DAEX- A Reliable Clearing Platform for Your Digitial Assets

Zara
Zara
Sep 2, 2018 · 4 min read

Centralized cryptocurrency exchanges offer people the most widely available platforms to trade in digital assets. The reason is not too difficult to understand: these exchanges are readily available and offer more compelling advantages, than distributed exchanges, in terms of greater matching speed and flexibility. However, such systems still face major functional and structural challenges that limit their operational potential and efficiency. Incessant hacks and trade volatility are common problems associated with existing centralized exchanges.

In this piece, I intend to examine both challenges with insights on how a new blockchain platform called DAEX proposes to help exchanges in overcoming them.

1 Incessant Hacks

Centralized exchanges have had unenviable records of being targets of criminal manipulations and unrelenting hacking attacks. According to a research published in Reuters, 1 in 3 bitcoin exchanges were hacked between 2009 and 2013, and no reliable security measure has been taken on most of those exchanges since then.

Perhaps, the most shocking hack occurred in 2014 during which the then world’s largest bitcoin exchange, Mt. Gox, lost a whooping $460 million in a cyber attack. The Japanese exchange was bankrupted and the court proceedings that ensued are still ongoing till today.

Again, in 2015, MyCoin, a Hong-Kong exchange, disappeared with an estimated $386 million worth of cryptocurrency. Bitfinex, Bitstamp, Poloniex, and hundreds of other exchanges have all fell victim to elaborate criminal breaches and ponzi schemes. The largest of crypto heists till date took place on Coincheck, in January 2018, when $530 million in the value of NEM (XEM) tokens were stolen from the platform in one fell swoop. Needless to add, this history of hacks do not bestow confidence in centralized exchange platforms.

How will DAEX solve this major problem?

  • By Unbundling the Infrastructure:

Centralized exchanges take control of trading funds and act as clearing houses for order matching, trade clearing, and settlements. What this arrangement does is to make exchanges prone to continuous internal and external attacks.

DAEX will separate these processes in a decentralized manner. The entire trade clearing process will take place separately on DAEX which is a unique clearing chain built on Distributed Ledger Technology (DLT) and based on smart contracts. Registering digital assets, matching trades, clearing assets, and settling trades are broken into simpler functions in such a way that exchanges will only be concerned with trading. Trade clearing and settlement aspects will be left to the DAEX ecosystem to handle. Registered traders will retain full control of their crypto assets and can access them on the DAEX Wallet with a private key.

In essence, DAEX retains the great advantages of centralized trading and complements it with the enhanced security of distributed systems. No hacking attack can breach such a powerful combo!

As a result, exchanges that join DAEX will be given impetus to focus more on trading and compete favorably in the marketplace. Among other benefits, they will not need to waste precious resources on building (vulnerable) asset storage facilities and other mechanisms for customers trade clearing and settlement. DAEX will rather provide these services for all its listed exchanges.

2 Volatility on New Exchanges

So far, the biggest issue confronting cryptocurrency centralized markets, especially new ones, is excessive price volatility due to lack of liquidity. In turn, the lack of liquidity makes it very hard for investors and traders to exit the marketplace at profitable prices. This often create a catch-22 situation in such exchanges, since traders will be less inclined to join those low-volume platforms and, at the same time, the exchanges cannot grow without attracting more traders.

For new centralized exchanges, though the challenge of generating liquidity quickly enough to meet up with desired liquidity levels is quite daunting, yet it’s surmountable.

DAEX solution to liquidity problems?

  • By Providing Access to Multiple Exchanges:

As explained earlier, new exchanges face the formidable challenge of generating enough liquidity to meet demands and attract new investors.

DAEX intends to solve this problem by providing access to multiple exchanges for registered traders. What this means is that, when an exchange joins DAEX, already registered traders will be able to use the exchange for trading immediately, without having to go through unending registration processes which take weeks.

One potential benefit of this can be seen in more number of users and increased trading volumes on the new exchange. So, using DAEX will definitely improve the customer acquisition process for new exchanges. Besides, there is an additional incentive for traders to use such an exchange since there are DAX token rewards for participating in the clearing process. For example, if I am a trader on DAEX, I will be tempted to join those newly registered exchanges, so as to earn more for participating in trade clearing and settlement. Even if this doesn’t completely solve the problem of price volatility and liquidity on exchanges, it will surely improve the situation.

In conclusion, these are strong use cases worthy of industry attention. Registering on DAEX as a cryptocurrency exchange is going to be a win-win situation for customers and traders alike.

For more details on DAEX and its ongoing ICO, visit the links below;

Website

Whitepaper

Telegram

Reddit

Medium

Bitcointalk

Facebook

Twitter

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