Let the exodus begin: the Blocknet’s reason to leave centralised exchanges behind

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Let the exodus begin: the Blocknet’s reason to leave centralised exchanges behind

Amidst devastating attacks on centralised exchanges, the Blocknet is the only technology that decentralises all the core components of exchange, namely, coin deposits, order book, order matching, and the exchange protocol.

Cryptocurrencies need decentralized exchanges like the dark ages needed vaccines. Every person in the crypto community will be uncomfortably familiar with ongoing exchange theft, attack, and fraud. One in sixteen Bitcoins have been stolen. As Poloniex demonstrated recently, centralised servers are vulnerable to DDOS attacks, or occasionally just cannot cope with demands on their systems. Mt. Gox, Bter, Mintpal, Cryptsy, Bitfinex, and an alarmingly long list of other exchanges have significantly damaged confidence in cryptocurrency, diminished exchange liquidity across the board, and lost millions of dollars of customers’ funds. It is time to remedy the problem. The Blocknet offers a solution, in the form of its first consumer-focused spinoff of its core technology: a decentralised exchange.   The Blocknet is an inter-blockchain application platform, devoted to creating solutions to inter-chain interoperability without sacrificing the security properties of blockchains. Its three core components, namely (1) a Blockchain Router, (2) an end-to-end p2p data transport protocol, and (3) an atomic coin exchange protocol, serve to deliver the first ever comprehensively decentralised exchange technology to the world.

How decentralised?

Not every “decentralised” exchange is decentralised in the necessary ways. Exchanging currency is, in fact, a complex phenomenon with several aspects:

  • Coins need to be held or deposited somewhere before they are traded
  • Orders need to be both broadcast and matched
  • Coins need to be exchanged between counterparties

Every exchange platform features either centralised or decentralised implementations of these functions. In the Blocknet’s implementation, every single one of these functions is decentralised.

  • Unlike coloured-coin-based “decentralised” exchanges, which require traders to deposit coins at a central intermediary in order for tokens to be issued to them, users of the Blocknet keep their coins themselves.
  • Unlike several other decentralised exchange projects, which run their order books on servers, orders are broadcast peer-to-peer over the Blockchain Router, meaning that no central party can gain privileged information to outcompete other traders.
  • Similarly, no central entity is used for matching orders or for inter-node communication, removing the risk of frontrunning. Instead, nodes directly accept orders, with no intermediaries involved.
  • Some decentralised exchanges suffer from a further frontrunning risk, due to their design requiring bids/asks to be mined before they can be accepted. In such a scenario, miners gain privileged information and can thus only mine blocks in which they have accepted the best orders. In the Blocknet’s exchange, order broadcasts occur over the Blockchain Router, with no mining required. Only after an offer is accepted are transactions committed on the blockchains native to the nodes participating. In addition to avoiding frontrunning, this delivers a realtime trading experience.
  • When an order is accepted, coins are exchanged directly and only between counterparties, with no intermediaries or escrow services handling the coins. This is trustless, with either party safely being able to cancel the trade if the counterparty does not play her part.

Will it take off?

An odd fact about decentralized exchanges is that there are, in fact, several of them in existence already; why hasn’t the crypto community welcomed them en masse? A large part of the reason is that they require developers to implement code before a new coin can be integrated into the exchange. But the Blocknet’s decentralised exchange requires no code whatsoever in order for every single wallet with the Bitcoin Core API or Ethereum’s codebase to work. Interoperability is a key feature across the Blocknet’s design, and this extends to its exchange technology: using the exchange simply requires giving a local Blocknet node the API credentials of the wallets on your local PC, nothing else.

Future Plans

The Blocknet’s decentralised exchange is currently in beta, with new builds being released several times a week. Its next major milestone is the delivery of a familiar, trader-friendly UI that delivers industry standard trading tools and a realtime experience. Additionally, a full functional specification of the Blocknet’s technology is underway, and the resulting documentation will be made available in due course. Traders interested in using or testing the exchange may download it from the Blocknet’s website and use this how-to document to set it up. Users are also welcome to join Slack to participate.

blocknet.co

A PDF version of this press release is available here.