(Source: bitcointalk.org)

clicks | a year ago | comments: discuss | tags: bitcoin

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(Original link: bitcointalk.org)

DAEX is a clearing solution for centralized cryptocurrency trading exchanges. Its clearing service is based on distributed ledger technology. Clearing and settlement rules are preprogrammed into clearing smart contracts on the DAEX clearing chain. The clearing process is automatic without people’ s interference. The objectivity of clearing is guaranteed by the consensus mechanism on the clearing chain. Also, customers’ digital assets are registered and stored on the DAEX’ s clearing chain. No other institutions or individuals can access these assets without the owner’ s permission.
The current total market value of all cryptocurrencies has far exceeded $280
billions. Among all of these cryptocurrencies, bitcoin stands out with over 50%
of the market share. At the same time, new cryptocurrencies keep pouring into
the market. Bitcoin derivatives are also entering the market. Regulated
exchanges like CBOE and CME followed each other in listing bitcoin futures.
Until the third quarter of 2017, investment return on cryptocurrencies is as high
as 448% which has far exceeded investment returns on other assets like the
stock market, gold and real estate. Cryptocurrency trading has been very active.
Almost 60 cryptocurrencies boast average daily trading volume of 10 millions
dollars. Such active trading leads more and more trading exchanges entering
the market.
The Cryptocurrency Market
There are currently two types of cryptocurrency trading exchanges, centralized
exchanges and distributed exchanges. Each type has its advantages and
A distributed exchange is usually based on distributed ledger technology. It runs
on its own. It does not need people to maintain its operation. Trader’s asset on
a distributed exchange is held in his own account. The exchange does not have
access to it. Traders trade directly with each other on a distributed exchange.
The exchange’s underlying technology guarantees the trade go through, and
cleared and settled correctly. Such distributed exchanges include BitShare and
The advantages of distributed exchange are very obvious. Trader’s asset is well
protected; trading and clearing costs are low; traders can freely join and leave,
and they can trade with anyone in the world as long as the other party also uses
the same exchange. Despite of all these advantages, however, distributed
exchanges also have serious disadvantages, particularly in terms of liquidity,
matching speed and flexibility. Because of these disadvantages, distributed
exchanges never become widely used in cryptocurrency trading.
Centralized exchanges are exactly the opposite of distributed exchanges in
almost every aspect .
It provides a centralized order matching mechanism for
traders. It receives trader’s cryptocurrencies as deposits, and holds these
cryptocurrencies in its own storage. The exchange then issues IOUs to trader’s
exchange account. Traders effectively trade these IOUs with each other at the
exchange. When they want to transfer their cryptocurrencies to other places,
they use their IOUs to instruct the exchange to send corresponding
cryptocurrencies to specified addresses.
While current cryptocurrency centralized exchanges have strong advantages in
providing liquidity, matching speed and flexibility, they are inherently flawed in
their current infrastructure. Each exchange maintains its customers’ assets. This
exposes customers’ assets to both serious internal and external risks. The
operation of such exchanges is also opaque. There is no way to guarantee an
exchange’s objectivity in being an unbiased matching mechanism. In fact,
security incidents keep happening to centralized exchanges in recent years,
from Mt.Gox to the most recent Yubit. Such incidents will for sure keep
happening because of the basically flawed infrastructure of centralized
The Goal of DAEX
The goal of DAEX is to provide a better infrastructure for the cryptocurrency
trading industry by taking the reasonable parts of the mainstream securities
trading industry and by taking advantages of new opportunities brought about
by the distributed ledger technology. Specifically, trading and clearing will be
separated into different entities. Current centralized exchanges will continue to
provide trading service. But the clearing work will be handled over to a common
clearing service which is based on the DAEX solution. But, different from
current centralized clearing services, the DAEX clearing service is based on
distributed ledger technology. The distributed ledger technology guarantees that
trades are correctly and safely cleared and settled. By using distributed ledger
technology, trader’s assets are kept in their own accounts on the blockchain. No
one else can access traders’ assets without their permissions. This effectively
removes trader’s asset risks in current centralized exchanges.
The DAEX solution will be an open sourced clearing service based on a public
blockchain. Its code is open for public ins...