In the emerging field of blockchain technology and cryptocurrency, an ecosystem has emerged to ensure that the innovations aimed at achieving decentralization and making the world a better place is achieved. This ecosystem is comprised of blockchain startups, cryptocurrency exchanges and investors. Blockchain startups come in a wide variety, all with the goal to solve various real world problems by leveraging blockchain technology. In the process, they issue tokens which are a representation of the value they seek to create in the form of digital assets. To achieve their crowdfunding and development goals of making digital value created equally accessible to all globally, digital asset creators rely on exchanges to facilitate the safe and convenient acquisition and transfer of ownership of the digital value they create.
There are two main types of exchanges, decentralized and centralized exchanges. Decentralized exchanges (DEX) are built on the distributed ledger technology and only serve to match and settle trades. Users’ assets are retained in their own wallets, hence security is assured. Unfortunately, owing to their complicated operations and slow speeds decentralized exchanges attract fewer traders and therefore suffer from low liquidity. However, since the trading and clearing is based on distributed ledger technology which is tamper proof, DEXes are transparent and devoid of malicious price manipulations.
Centralized exchanges have centralized operations which are not based on distributed ledger technology. A single authority plays the traditional middleman role of connecting traders and making settlements. Centralized exchanges offer more user-friendliness, quicker trades and more liquidity. However, since their operations are centralized, users first have to deposit funds into exchange wallets before making trades. A single authority keeping everyone’s funds presents a single point of failure, and as such many centralized exchanges have been victims of hackers with millions worth of digital assets stolen. Most recently, 530Million USD worth of NEM tokens were stolen from Coincheck exchange. Another disadvantage of centralized exchanges is the lack of transparency since not all exchange records are available for public audit.
DAEX is an acronym that stands for Digital Asset Exchange. It was conceived as a hybrid of both centralized and decentralized exchanges which would provide the benefits of both centralized and decentralized exchanges while eliminating their weaknesses. As a result, security, transparency and liquidity will be achievable through the DAEX solution.
The core of the DAEX solution is a clearing chain. This clearing chain will provide decentralized clearing solutions to existing and new centralized cryptocurrency exchanges based on distributed ledger technology. Centralized Exchanges will continue to carry out the functions of trading, however, the clearing other functions such as KYC, registrations of assets and settlements of trades will be carried out by the DAEX ecosystem.
The DAEX ecosystem is comprised of distributed ledger technology based clearing service, users’wallets and centralized exchanges. The wallets allow users to register, and trade their digital assets in the centralized exchanges. Once trades are matched, the clearing is performed on the DAEX blockchain by preprogrammed smart contracts. In the first phase DAEX will only support cryptocurrencies, however in later phases, DAEX will support trading of cryptocurrency derivatives.
Clearing as a service
A clearing service based on preprogrammed smart contracts which ensure there is no human interference. The clearing will be guarded by CVF-POS consensus mechanism which identifies and prevents manipulations. The service will encompass vetting and clearing of new projects to ensure they are legitimate and authentic. Once the project is approved, its tokens will be integrated into the DAEX wallets. As such, centralized exchanges don’t have to worry about setting up APIs to support new tokens, they can just list the tokens. Users will be able to trade all the tokens listed by DAEX in all the DAEX supported exchanges. Additionally, once trades are matched in exchanges, the clearing and settlement will be moved over to the clearing chain.
Digital Assets Storage
All digital assets will be stored on the DAEX blockchain in users’ wallets, which cannot be accessed by other parties without the express permission of the User. After fulfilling KYC compliance, users will be given a unique public address for managing their digital assets. The DAEX wallet has a three-part private key which increases the level of security and allows the recovery of ownership of assets in case the user loses access to his wallet.
DAX is the native token of the DAEX ecosystem, and will be initially launched on the ERC20 standard. A 1:1 swap will be conducted once the mainnet goes live in 2019. The DAX token is the fuel of the ecosystem, and is used to pay for all the services on the platform such as trading fees and clearing fees.
To ensure the long-term stability of the token, DAEX will initiate a token repurchase program to manage the supply in the market. Coupled with strategic post ICO token lock ups, these strategies will sustain the demand for DAX tokens by driving utility through the services offered on the platform.
DAEX is simply separating the trading and clearing services which have been previously provided by the same entity into two distinct functions carried out by two different entities. The trading aspect will be handled by the centralized exchanges whereas the settlements and registrations of digital assets will be handled by the DAEX ecosystem. Since the DAEX ecosystem is based on a public distributed ledger with an open source code that is available for public audit, transparency in digital asset trading can be guaranteed. Users’ assets will be held in the DAEX blockchain which also guarantees security
I think this is one of the most innovative projects of 2018 which will provide the much needed transparency and security to quell the fears of most investors regarding the security of their digital assets, fear of manipulated markets and scam projects. The DAEX solution will offer users the convenience of using centralized exchanges while guaranteeing safety and transparency through distributed ledger technology.
For all crypto and non-crypto enthusiasts, this is a project to watch. You can learn more on DAEX by visiting the following links.
Website
Twitter
Whitepaper
Reddit
Telegram
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