Next Generation of Crypto Currency Exchange Infrastructure
With the interest and investment in cryptocurrencies having surged, the requirement for secure and user-friendly exchanges is becoming increasingly important. Initially, the exchange sector was the first to emerge in the crypto industry as it offers a marketplace for trading, liquidity and price discovery. It provides on-off ramps for users wishing to buy or sell cryptocurrency and remains the largest sector both in terms of the number of operating entities and employees on a global scale.
The essential role of exchanges in the crypto-economy and issues around different platforms in the past (such as Mt. Gox), subjects the maturity of the existing models of exchange infrastructure to the closest scrutiny. Until now, there were two models of crypto currency exchange infrastructure available - centralized and decentralized exchanges. Each of them has own trade-offs. The centralized exchanges, as history of cryptocurrency trading has shown, introduces the risks of a single point of failure (such as vulnerability to attacks causing suspension of the service and unresponsive server), lack of transparency and price manipulation due to a centralized control and governance, lack of the adequate checks and balances, as well as overreliance on the safety of the system. While decentralized exchanges are meant to solve the governance risks, there still is a systematic lack of interconnectivity and liquidity bridging, inefficient price discovery, arbitrable differences of prices and high cost of execution of big transactions. Thus, there has been a lack of a hybrid solution designed to combine the advantages of the centralized and decentralized systems.
What is EXPREAD ?
EXPREAD, a new platform integrating Blockchain technology based solutions, proposes to change the way cryptocurrency exchanges are established and operated. With the proposed system, EXPREAD will provide a shared economy approach of operating exchanges with common order book, trading engine and liquidity pool. It will provide a unique backend architecture for the exchanges, immutable security standards, where new operators are able to adopt the EXPREAD protocol and start their exchange in a matter of days.
Multiple exchanges, built on top of the EXPREAD platform, will aggregate their liquidity, technology costs and unique expertise to achieve synergy value from network effect. The whole system is composed in a way to distribute the reserves of the liquidity to avoid single point of failure. The trading system is fully auditable by each exchange as adequate internal control mechanisms are provided. Every order initiated in one of the exchanges attached to the EXPREAD ecosystem will be routed to the whole system enabling higher probability of match-making. This is fundamentally different from the current centralized crypto exchanges that are mainly seeded by the internal order flow. Therefore, if the centralized exchange systems do not achieve the critical mass of ongoing liquidity in standalone basis they will need to cease the operation. The decentralised exchange model faces the similar needs. Through multi-venue design the EXPREAD ecosystem is anticipated to have much higher velocity of user growth, enabling new exchanges opened in the system to enjoy significant market depth. At the centre of the whole ecosystem (all connected exchanges) is the EXPREAD foundation, which will make sure that unified order book and trading engine are operating properly. The foundation will be built for a sole purpose to provide technology, security and further development services to the EXPREAD ecosystem.
EXPREAD introduces a new paradigm of operating crypto currency exchanges and is meant to liberate the space while eliminating the high barriers of entry. It will enable the exchanges to spread throughout the world, including in the locations, where previously both centralized and decentralized models were not feasible option due to the lack of liquidity pool, security protocols and backend Blockchain architects. With its innovative model it challenges the conventional practices in the market. The combination of shared economy model with the new governance mechanisms, collective control of liquidity pools, backward auditability and cross-settlement of book orders enlarges the potential magnitude of trading on the platform.
The EXPREAD platform aims to play a role of challenger on the crypto market and intends to redefine the conventional features and behaviour of the crypto currency exchanges. In the future, the number and scope of assets that become tokenized will exceed what we see in the current financial markets by orders of magnitude. With growing demands and desires of the new crypto economy, EXPREAD ecosystem endeavours to power a “globally accessible financial network”. So far, the EXPREAD platform raised early-stage funding from angel investors for building the testnet and initial implementation of the idea. In December 2017 the platform launched beta version of the first “white label” crypto currency exchange. The beta version of backend architecture will be released during Q1 of 2018 and the public crowdfunding campaign will be conducted. 2018 is an important year for EXPREAD ecosystem as the project puts forth a global agenda in order to ensure its fast and sustainable development.