Why Ethfinex Trustless Launch Is Amazing & Disappointing

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The Cryptoverse

5 min readSep 21, 2018

On Today’s Episode of The Cryptoverse…

If you think the word Ethfinex sounds like the love child of Bitfinex and ethereum you’d be right. That’s exactly what it is.

Now we know this was in the works (and not because we have cameras in their bedroom), but Bitfinex originally announced their intentions some time ago.

Ethfinex was in fact already launched, however as many pointed out at the time it wasn’t really the decentralized version of the Bitfinex exchange we were expecting.

Today though we can talk about what they are calling ‘Ethfinex Trustless’ which is a significant step closer to what we think of as a truly decentralised exchange.

I’ll run you through the key features and then tell you why I think it’s a flop.

And before anyone asks yes you can use Ethfinex to trade directly from tokens stored on your Ledger Nano S hardware wallet.

Watch right here in the article!

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https://blog.ethfinex.com/introducing-ethfinex-trustless-2f7390955fe0

The official source is the Medium account of Ethfinex itself where they published the introductory post.

And just to make sure everyone is on the same page, the number 1 problem with centralized exchanges is security.

Centralized exchanges provide one huge, centralized pot of money, providing a single point of attack.

If that attack is successful you stand to gain way more than if you hacked the wallet of an individual user.

With a decentralised exchange model, the tokens are traded directly from the users wallet, meaning you would have to target individual users who may not have enough money to make it worth the effort or risk.

So they tout here that Ethfinex Trustless is the first trading solution designed to empower community members and return control to them, without having to sacrifice the benefits which centralised exchanges provide (such as speed and liquidity).

Now here is the bit you want to know…

“With Ethfinex Trustless there are no signups, no deposit or withdrawal delays and no sacrificing custody of your tokens. Users retain full control of their funds throughout the entirety of the trading experience whilst executing trades against a highly liquid off-chain order book to ensure an entirely seamless trading experience.”

There is a deposit and withdrawal delay because they require 17 Ethereum block confirmations before funds show up in your account.

What that paragraph means though is you can trade anonymously and securely from your Ledger Nano S hardware wallet. And how does it get better than that?

Here’s where the flop comes in.

I understand why they have opted for an off-chain order book, but that actually removes a key element of transparency.

An off-chain order book means there is still the possibility of market manipulation by Bitfinex in terms of fake orders and fake volume.

How do you know if an order is being placed by a real person or not?

Without on chain order matching, you can’t.

And the reason it’s not being done on chain is because it’s Ethereum.

Its too slow, too overloaded and too expensive.

I deposited 0.5 ETH to the Ethfinex smart contract and had to pay $0.12 in Ethereum just to do that.

Then I find out I can’t trade because during the launch phase you need to hold at least 1 Nectar token in order to trade on Ethfinex Trustless.

Where do you get those from?

The regular trusted version of Ethfinex.

And before you can trade on THAT it requires you to deposit a minimum of $1,000 of cash or crypto in order to access the platform features.

At this point, I gave up. I’m just going to wait until the launch phase is over and they remove the requirement to hold Nectar before I do a full review.

But the major flaw regarding full transparency through on-chain order matching remains.

But that’s a trade off they have decided to make in order to hook into the liquidity of the regular Bitfinex order book and increase liquidity.

I also wonder whether they will be able to continue to offer zero signup and zero ID trading on Ethfinex Trustless. I can’t imagine the regulators will look favorably on that.

And the final reason I’m going to wait to do a full review is that Ethfinex Trustless currently has just 6 trading pairs among 3 different cryptos including Ethereum.

So it’s not even that useful yet.

But feel free to check it out yourself and let me know what you think.

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