Blockchain For Trading Applications
Like many other people, I am a terrible trader.
I learned that the hard way in 2011 when I lost a small fortune on leveraged silver. For many people, the misery of trading losses is further compounded by the brokerages, who extract huge fees and spreads while providing poor market access terms to retail investors. I wish that Quantfury had existed in 2011, so that I could at least have learned that I was a poor trader on fair terms, with limited downside. This is personal for me.
My name is Bob Summerwill, and I am the Blockchain Lead for Quantfury. When I met the Founders of Quantfury in April 2018, my first impression was “Wow! A trading app that’s not looking to fleece people?”
I have been deeply involved with the blockchain community since 2015, primarily with the Ethereum project and more recently with Hyperledger. I worked for the Ethereum Foundation in 2016 and later for ConsenSys as a key figure in the creation and operation of the Enterprise Ethereum Alliance (EEA).
Blockchain is no silver bullet. There is a very high overhead for achieving global consensus on a given transaction, as detailed by Colin Platt recently in Analysing Costs And Benefits of Public Blockchains. It can be millions of times more expensive to use blockchains than to use conventional server technology.
So why use blockchains? Because they provide an unparalleled means for making shared data tamper-resistant and for censorship resistance. Those abilities come at a high cost, so can only be used sparingly at the time of writing, in a targeted, intelligent manner.
At Quantfury, we have built a mobile app which lets crypto currency holders trade equities, crypto currency, fiat pairs, and commodities, free of all fees, commissions, at the real-time best market bid and ask prices, with up to 20x leverage in fiat. While Quantfury’s architecture is based on a conventional technology stack, its blockchain implementation is key for Quantfury’s model of operations.
The use of crypto currencies to fund your collateral account and to withdraw profits is the simplest way in which Quantfury uses blockchain. Hold your crypto as collateral, use your fiat trading power to buy or sell Tesla, Crude Oil, and ETH/USD.
Further, Quantfury uses blockchain through the issuance of QTF tokens. Quantfury QTF tokens give the Quantfury trading app liquidity to make the most efficient and fair market making for the app users. QTF token owners have proportional rights in QDT (Quantfury Data Token). These QDT tokens are minted for every trade made by a Quantfury app user and represent in total each period’s aggregate spread revenue for user trades. The QDT tokens are sold back to Quantfury via its smart contract in exchange for ETH as they are burnt. In the future, QDT token will have transactional and additional use cases on the Quantfury platform, including staking Quantfury trading strategies developed based on its user base trading data, further monetizing it by making its value available to any QTF token holder.
Instead of taking advantage of information asymmetry to take advantage of its users, Quantfury delivers unmatched cost, market prices, speed, accessibility and absolute transparency to trade all financial markets. Further, Quantfury incentivizes investors to participate in this healthy business model, which is in stark contrast to the churn and burn business model that traditional brokerages and exchanges offering margin trading use to maximize their profits by charging high fees and manipulating bid-ask spreads.
QTF token ownership is not necessary for users to take advantage of the platform, so there is no artificial “appcoin” model here. Rather there are two value propositions — one for users and one for investors — and they are synergistic. Quantfury needs trading to be without commissions and trading fees with the same (best) bid and ask prices in order to effectively manage the market making back to back to the real market. App users enjoy unmatched trading conditions, and any token holder benefits from user growth as more spread revenues are generated from growing trade volume.
Better than “Don’t Be Evil” is “Can’t Be Evil”, and that is the level of transparency which Quantfury achieves, by publishing all of our trading data (with user identities anonymized) in an encrypted form to IPFS together with a hash of that data on the Ethereum mainnet.
We publish the key to decrypt that data on a delayed basis for auditing purposes. We also provide tools which can be used to verify the consistency of instrument prices at any given time for all users, as well as tools for QTF token holders to gauge platform performance and QDT token price metrics.
All of this functionality boils down to two smart contracts on the Ethereum mainnet — one for QTF tokens and one for QDT tokens. The QTF smart contract contains a registry of the holder addresses which is used when minting the QDT tokens on a monthly basis. The QDT smart contact allows the sale of the tokens to Quantfury’s smart contract where they will be burnt in exchange for ETH. The QDT smart contact is also where the hashes for the trade data stored onto IPFS are recorded — leaving a full audit trail on our trading operations open for all the world to see.
Can we do more? Will we do more? Yes, we will, as the capabilities of the public blockchains grow, and scalability issues are overcome. But these small steps are significant in themselves. Right now, a hybrid approach is the best we can do, but I am proud of the transparency which our architecture brings to the table in the interim.
Quantfury makes trading of traditional and crypto currency markets free, fair and transparent for millions of traders who own crypto currency. We deliver unmatched cost, market prices, speed, accessibility and absolute transparency for crypto currency holders to trade all financial markets including the crypto markets.
