In the light of regulations: How about non-custodial derivative trading?

On March 7th 2018 the SEC issued a statement regarding potentially unlawful online trading platforms. The report was not directly concerned with reliability or fairness of cryptocurrency trading platforms, nor with the problem of ICOs. It simply stated that online exchange should not call themselves exchanges because they might be misleading users in that they fall under the same standard as SEC-approved exchanges. That is an invitation to expensive regulatory implementations which would probably make small traders a financial loss even for fully-crypto trading platforms that do not handle fiat routes at all, and a one more reason to support decentralized projects.

So, why are decentralized exchanges relevant especially these days?

Crossover between centralized and decentralized exchange

Decentralized exchanges are not a new thing, there are several of them (EtherDelta for one). But as the team behind altcoin.io already pointed out, decentralized exchanges work but only in a slow and tedious way. Pulling off a more complex trading strategy is difficult when the platform doesn’t really work when you need it to work.

The two best shots at usability: Altcoin.io and LeverJ

While altcoin.io is working on a spot solution utilizing the atomic swaps, some degree of centralized control would make the operation more efficient as well. As a matter of fact, both altcoin.io and LeverJ decentralize the trading itself but around the app there is a team of people (market makers? economists? certainly engineers, designers and support staff).

This kind of solution is very plausible even in the light of the recent crypto trading regulatory news from both the SEC on March 7th and Japan on March 8th.

Since the official reports tend to make cases for stronger regulations via the showcase of lacking security, the key point for both spot and leveraged crypto trading is the storage of customer funds. Cryptocurrency trading platforms are more robust if the trading is non-custodial.

LeverJ implements this for derivative trading on the Ethereum blockchain with smart contract that settles on-chain between the participants of each trade. The orderbook and matching engine are centralized and off-chain. This way the order processing speed will not depend on momentarily blockchain congestions. The only thing that will depend on that is the withdrawal of the funds from the order contract.

That, again, can be done only by the owner of the cryptocurrency. The exchange does not have access to customer funds. This property minimizes the possibility of a big-scale heist, most of the danger is split between skimming attacks and traders’ personal responsibility.

Read the full review of LeverJ on altcointrading.net [not sponsored].

More about LeverJ

LeverJ is a leveraged cryptocurrency trading platform project brought by people who were behind Coinpit, a fully trustless crypto futures exchange. LeverJ completed an ICO in November 2017 and a short public awareness airdrop at the break of November and December 2017. The total amount of $LEV tokens sold publicly and privately was almost 156MM LEV.

The way tokens are incorporated into the LeverJ ERC20 DApp mechanism are the LEV token being a share in the LeverJ network, reflecting its monetary value, and if staked it produces FEE tokens that are used to pay for trades at LeverJ.

The LEV token trades on OKEx since late January 2018 and the value of the token sale at the time of publishing is over 16MM USD. However, the tokens were sold in the ratio of 1 ETH to 3000 LEV meaning that at the current fiat rates of ETH and LEV the ICO investors are being at a loss.

The LeverJ team holds a percentage of the tokens, big part of which will be used to provide liquidity and support the platform operations. No more LEV tokens will ever be generated.

Some of the people behind the LeverJ project are known old-timers from crypto voice chats and Slack groups — the CEO Bharath Rao, the community manager Alex Ward, the advisor Swapman. It is always good to see new products created directly by people from the community.

Originally published at news.altcointrading.net on March 8, 2018.