NEO Blockchain’s First Operating Decentralized Exchange Takes Flight, Targets Multi-chain Functionality
NEO Smart Economy has come out in full force in 2018 with a strong kickoff at their Silicon Valley NEO Devcon 1 event where Da Hongfei gave a speech on ‘The New Vision.’ This speech explained the core of the ‘why’ behind NEO’s birth, what research they have gathered, and explained the strategy to become the #1 public blockchain by 2020. Hongfei cites that Ethereum’s rise was undoubtedly fueled by the sheer number of Initial Coin Offerings (ICO’s) on its platform.
This article dives a bit deeper into the foundation of NEO as context to why the Switcheo Exchange is an exciting project to pay attention to. It is NEO’s first operating decentralized exchange (DEX) which also plans to implement ERC-20 (Ethereum) and QRC-20 (Qtum) token trading alongside their already implemented NEP-5 (NEO) token trading. They would be the first mainstream multi-chain DEX to implement a crossover of these token standards. Let’s dive in!
Some Context into The Importance of Decentralized Exchanges
Have you heard about the various $100’s millions Bitcoin exchange hacks that have happened in the recent past? Mt. Gox may be one that you’ve heard which I touch up on in this article about how Binance started a new token-based exchange model found here. How about hearing the word ‘decentralized exchange’ or ‘DEX’ more often recently? Decentralized exchanges put the security of the funds in control of the user instead of the exchange — self-reliance as opposed to institutional-reliance.
On a DEX, the user is in control of their wallet’s private keys and ‘plugs-in’ to the exchange interface in order to trade in a decentralized manner. This system alone can prevent $100’s million centralized exchange hacks, limiting the point of failure to individual users as opposed to a centralized database with all of the user’s funds.
For instance, Binance is a centralized exchange and holds the private keys to all of our wallets. Bitcoin, Ethereum (and ERC-20 tokens), Qtum (and QRC-20 tokens), NEO (and NEP-5 tokens), Dash, Nano, every coin/token address on their exchange, they control the private key. You interface with your wallets in their system through your account log-in when using centralized exchanges.
Even today, the Mt. Gox trial is yet another negative force acting on Bitcoin as their lawyer dumps 200,000 BTC recovered from the hack, onto the market, at his will. Here’s a recent story on it from Bloomberg.
NEO, A Platform For Secure ICO Crowdfunding
Da Hongfei, NEO’s Founder, purchased his first BTC in 2012 at $10. He went to school for computer science and economics and, in 2013 started China blockchain meetups, the beginning of the growth of the Chinese blockchain community. He met Vitalik for the first time in 2013 and, soon after, learned about a BitcoinTalk.org event where the first ASIC Miner was crowdfunded, shares were issued for the funds raised.
The exchange trading the shares was closed down, it was just a centralized exchange. The person disappeared with all of the shares, which had increased in value in the secondary market they were being traded on — investors lost all their money that the shares were worth. NEO’s goal since 2014 is to prevent things like that happening — implementing what I like to call ‘Smart Crowdfunding,’ a more secure and connected way to raise funds in the Initial Coin Offering (ICO) process.
In the NEO Devcon 1 event that took place in Silicon Valley earlier this year, Hongfei announces that NEO aims to become the #1 public blockchain by 2020. I consider this event the true birth of the NEO Smart Economy as, together, the projects in their ecosystem work to create an innovative, more connected digital economy.
Understanding The Cryptocurrency Exposure Problem of 2018
So how does implementing a new system that allows for more secure crowdfunding have anything to do with a DEX? Last year, we saw 1,000’s of ERC-20 tokens launched on the Ethereum network. This caused sort of a data overload for service companies operating in the space — primarily exchanges and token listing sites. Remember, Ethereum isn’t the only blockchain with it’s own token standard (ERC-20), Qtum has their own QRC-20 token standard as well as a couple others.
CoinMarketCap stopped listing tokens unless they had $100,000 24-hour volume at one point, something that will not happen unless projects can get listed on an exchange with significant trading volume. Well, exchanges stopped listing tokens unless they had a chunk of change to pay to get listed — this varies from costing nothing to costing 100BTC+ depending on the exchange. See how this could cause a problem for the budding NEO Smart Economy?
Now that NEO has its own DEX, this will become home to new NEP-5 token projects launched on their network! NEO already allows users to participate in compliant initial coin offerings or token sales from the comfort of our desktop or hardware wallet — Switcheo Network Exchange aims to list all NEP-5 tokens that launch on the network. It’s pretty safe to say this can be a go-to when looking for new NEO-based projects.
NEO’s First Operational DEX, Aspiring For Multi-chain Growth
Switcheo closed their token sale on March 17th of this year with a total raise amount of $8.7 million. In their crowdsale, they minted 1,000,000,000 SWTH tokens, 25% of which are locked up by their leadership team. CoinMarketCap reflects a 386,102,180 SWTH circulating supply, feel free to ask the team about specifics around the releases in their public Telegram channel.
As you can see from the roadmap image above, the Switcheo Network team already accomplished being NEO’s first operating DEX, but they also aim to integrate cross-chain functionality into their DEX with ERC-20 (Ethereum) and QRC-20 (Qtum) tokens alongside their already offered NEP-5 trading. Switcheo does not intend to necessarily compete head-to-head with other DEX’s, but instead taking on centralized exchanges like Binance and Huobi exchanges.
Token Utility & Synergies — The Switcheo Competitive Advantage
There is no question that being the go-to exchange for listing new NEP-5 token projects will bring residual trading volume to the platform overtime as traders learn about the new exchange; however, I believe their SWTH token utility might be the real kicker.
Binance proved that the trading-fee token utility is a viable model for exchanges and, similar to Binance’s BNB, the SWTH token is used to gain 50% off of the variable 0.0-.05% trading fees on the Switcheo Exchange. 100% of the SWTH used to pay trading fees is burned via smart contract. Yes, you heard that right — no intermediary handling the burned fees, they’re auto-burned. This is in contrast with Binance’s quarterly token burning which happens once every 3-months, not each trade.
The automatic listing of NEP-5 tokens on the Switcheo Exchange immediately following the close of the token sale is yet another major competitive advantage as these projects will have a seamless transition into a liquid market, without the dire need to get listed on another crypto exchange. If you’ve been in any Telegram channel for ANY crypto project, this is always a major concern for investors.
Looking at the picture above would give us the impression that Switcheo has a major competitor right out of the gates — I think otherwise. Notice how these two projects ‘fill-the-gap’ for each other? This is a symptom of the NEO Blockchain ecosystem — projects aim to work together more than competing against each other. Consider that Ethereum’s network has various DEX’s that compete with each other. They all have pretty low volume which makes it unattractive for most traders. By working to compliment each other in this extremely critical startup period, NEO DEX’s will likely accomplish more/create more value for the projects within the network.
Remember that the price of something is determined largely by the laws of supply and demand. Switcheo did something brilliant here with the auto burning scarcity-mechanism built-in to their exchange interface. The more trading volume that occurs on their exchange, the more SWTH is burned, leading to an infinitely diminishing supply. The team mentioned adding a counter to the exchange so that the number of SWTH burned is transparent for the community.
Edit: After speaking with a Switcheo team member, he suggested I add this little bit:
The Switcheo team will add ‘V2 NEO Contract & Off-chain Matching’ which will be an “upgrade to their NEO Smart Contract to make the exchange architecture more robust and will consider doing order matching fully off-chain.” The Switcheo team member assured me that this is not much different from what they are already doing, but will allow for instant confirmations. Yup — instant. This update’s ETA is a minimum of 2-weeks and will likely be longer, as tends to be the case when programming anything.
What do you think about Da Hongfei’s plan for NEO Smart Economy to become the #1 public blockchain by 2020 now? I’m not sure about you, but it seems to me they took some stellar notes on Ethereum’s progress last year with intention of out-growing the network. It’s pretty obvious that I’m a big fan of the NEO Smart Economy as well and none of this should be taken as any sort of financial advice. I’m a huge fan of the Ethereum network as well which is ultimately what brought me to learning more about NEO.
I hope, at minimum, my perspective on the Switcheo Exchange project as well as the NEO Smart Economy is insightful to you and your network as this beautiful, innovation-driven technology grows quickly. Until next time!
For more information on Switcheo, visit the following links:
CoinMarketCap Profile: https://coinmarketcap.com/currencies/switcheo/
Exchanges w/ SWTH Trading: Switcheo.exchange & Gate.io
Website: https://switcheo.network
Twitter: @switcheonetwork
Reddit: /r/switcheo
Telegram: https://t.me/switcheo
News & Updates: https://t.me/switcheoANN
Below are some resources for beginning cryptocurrency enthusiasts or others interested in something new:
- History of Cryptocurrency Exchanges — insightful look into the token-based exchange model and how exchanges have evolved.
- CoinPayments — Receive and make payment via 70+ different cryptocurrencies — the crypto-PayPal.
- CoinTracking — Your personal Profit / Loss Portfolio Monitor and Tax Tracker for all Digital Coins or cryptocurrency. Bitcoin, Ethereum, Litecoin, altcoins, etc.
- Changelly — the ultimate fiat-cryptocurrency exchange to buy/sell instantly with credit cards, for anybody, anywhere.
- HitBTC — great exchange for trading various cryptocurrencies and operational since 2013.
- Gate.io — Cryptocurrency exchange listing new coins — get 10% off trading fees if you register with this link.
- LinkCoin — Your ticket to using LinkCoin, Bibox, and Bibox365 exchange products and ICO’s — mainly Asian cryptocurrencies that are not available on other exchanges.
- CEX.io — Buy Bitcoin w/ credit card, ACH bank transfer, SEPA transfer, cash, or AstroPay. Credit purchases are instant.
- CoinMama- purchase Bitcoin and Ethereum w/ credit/debit cards & using cash through WesternUnion on their platform. Best for Euro purchases.
- Cryptocurrency Resource Telegram Channel — Telegram channel dedicated to providing beginners or experienced cryptocurrency traders with alternative resource options. Exchanges, hardware wallets, tax resources, etc.
- Ledger Nano S — multi-cryptocurrency cold hardware wallet supporting Bitcoin forks. Keep your coins safe and offline. Cold storage.
- Kucoin Exchange — Binance’s ‘little brother.’ Very similar with trading competitions and whatnot. Revenue share token as well!
- Exmo Exchange — just launched their own coin and adding robust features to the trading platform.
- Binance — the up-and-coming cryptocurrency exchange that has truly entered as a leader among exchanges. Tons of benefits, a trader’s must-see.
- CoinMate — great Bitcoin Exchange for those who reside in Europe, the EU and surrounding area. Very easy to understand.
- Huobi Exchange — newer Asian-based exchange, many new tokens.
- InvestFeed — Follow along on InvestFeed to get the best cryptocurrency project news. The go-to social platform for crypto enthusiasts.
