DAEX | A decentralized clearing solution for exchanges
DAEX Foundation is developing a DAEX solution for centralized cryptocurrency trading exchanges based on distributed blockchain technology. DAEX’s goal is to provide better platform for cryptocurrency trading by merging the beneficial parts of centralized exchanges and the advantages of ever improving distributed ledger technology. Currently we have centralized exchanges and distributed exchanges as the two types of cryptocurrency trading exchanges.
Distributed exchange runs on its own and is based on distributed ledger technology. This technology does not involve people to maintain its operations. Here trader’s assets are distributed to their own accounts and the exchange cannot access them whatsoever. Traders here trade directly with each other and relies on the exchange’s technology to make sure their trades are successful. Examples of such technologies include BitShare and EtherDelta. Distributed exchanges enjoy obvious advantages such as secure protection of trader’s assets, low costs of trading and clearing, trader freedom to join and quit at will and the traders enjoy global trading as long as they are on the same exchange. However, distributed technologies have their short comings such as problematic liquidity, matching speeds and their flexibility and that explains the slow growth of its popularity.
Centralized exchanges counters distributed exchanges in almost every front. They enjoy strong advantages of flexibility, fast provision of liquidity and matching speeds. They provide centralized matching mechanism for its traders and hold onto their trader’s deposits. They also maintain their users’ assets and this presents their inherent flaws of insecurity basing on their infrastructure, their operations are opaque at the user’s end. They also don’t guarantee exchange’s objectivity in being unbiased during matching for trade.
DAEX’S AIM
DAEX is aiming at providing an improved infrastructure for cryptocurrency trading. In its blueprint, the current centralized exchanges will continue to provide trading services but the clearing service will be taken up by DAEX solution. The DAEX clearing service will be based on a distributed ledger that guarantees security of trade ensuring they are safely cleared and settled. By implementing the distributed ledger technology, DAEX ensures traders keep their assets in their own accounts thereby limiting access to upon their permissions. This tackles the current insecurity threat posed onto centralized exchanges. The DAEX solution will be based on public blockchain and will be open source, open to both public inspection and supervision.
DAEX’S ECOSYSTEM
This will be comprised of a clearing service based on distributed ledger technology, user wallets and centralized exchanges. Users make use of their wallets to do trade and exchanges. The clearing service receive matched trades from the exchanges and then clearing is performed by smart contracts that are on the distributed ledger technology. DAEX in its initial phase will see cryptocurrencies serviced but at its later phases will intend to service derivatives of cryptocurrencies. DAEX will then provide clearing service for cryptocurrency derivatives traded on exchanges. This ecosystem will enable its users to enjoy the advantages of security, trust and openness.

· Security: the ecosystem maintains quality of trading by ensuring the users meet the set business requirements. The user’s assets are held on blockchain and cannot be transferred without the user’s permission. Smart contracts come into play to ensure proper clearance and correct settlement. They also ensure asset security by providing recovery mechanisms.
· Trust: this ecosystem decouples between trading and clearing by adding a layer safety to guarantee user asset safety.
· Openness: exchanges based on DAEX will enjoy all its services and its ecosystem is open and welcome to new exchanges. DAEX will even add more value when it includes cryptocurrency derivatives trading.
DAEX aims at providing CaaS for the cryptocurrency trading industry. By using this service that is based on distributed ledger the industry becomes unbiased, transparent and objective and allows for proper utilization of its resources building the industry to a more secure foundation. DAEX as a clearing service lists new clearing products to enable participating exchanges to trade. DAEX’s services aims at improving the listing work in a bid to increase the competitiveness in this rapidly growing industry.
THE CLEARING CHAIN
This is the core of DAEX clearing ecosystem. It provides clearing services to both individuals and organizations. This chain uses POS consensus mechanism to validate transactions and is deployed on several nodes on a public cloud. The clearing chain comprises of three elements; clearing contract, clearing mechanism and a clearing account.
o Clearing Contract
This is a clearing contract that is based on the smart contract technology. It contains a program of all clearing and settlement trade. It finishes a complete clearing and settlement cycle of a matched trade. When a matched trade is formed on the DAEX exchange platform, a clearing smart contract is attached to it. The contract then validates the matched trade and goes through to a consensus mechanism before it updates the corresponding accounts on the ledger.

o The Clearing Mechanism
This is a governance standard for distributed digital clearing ledger intended to identify and prevent users of ill intent and irresponsibility (CVF-POS). Every DAEX wallet can participate in the clearing process and all have equal accounting power just different accounting scores that is purely decided by the ecosystem. Accounting power in this ecosystem is determined in the early stages together with accounting range and parameter. The clearing responsibility mechanism is able to detect processes that might lead to mistakes in consensus and inflict necessary punishments according to the clearing rules. It could suspend any clearing requests when it notices or detects malicious attacks. The administration of the clearing chain can solve temporary trading exchange disputes. With the growth and constant improvement of the ecosystem, users are encouraged to participate in proposing and amending these rules. The rules provide regulations that bind parties in solving issues of asset theft, contract flaws for better and clearer solutions.
o Clearing Account
Each user will get a clearing account usable for digital assets, keep asset balances and store previous clearing history. DAEX uses a single ledger to manage customer accounts and the same to manage customer’s trading assets. The technology in play here ensures open business rules and transparent exchanges significantly reducing exchange’s costs and errors. DAEX clearing service incorporates existing infrastructure. Adapters ensure matched trade meets DAEX clearing protocol are provided to exchanges to facilitate adoption of DAEX services. End Users make use of their wallets to manage their trading assets in the ecosystem.

DAEX clearing services will be available to users all over the world and is unregulated by any authority. The service however relies on the distributed ledger technology for guaranteed objective and correct clearing service. This improves its trust capability.
Important Links
Profile: https://bitcointalk.org/index.php?action=profile;u=2218436
