LQDEX, a decentralized cross-chain trading platform, has successfully executed the first trustless cross-chain trade without the use of atomic swaps.
The company has developed proprietary technology that allows trustless cross-chain trading. Unlike atomic swaps, it does not require modifications to external blockchains or the users to be online to execute a trade.
LQDEX is a public Proof of Stake blockchain that consists of a network of nodes called Collators. As in any PoS blockchain, Collators stake an amount of LQDEX token (LQD) to generate and vote for blocks. But, unlike other blockchains, Collators are also trusted with holding users’ funds on external blockchains, such as Bitcoin and Ethereum. If a Collator holds user’s funds, its stake in the network also acts as a collateral.
The collateral is used similarly to a stake. If a Collator fails to perform a withdrawal or, even worse, disappears with user’s funds, its collateral gets slashed or liquidated. It is then distributed among other Collators of the same external asset that replenish the asset in the network in exchange for LQD token.
Why Not Decentralized Single-Chain?
While other decentralized exchanges are in existence, such as EtherDelta — they only work on Ethereum tokens. For example, EtherDelta does not offer cross-chain trading capabilities, so users cannot trade Bitcoin or any other crypto that is not based off of Ethereum. Trading on EtherDelta can be slow and expensive; new blocks are only produced every 14 seconds, and users must pay both trading and mining fees.
The Limitations of Atomic Swaps
Many theorize that Atomic Swaps are an effective way of removing trust from the equation. Although Atomic Swaps allow some cross-chain interoperability, this exchange is inconvenient and limiting. To execute an Atomic Swap, both users must be online and sign within a specified time window, which proves difficult due to the international scale of cryptocurrency.
Deficiencies do not end with the hash time-locked contract; the exchange is limited to Bitcoin clone blockchains or requires modifications to the blockchain core software (a hard fork) in order to work. Furthermore, users cannot execute stop-loss orders due to the peer-to-peer nature of the technology. Atomic Swaps prohibit limit orders, which impedes market makers. Without market makers, there is no liquidity. Bottom line — Atomic Swaps are impractical.
Cross-Chain Decentralized Exchanges Are the Future of Trading
Although exchanges, like Coinbase, may seem straightforward, they do not adhere to the decentralized ethos of blockchain tech due to the dependency in having a third party hold user assets.
In 2014, Mt. Gox, a Japanese-based bitcoin exchange, handled more than 70% of all bitcoin transactions worldwide. The victim of a massive hack, Mt. Gox lost almost half a billion US dollars of user funds due to their vulnerability in having a single point of failure.
The desire for a better and safer system is pertinent to the longevity of cross-chain trading. Decentralized exchanges, like LQDEX, will eliminate the need for a third-party service to hold funds in a centralized system, and provide a secure and fair way to exchange digital assets. As the public grows savvy to blockchain processes, holders will demand increased control and security to their exchanges.
The Ideal Exchange
Being decentralized and eliminating counterparty risk is merely one characteristic of an ideal exchange. Market research indicates an efficient exchange should model with the following advantages:
- Allows trading of assets on multiple blockchains
- Has substantial liquidity
- Is inexpensive to use
- Has fast order execution
- Is transparent and publicly auditable
LQDEX founders, Yogesh Srihari and Sergey Nikitin, are focused on developing the ideal exchange.
LQDEX: The First Cross-Chain Exchange Of Its Kind
By perfecting the exchange of cryptocurrency and meeting the market need, LQDEX will be a safe and convenient way to quickly sell, purchase and trade assets across multiple blockchains.
Technical demo of a trustless cross-chain trade, performed by Yogesh Srihari, LQDEX Head of Product:
Learn more about LQDEX:
- Read the Whitepaper
- Chat with the team on Telegram
- Visit our website
