox was also a concentration point and an excellent target for attacks. Because of the protocol that allowed to make currency-based p2p transactions , Gox concentrated risks by collecting customer money. The protocol, as it turned out, was protected by a rather unstable code. We probably will never know how many of the 650,000 BTC were lost due to uncleanliness, incompetence, or malicious hacker actions. With the Bitcoin protocol, everything is fine, but the strength of the chain is determined by the strength of the weakest link. Gox was a very sad illustration of this principle.
Decentralized trade
There were several decentralized cryptocurrency trading platforms, not the last of which - CounterParty and NXT. All of these sites had serious flaws. Often, poor usability is poor quality or unjustified congestion of the interface. Moreover, many exchanges allow trading only in the native currency (Bitcoin in the case of CounterParty, NXT on the Nxt Asset Exchange). They are slow, clumsy because of their blocking intervals: it could have been more than 10 minutes before you knew that the transaction was made. And of course, they were not suitable for exchanging for USD or any other fiat currency, as there were very few or no trusted providers of blockchain USD-tokens. In other words, being innovators in their own fields, they hardly corresponded to their goals.
Here are the minimum qualities that a truly useful decentralized exchange should have:
- Speed High-frequency trading (HFT) is not necessary to start, but traders should be aware that their orders are executed in real time, and not in the next block.
- Bidding token-token . Users want to trade currency pairs directly, and not through a third currency: USD-BTC, USD-EUR, etc. - not USD-xyz, and then xyz-BTC. This creates unnecessary delays, additional complexity and cost.
- Fiats on the blockchain . This is a difficult task, because the centralized fiat system does not interact well with the decentralized blockchain environment. In the past, several approaches have been made, but not one has been justified. However, traders need a reserve of currency to keep their funds in it, or withdraw from the exchange in the form of profit.
DEX and Tidex
A fully decentralized exchange engine has long been considered the holy grail of bitcoin trading, but it is difficult to put it into practice. How exactly to move fiat money centralized by nature without even more centralization? There have been several attempts to do this. Coinffeine is an intriguing and innovative approach to the problem. He breaks down both bitcoin and fiat currency transfers into small parts, and sends them one by one. Deposit insures against non-payment when attempting to cheat. This is a beautiful solution when trading without trust. Like BitTorrent, it works on a p2p network, but it has its limitations. It is not at all like an ordinary stock exchange. First of all, this option requires registration through a provider of fiat payments that supports non-refundable transfers. And this in itself entails additional costs and difficulties.
Our Waves platform arose from the understanding that existing cryptocurrency platforms are not ready for implementation into the masses. User experience, speed, and scalability were limited, and business development — a vital condition for launching a platform to the market — was at best at the amateur level. And not a single decentralized trading platform would have gained the momentum necessary for traders without the key points described above.
Waves is a custom tokens platform. It is based on the idea that at the forefront of cryptocurrency implementation there should be a relatively simple blockchain functionality for creating and sending simple tokens. These tokens can impersonate everything that you want and can support them with. In order to trade bitcoin, say, for USD on the Waves blockchain, you will need gateways for both bitcoin and USD.
In the case of bitcoin, you need a “multi-lock” option: a group of three or more reliable servers that allow users to store bitcoins and keep them under a multi-identifier address (multisignature address). The corresponding token is automatically released into circulation in the Waves blockchain. This process is similar to the process of depositing funds on a traditional exchange, but much more reliable. It is not fully decentralized, but distributed - this is a significant increase in the level of trust that was required at the very first sites and at many of the existing ones.
For USD, the only way is to go through Tether: keep the fiat currency on the insured and verified account and issue a token for every dollar on it - a 100% reservation system instead of a partial reservation adopted in banks. The level of trust is embedded in the approach itself and simply reflects the nature of the fiat system itself.
Tokens are traded on the decentralized Waves Exchange (DEX). This is implemented by allowing miners to collect transaction fees in any currency in which they want. They can add to the black or white list the currencies that wish to include / exclude. Thus, the assets declared useless are transferred to other nodes. All trades are carried out using the blockchain, but orders are linked in pairs by individual nodes that act as Comparators. This ensures speed at the centralized exchange level and security of the decentralized protocol. If the Comparator fails, the exchange will not take place, but the funds will not be lost.
Add to this version of Tidex , a new exchange platform (currently in beta testing), which will be integrated with Waves DEX at the backend level. Tidex will provide a familiar trading environment with several variants of fiat and cryptocurrency. It will also act as a Mapping node, providing the service directly to DEX.
Long-term problems within Bitcoin ecosystems associated with centralization cannot be solved by one participant. Decentralized trading protocols, many new exchanges, tools for aggregating lists of orders and arbitration actions between them are needed. DEX and Tidex provide one direction for a much-needed solution. In time, new ones will appear, and it is possible that the days of centralized trade with decentralized currency will come to an end.
Source: https://habr.com/ru/post/399057/
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