Why Use ERC dEX?
ERC dEX is a platform for exchanging Ethereum-based cryptoassets easily and securely. We do this by maintaining an order book and network relay built using the 0x protocol. Having recently launched our project, we are pleased to announce the release our private beta version TODAY! It’s undergoing review from community members who signed up, but we’ll open it up to the public here soon. Sign up for our newsletter and follow us on Medium for updates.
In this post, we hope to answer some questions around what ERC dEX is, where it fits in the industry, and ultimately why it’s useful.
With the advent of various cryptocurrency exchanges like GDAX, Bitfinex, Poloniex, Kraken, EtherDelta, etc., people have been able to purchase Bitcoin, Ether, Litecoin, Dash, Zcash, and other major cryptocurrencies with varying levels of ease and security.
With these cryptocurrencies, one could possibly evaluate or partake in arbitrage opportunities, pay for products and services in Bitcoin — notably, Microsoft products, trips with Expedia, and registering domains on Namecheap, to name a few, or just grow a cryptoasset portfolio with the goal of long-term holding and asset appreciation.
However, more recent advances in blockchain technology have since kickstarted massive development of decentralized applications (dApps). Investors, speculators and technology enthusiasts alike have been participating in funding rounds of Initial Coin Offerings (or “ICOs”), resulting in the mass distribution of this new asset class — cryptoassets.
This is where ERC dEX comes in.
As a new form of exchange, we offer several advantages over the incumbents in the space.
Trade Any (Reputable) Token
After participating in an ICO or two, there are few places where you can reliably make deals to buy or sell the tokens you purchased. There are a few avenues for exchanging tokens currently:
- You meet someone in person or online who has a certain token you want. You trade.
- You search for an exchange that offers your trading pair and is available in your country. The exchange might be relatively unknown and have an order book that is difficult to navigate. You might not feel confident in your trade, but you do it anyway because there are limited options.
The problem here is that most centralized exchanges don’t have many ERC20 tokens available for trading, and the one decentralized exchange that happens to list all tokens is painful to use (or so we’ve been told.) At ERC dEX, we aim to have high liquidity and offer all tokens issued by reputable companies. Network liquidity is among the most difficult, but essential aspects of hosting a successful exchange. More on our liquidity strategy, our standards for “reputable”, and when specific tokens will be available as we draw closer to our public beta.
Next Generation Technology
In the last couple of years, the blockchain industry has undergone a few development cycles. With new foundational infrastructure, the next generation exchange has evolved to handle some of the difficulties these incumbents have faced.
If you’re unfamiliar with the differences in exchange technology, let’s go over them briefly:
Centralized Exchanges
All assets are held by the exchange. In order to trade, customers must be in an approved jurisdiction, register, go through lengthy identification procedures, and wait for a slow wire-transfer/ACH processes to deposit their funds. The exchange creates and hosts their own order book, and the trader must trust that the exchange will properly manage funds and behave ethically with regard to trading.
Fully-decentralized Exchanges
These exchanges try to address the problems with centralized exchanges by putting everything on-chain. The two crucial parts of the exchange, the order book and settlement, are all on-chain. While this approach eliminates a lot of the trust required of the user, it also produces a very unpleasant user experience.
Network Relays
These exchanges are similar to their decentralized relatives, but host order books off-chain. This adds several benefits, such as speed of settlement.
This new approach to exchange development has essentially taken the best aspects of previous models and created a hybrid — a snappy, familiar trading experience with a trustless settlement process that is more in-line with the philosophy behind blockchain technology.
Your Tokens are Safer in Your Own Wallet
If you’ve experienced having your assets stolen by hackers targeting one of the large centralized exchanges, as in the case with Mt. Gox and Bitfinex, then you know first-hand why you would want your tokens stored in a way of your choosing, instead of being forced into relying on the opaque security measures of the exchange.
However, if you’re new to the crypto asset market (as most people are), then you may not be fully aware of the security risks of storing tokens in a centralized manner. Think of your traditional bank — only, within the blockchain space, your account isn’t insured by regulatory authorities. The central body isn’t held accountable for your funds, and they could quite literally vanish within seconds due to a hacker or untrustworthy exchange admin.
The network relay approach, ultimately, separates concerns, leaving security to wallet makers and auditors — who you can elect to move your tokens from more easily. Additionally, you benefit from being able to leverage support for multi-signature local storage and hardware wallets, as well as from reduced trading friction because relays don’t require additional transactions to move on- and off-exchange.
Having a Way to Hedge Risk
One of the largest hurdles to investing in cryptoassets is volatility of the market. As in traditional markets, people create investment portfolios where they can estimate risk and create custom strategies. With the infrastructure of a network relay and the resulting token liquidity pool, our users will more easily design their portfolios on the ERC dEX platform because when the industry-standard protocols for derivatives are made public, we will support them and provide hedging products to our users.
Robust Community of Developers
With any new technology, you need an ecosystem to support the growth. Luckily, with new protocols, such as 0x and dy/dx, there has been a growing demand and support for this technology. We are likely to see more projects develop as a result.
If you have any questions or want to join the conversation, please join us in one of the following ways:
