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Bitcoin, Ethereum, DeFi, NFTs, and gaming are dominating crypto and blockchain discourses. On the one hand, the explosion of Bitcoin and Ethereum adoption has ushered in a new wave of acceptance and adoption. Gone are the days when Bitcoin and Ethereum were intertwined with doubts and fear. Instead, less than 15 years after the first cryptocurrency, Bitcoin, launched, the sphere has been associated with stellar return on investment, outperforming any traditional market. Cryptocurrency Exchanges in Driving Adoption Amid the influx, traders and investors have to choose: Which best cryptocurrency exchange do they funnel their hard-earned capital to? Cryptocurrency exchanges remain the only convenient choice, the most practical conveyor belt into the burgeoning world of cryptocurrency and blockchain possibility. To better understand , it is best to define what a cryptocurrency exchange is. crypto trading and investment With this, we also have to understand how a market functions. Typically, a market is made up of participants—buyers and sellers. Price discovery is a factor of demand and supply determined by the level of interaction of buyers and sellers. In the early days of Bitcoin and cryptocurrency, swapping was peer-to-peer. Buyers and sellers used to manually estimate the worth of each coin relative to USD. Then, the crypto market was informal and, as expected, hadn't grown in sophistication operating as it is presently. It took years before the first cryptocurrency exchange grew, allowing the free flow of capital into the sphere. Cryptocurrency exchanges have since evolved to mirror the level of progress in the sphere. They are now at the center of the crypto development, allowing funds to flow into the expanding ecosystem freely. Cryptocurrency exchanges can be described as gatekeepers, allowing users to participate and, similarly investors, cash out. Depending on the type, these ramps are suitable for both retailers and institutional grade investors and traders. Types of Cryptocurrency Exchanges There are two types of cryptocurrency exchanges. Decentralized exchanges or DEXes, as the name suggests, are non-custodial, allowing the swapping of tokens via a non-custodial wallet like MetaMask or Formatic, for example. DEXes are part of and operate on a peer-to-peer model without a centralized entity. These exchanges also employ a different algorithm for price discovery, primarily using pools and Automated Market Makers (AMMs)--and their variants. In this arrangement, holders within a given community supply funds and are rewarded with the DEX's token. DeFi On the one hand, there are centralized exchanges, or CEXes, allowing the swapping of crypto-to-crypto or crypto-to-fiat, including . As a centralized entity, traders forfeit the control of their assets to the exchanges via their custodial wallets. However, centralized exchanges continue to play a critical role in cryptocurrency and blockchain circles, allowing the seamless flow of funds from the traditional to the crypto world. Besides, centralized exchanges have also proven to be more secure over time as more stringent control measures, including the need for regulation, have been implemented, averting hacks and other reputation-damaging exploits. stablecoins Despite the increasing popularity of DeFi, CEXes are preferred by institutional and retail traders because of the ease of funding, the safety of funds--as most are regulated and comply with existing jurisdictional laws. Also, the performance of CEXes isn't tied to the throughput of the base layer, as is the case with some exchanges. As such, they tend to have higher throughput with instant trade execution. For the critical role of centralized exchanges in and allowing the safe trading of digital assets, traders usually take their time researching the best cryptocurrency exchanges. According to CMC, there are over 400 exchanges—DEXes and CEXes—to choose from. Depending on the needs of the trader, each type exists to meet a specific demand. driving adoption Aware that a trader's choice evolves with the increasing sophistication and adoption of cryptocurrency and blockchain, developers are taking time to develop exemplary exchanges using some of the industry's best practices. Focus on Liquidity and the Trading Engine At the heart of any cryptocurrency exchange are liquidity and the underpinning technology, trading engine. In layman's terms, liquidity is the ease of buying and selling an asset without adversely affecting its price. At any point in time, an active exchange executes thousands of trades. During this time, market participants expect execution to be instant without prices being negatively impacted. An exchange should incentivize market-making, allowing liquidity to grow, which in turn positively impacts the user experience of market participants. The work of the trading engine is to ensure that buy and sell orders are efficiently matched and executed regardless of load, without compromising security, and uniformly without order discrimination or prioritization. Additionally, the trading engine should be shielded from manipulation malpractices such as wash trading or insider trading. Instead of building an exchange from scratch, HollaEx a white-label crypto exchange where creators, developers, and traders can participate in an open and accessible digital asset marketplace. According to the platform's creators, their solution allows for coin listing and building of new markets, has a baked-in automated trade matching engine and an open-source HollaEx Kit. A user can choose to build and host a cryptocurrency exchange from their own computer or opt into a paid cloud service. Operators can then manage and maintain the exchange on the back end with the Operator Control Panel. Users can also opt for Binance Cloud by Binance—a leading cryptocurrency exchange. The Binance Cloud white-label B2B2C solution provides an option for partners to launch their cryptocurrency exchanges that mirror the core functionalities of the Binance's exchange. The difference with other options is that the platform prioritizes security, liquidity, and scalability, tapping on Binance's rails. With the core parts needed to operate an exchange handled, the builder can focus on business development, marketing, and client onboarding. Besides, there is AlphaPoint, a company focusing on providing blockchain technology and infrastructure to institutional players. The platform offers a customizable and scalable cryptocurrency exchange white-label solution comprising exchange technology: an order management system and a matching engine--custody—wallet and risk management--and yield. According to the developing team, their solution can process up to one million transactions every second. The result, therefore, means high throughput, low fees, and ideally, better liquidity. Additionally, AlphaPoint also has a liquidity solution using automated market makers and managed liquidity options. Conclusion Experts expect cryptocurrencies to command trillions in market cap in months to come. As of early October 2021, alone commands a market cap of over $1 trillion with predictions that altcoin projects, especially Ethereum, would grow as emerging technology finds adoption. Combined with outperforming the rest, more players rush to launch ramps to channel funds from the traditional markets. Bitcoin assets As of early October 2021, there are 421 cryptocurrency exchanges representing a 23 percent rise from June 2020. With rising crypto adoption and the demand for safe trading solutions, the role of white label trading platform providers will continue expanding. While they may not provide customized options, their solutions meet the baseline of what defines a secure, liquid, functional, and cost-effective trading platform giving the owner a competitive advantage while saving time.

Crypto Is A Multi-Trillion Industry, How Is Exchange Building Evolving?

The potential of the GameStop (GME) stock was first discovered on in the fall of 2020, and soon the GME market price started to rise, creating more hype on social media, and eventually culminating in a short squeeze of Melvin Capital’s position, which lost them about $13 billion. r/WallStreetBets Since this happened, I’ve talked with the founders of blockchain projects operating in this climate and asked them what they think about DeFi and the fintech market in general. Some of the founders suggested that now may be a great time for decentralized finance to finally hit the mass market. Others disagreed, and we separated their opinions into three distinct groups, which you can find in this article below. GameStop timeline GameStop mania truly started to pick up steam late January 2021, when r/WallStreetBets started hyping GME, the stock of the embattled game retailer. GameStop, which saw its revenues severely impacted by the COVID-19 pandemic, was also targeted by Melvin Capital, which bet on GME shares hitting rock bottom. Melvin Capital had been shorting GME , while increasing its short position until it exceeded the free float of stocks, a discrepancy noticed by Reddit traders back in October 2020. since 2014 A surfaced on the Reddit board, which suggested traders could organize a short squeeze for Melvin Capital. The conversations and hype increased, which brought the price of GME to a record high. Melvin Capital had to close its short position, ending up with a $13B loss. GME itself went through a wild price swing, starting off at below $5 just six months ago. video During the peak hype on social media, spiked on two occasions to a record of $347.51 and a lower peak at $325, when Melvin Capital was forced to buy and cover its short position. The short squeeze turned into a social media competition to break the logic of markets, as traders swore to give up profits just to make a point. GME GameStop: The Repercussions Despite the social media buzz, one name stood out; a user known as Keith Gill, who used the moniker RoaringKitty for his YouTube persona. Gill went through a before the US House Financial Services Committee with the goal of clarifying unpredictable market effects, trading stops, and a concerted effort for a short squeeze. hearing Gill’s testimony that he only used publicly available information on the for GME. Despite his participation on Reddit and highly influential persona, Gill claimed he was not trying to create a mass movement of investors. held the position short interest The community of r/WallStreetBets is still alive and well, and it still works to amplify stock selection signals. The signature profanity and apparent mindless risk-taking also hasn’t slowed down in the slightest. While this swarm behavior of investors was noted, in the end, it was Robinhood who took the brunt of the criticism for stopping orders. The rules of a short squeeze would have raised GME prices even higher if the Robinhood app had to order more shares. allowed more new buyers The hearing centered on the role of Robinhood in essentially manipulating the market, with most of the questions aimed at Vlad Tenev, one of the co-founders of the trading app. But the hearing also set the floor for potential repercussions for retail traders using social media. So far, US lawmakers have not started tackling these trends in earnest, with only tangential rules such as the act potentially holding social media companies responsible for some of the content within. Section 230 What the r/WallStreetBets case exposed was a form of investor swarm behavior. The stock selections are often driven by memes and popularity, creating a market force to be reckoned with. As of February 2021, it is still unclear how US or international authorities will handle the potential for groups of traders deciding on a specific stock or a strategy. Repercussions for the fintech industry The GameStop saga happened at a time when fintech was expanding, and expecting multiple investment markets to open for retail. Fintech first tackled banks, allowing relatively high international money transfers at a lower cost. Later, apps appeared for investing in various assets. The process also coincided with the rise of cryptocurrencies, where wallets immediately opened the opportunity to buy highly volatile assets. In general, fintech-based investment remains a free-for-all in 2021. There are indications that regulators are more concerned about the proper liquidity and capitalization of large-scale market participants, which is also easier to measure. But the potential for so-called behaviors also opens the door to closer observations for social media content. “social contagion” One of the growing markets for risky assets, known as crypto-based decentralized finance, is a hotspot for social contagion behavior. DeFi projects often expose themselves to social media, attempting to with the promise of high yields. The problem with newcomers, however, is that it is possible to sway the price of an asset, but when the driver of group behavior slows down, this may lead to deep losses in the personal finance level. draw in newcomers There were also personal consequences for Keith Gill, who will now face a for misrepresenting his persona, and acting as an amateur investor when he actually had a deep knowledge of finance and accounting. lawsuit For now, almost all Reddit personas remain anonymous and there are still no barriers to sharing stock tips on social media. The US Department of Justice followed the Congress hearing with its own , but the outcome of that is still to be determined. Due to social media amplification, the reliance on may also have to evolve and reflect unexpected events and even illogical trades. criminal investigation algorithmic trading What do the founders of blockchain startups think? DeFi Pessimists Matthew Niemerg, President of the Aleph Zero Foundation - Aleph Zero is a high-throughput, enterprise-grade public blockchain platform powered by a state-of-the-art, DAG-based consensus protocol that is designed from mathematical principles. Ian Campbell, DeFi Product Manager SUKU - SUKU is the link between decentralized finance, transparency, and traceability in supply chains. Infrastructural Players’ Opinions -  GateHub is the largest wallet provider on the XRP Ledger, your digital asset wallet for the Internet of Value. Eric Polo, Head of Product, GateHub - This is a digital assets management solutions company helping businesses transit from conventional technology platforms to DeFi systems. Vikram R. Singh, CEO, Antier Solutions - An open application platform powered by a peer-to-peer computing protocol and a decentralized licensing system. Tom Trowbridge, co-founder Fluence Labs - One SDK for passwordless, WebAuthn, and social login. Sean Li, CEO Magic - A fast and open blockchain for scaling Ethereum applications and cross-chain finance. Stephen Tse, Harmony CEO, Harmony DeFi Believers - AlphaPoint is a white-label software company powering crypto exchanges worldwide. Igor Telyatnikov, CEO & Co-Founder, AlphaPoint -  An Australian-based blockchain startup. The company has been offering fiat on/off ramp solutions to the DeFi platforms. Charlie Karaboga, CEO & Co-Founder of RelayPay -  Interplanetary Crypto Token Exchange. Alexander Kaplin, CEO of ICTE Founder of - A merchant system and online marketplace with a unique marketing model. World Token - LATOKEN Exchange is the easiest way to access money and assets worldwide. Valentin Preobrazhenskiy, CEO of LATOKEN — Donut is a mobile app providing the easiest way to earn high APY on your money through the power of DeFi. Neel Popat, CEO of Donut - A mobile shopping and investment app. Brian Goldberg, Blockchain Advisor at PAYMYNT Financial - A revolutionary payment system that drives the Dream Channel economy. Jonny Peters, Founder & CEO, Gazecoin Igor Telyatnikov, CEO & Co-Founder, AlphaPoint As a white-label exchange software provider serving a global client base, we stay tuned to the regulatory changes that may affect client compliance requirements worldwide, and we’re continuing to see regulatory clarity and acceptance. The Office of the Comptroller of the Currency (OCC) in the US recently clarified that national banks and federal savings associations can provide cryptocurrency custodial services for customers. The OCC sees banks providing crypto custody services as a modern form of traditional bank activities related to custody services. Never in our almost eight-year history have we seen higher demand to launch digital asset exchanges and offer access to cryptocurrencies, and we believe this is fueled by the positive regulatory stance and corporate interest in this new asset class. While DeFi has introduced new decentralized offerings to the market such as lending, borrowing, and on-chain insurance, we also see the demand for these same services integrated with crypto as the underlying assets from CeFi institutions booming. Charlie Karaboga, CEO & Co-Founder of RelayPay Within the last few years, we’ve seen how we can reimagine borrowing/lending without the centralized intermediaries. DeFi lending projects are going for mainstream adoption with their increasing abilities and applications. Similar to lending, stock trading also has unnecessary intermediaries and the majority of the world's population cannot access popular stock markets due to these inefficient gatekeepers. Robinhood meant to democratize trading for the masses, but GameStop's case and a trading halt once more justified the importance of DeFi. Until corporations tokenize their stocks, we’re unfortunately a bit limited. However, I believe DeFi can act as an “L2” for stock trading in the near future. Alexander Kaplin, CEO of -  Interplanetary Crypto Token Exchange ICTE We at ICTE are certain that DeFi blockchain technology is advanced and mature enough to support the requirements of all sectors of the global financial market, like high-frequency trading, trusted composition data, and trading strategy transparency at reduced overhead costs. DeFi ensures that you have full control of your assets and no one else can access, use, freeze, or take your assets without your permission. You are also free to find other providers and venues to exchange your assets with. All your actions are associated with your trading address and your positioning in the market is transparent. This is very beneficial for personal security because your address is the only identity you would have on the market, and you are otherwise anonymous as a trader. The personal control of your assets, anonymity, and transparency are the most important values that DeFi would bring to the financial world, especially in cases like GameStop. The blockchain would show the movement of assets from lenders to investors to the open market, and short-selling would be more easily identifiable -- even if a single trader utilizes multiple addresses to execute their strategies. Now is definitely the time for DeFi to be fully adopted. Founder of World Token DeFi has created balancer pools, vaults, yield farming, algorithmic stablecoins, and these developers are just getting started. Network fees have been outrageous but it has not stopped further adoption of new and innovative protocols. Trustless protocols are far safer than anything we currently have in traditional finance and the GameStop fiasco proves that. A group of internet strangers can short squeeze billions of dollars from hedge funds and the government starts to step in to protect the funds from losing too much from their own behavior. There's no meddling in DeFi as code is law and autonomous immutable protocols will take over. Valentin Preobrazhenskiy, CEO of LATOKEN DeFi is like a "clubhouse" of finance. Money and assets are way simpler to access, and simplicity means new use cases, such as startups' "global IPO" crypto exchange listings , aka IEOs, or asset tokenization. DeFi reminds me of a clubhouse because it is driven by communities. GameStop's coordinated short squeeze highlights the growth of communities with social networks as LATOKEN reviews . Communities are strong in crypto, and their willpower can become a self-fulfilling prophecy, especially if it is about adopting a better currency. While GameStop and crypto are very different assets, I think some hedge fund managers would be less likely to short-sell crypto after this case of community power. Don't get me wrong, short-selling is necessary to prevent bubbles, and institutional and retail investor rights must be protected. Neel Popat, CEO of Donut The GameStop craze proves that the current financial system remains broken for everyday investors. Whether it's the monetary system or market-shifting hedge funds, the status quo is built for insiders. DeFi shifts the paradigm, giving the everyday individual access to a better and inclusive suite of financial products. It’s only just starting to reshape financial services, from high-yield savings to borrowing, but DeFi is actively providing a much needed catalyst for change. Brian Goldberg, Blockchain Advisor at PAYMYNT Financial The GameStop fiasco has not only exposed the fragility of our financial system, it highlighted the fact that access to investments is an issue faced even in the most advanced economies. DeFi will rise this decade as a way to empower individuals to invest how and when they want - with minimal intervention. Jonny Peters, Founder & CEO, Gazecoin The future of feature film funding is an NFT/DEFI  model that allows investors to buy and trade characters in a movie!  We are about to release a model that allows investors  to buy and stake “film character” NFTs to receive a film token, a token that can be zapped into film royalties. Matthew Niemerg, President of the Aleph Zero Foundation While DeFi has seen a recent surge of interest, I do not think it is ready for mainstream adoption, even after the enhanced attention the GameStop stock received within the WallStreetBets Reddit community. Several factors come into play, but they almost all boil down to user experience. Most participants in DeFi are still “power users” and many lack the requisite skill set to audit smart contract code or to manage private keys appropriately.  This level of increased risk and uncertainty is a large barrier for mainstream adopters. Retail investors will most likely come to DeFi through centralized on-ramp/off-ramp service providers who will not only vet the quality of the DeFi projects but provide a simpler (and more traditional) portal for accessing these innovative products. I think we are seeing this being built out in various CeDeFi products, particularly by centralized exchanges as they begin adopting new business models to compensate against loss revenue as power users migrate to DEXs. Ian Campbell, DeFi Product Manager SUKU What happened with r/WallStreetBets, Gamestop shares, and brokers like Robinhood is just one indicator that DeFi is NOT a solution in search of a problem. The problem is very real. The DeFi value proposition is that, due to its decentralized nature, there are no third-party intermediaries who can halt trading or shut down the exchange. However, adoption of any new technology requires a slow, deliberate transition. When email first launched, sending messages required knowledge of coding languages and pretty significant technical savvy. Only after a few years were user-friendly interfaces added to make email simple for everyone. Interacting with and using DeFi protocols is evolving at a rapid pace, but I don’t believe that it’s ready for mainstream use. With that said, more and more traditional traders are finding themselves “falling down the rabbit hole.” The more traders who join DeFi, the more investment is made into infrastructure to make it mass-market user friendly.  It may take a few years, but I believe that DeFi will inevitably cross the chasm on the adoption curve and become mainstream. Tom Trowbridge, co-founder Fluence Labs GameStop demonstrated the urgent need for both DeFi and tokenization; the danger of a single, for-profit company determining when/how over 20 million investors can trade became clear as did the totally antiqued, legacy exchange infrastructure with multi-day (!) settlements, which tokenization eliminates. But what the DeFi innovation explosion has really demonstrated so far is the power of composability, which makes it so simple to build.  What if we can bring that same composability to the entire web – imagine being able to take any existing application, fork it as easily as a DeFi service, quickly add some features, and launch it without having to rebuild backends or pay for infrastructure.  This is possible with a decentralized peer-to-peer hosting service and a blockchain based economic layer that compensates authors based on the use of their code by sharing in hosting revenue. This is the future, and it is possible right now. Sean Li, CEO Magic DeFi has been gearing up for mainstream adoption since 2018. Many talented developers and well-funded startups have poured an incredible amount of work into fundamental infrastructures powering blockchain applications, such as layer 2, identity and key management, smart contract tooling, node infrastructure, and fiat on-ramps, etc. Through the thick and thin of the market, the culmination of all of these persistent efforts have made it possible to build DeFi applications that are indistinguishable from the Web 2.0 experience - mainstream adoption is already here. Stephen Tse, Harmony CEO, Harmony Now is the time for DeFi to start going mainstream. As we saw with GameStop and other stocks recently, the centralized financial system has reached its breaking point with many challenges. In centralized finance, brokers and companies can decide to stop trading, but in DeFi, individuals can freely manage their funds for investing, trading, and lending. The centralized financial system relies on two-day settlements, which is why the entire system froze waiting for capital to settle. Harmony enables two-second settlements for transactions as demonstrated by our cross-chain Uniswap port on the mainnet. We envision the mass migration of global finance markets coming on-chain in the next few years. Eric Polo, Head of Product, GateHub The GameStop fiasco is the latest large-scale exposé on why many are reluctant to enter the traditional financial markets. Most notably, it left many thinking that markets don't actually evolve organically but rather just do what they were created to do. In DeFi, the markets are (or at least should be) fully controlled by transparent and auditable code, creating a level playing field. In the past few months we have seen moves by institutions and regulators that were aimed at “protecting investors,” but they mostly achieved just the opposite. DeFi is only in its infancy, but with time it will evolve and there will be a large uptick in users, giving everyone the opportunity to truly own their money and the responsibility that comes with it. Vikram.R.Singh, CEO, Antier Solutions The explosive rise of GME is a testimony to the overhauling impact of decentralized finance and the crumbling legacy finance. In the pre-DeFi era, those in power could easily delist assets or block opportunities for potential business cases. With DeFi , it is a truly democratic stage that bestows the credit to those who deserve to be in power. I won’t be surprised to see a lineup of more consumer services embracing P2P payment alternatives.

Is it Time for DeFi to Go Mainstream After the GameStop Craze? 

In early May, a few of us from 8base, Evgeny Semushin, Gabe Kelly and myself, decided to take on the challenge of competing for the AlphaPoint prize at the in New York City. There was a total of 33 participating teams at the hackathon, and there were some big-name sponsors such as CoinDesk, Microsoft, IBM, Hyperledger and Quorum. Consensus 2018 Hackathon The contenders in the AlphaPoint challenge had to build an application tied into a digital asset exchange and we thought that my hedge fund experience should give us an edge. We didn’t want to simply build a front-end to an existing blockchain solution. Instead, we wanted to focus on solving a real problem in a way that only blockchain architecture can enable, combining our expertise in smart contract development with knowledge of internal mechanics of finance. We built a set of smart contracts on the Ethereum network that allows creation of decentralized derivatives with on-chain collateral management. Our solution enables anyone to underwrite a put or call option contract on any ERC20 asset without a 3rd party managing the exercise and collateral requirements. We were honored to win first prize. Below we’ll describe the implementation detail of this project. Problem Derivatives are a big deal. Global derivatives are estimated to have at least ~$500 trillion market capitalization. Compare this to ~$0.4T crypto at the time of writing, ~$40T liquid money and ~$70T global stock markets, and it becomes clear how significant the role derivatives play in the global economy. Nothing shows this better than . Derivatives, such as options, futures and swaps are useful tools employed by banks, funds and companies to manage risk. this infographic Market cap of various asset classes The key complexity of derivative agreements stems from the fact that they are usually leveraged — meaning that potential risks exceed the amount of funds counterparties to the agreement have in their accounts. This leads to a complex system of settlement, maintenance margin and margin calls designed for counterparties to keep a level of collateral, such that it is always more expensive to walk away from an agreement than to honor it. This system failed in 2008. Entangled in a complex web of derivative agreements, Wall Street players couldn’t efficiently unwind or net them out. This triggered a domino effect of margin calls and subsequent defaults leading to the collapse of Lehman Brothers and other players. The US government had to step in and bail out Wall Street to help unwind staggering amounts of defaulted derivative agreements. We all know the rest… Solution is a set of smart contracts that enable creation and management of derivative agreements for crypto assets. The collateral management is done on-chain and doesn’t require an intermediary to ensure that the funds locked inside of a smart contract satisfy the maintenance margin requirements. BlockSigma The core innovation is fully on-chain margin management that requires no central party or oracle price feed. We achieve this by integrating with protocol. Bancor protocol is being adopted at a significant rate and already facilitating millions of dollars of daily trading activity. Bancor uses a deterministic price formula that is calculated based on supply and demand of an asset. As such, we can get the underlying token price directly on-chain, which allows us to calculate the maintenance margin requirement and trigger a margin call if necessary. Bancor The smart contract logic is designed in a way that enables an option buyer to force-liquidate the position as soon as the collateral held inside of the smart contract drops below the mandatory margin requirement. The maintenance margin formula includes excess reserves, providing economic incentives for the option buyer to closely watch the position and grab the reserve (including the excess amount) by force-liquidating the position if the maintenance margin level is not satisfied. At the same time, it incentivizes the option seller (underwriter) to timely add more collateral if the trade goes against them, otherwise they risk losing the excess reserve. Implementation The full source code of the solution can be found in the . GitHub repo There are three main solidity files: BlockSigmaBase.sol, BlockSigmaCall.sol, BlockSigmaPut.sol. BlockSigmaBase implements the common logic, while BlockSigmaCall and BlockSigmaPut inherit it and implement the logic specific to call or put contracts. Let’s look at the contract’s interface: Now let’s walk through the key workflows of a put contract. For example, let’s consider a put contract on EOS token denominated in DAI, which effectively allows one to hedge his/her EOS holdings against the US dollar. The lifecycle of the contract is as follows: Anyone can deploy the BlockSigmaPut contract corresponding to a specific . During the deployment we specify: (1) underlying token, (2) currency token, (3) expiration date, (4) strike, (5) address of an issuer that has the right to underwire contracts in this series and (6) the minimum reserve requirement per contract. Example: EOS put expiring Jul 1st 2018 at 10 DAI strike with a minimum reserve of 2 DAI. Such a contract gives the buyer the right to sell EOS to the underwriter for 10 DAI any time before July 1st 2018. The maintenance margin requirement per contract in this case will be calculated as 2 + max(0, 10 - current EOS price). option series A designated issuer underwrites a certain number of contracts by depositing the required reserve of the currency token. Continuing with the example above, if the current EOS market price is $12 the issuer will have to deposit 2 + max(0, 10 - 12) = 2 DAI in order to issue 1 option contract. Once issued, the contracts can be treated as regular ERC20 tokens and can be moved to an exchange and sold to buyers. Once the buyer wishes to exercise the contract they need to give an allowance to transfer EOS into the option smart contract and then call the ‘exercise’ method. Once the exercise is initiated the seller has 24 hours to deliver the payment in a form of the currency token. In our example, for each EOS token, the seller has to deliver 10 DAI. The issuer gives allowance to transfer DAI tokens from their account into the option smart contract and calls the ‘deliver’ method. Once done, the smart contract automatically settles the transaction by distributing DAI and EOS to the buyer and the seller(issuer) and returning the reserve to the seller. (Optional) If the seller doesn’t deliver within 24 hours the buyer can call the ‘forceLiquidate’ method to receive the deposited EOS back together with the reserve to cover the seller’s default. Now let’s look at how the collateral management is done. In our example, the EOS price was at $12 at the time of option contract issuance. Let’s say now it went down to $9. The required reserve becomes 2 + max(0, 10 - 9) = 3. This means the seller needs to deposit additional 1 DAI for each contract they had underwritten. If the seller fails to do so, the buyer has an economic incentive to force the liquidation: If the buyer simply exercises the option, they receive 10 - 9 = 1 DAI payoff per contract (acquiring EOS in the market for $9 and selling it to the issuer for $10). If, on the other hand, the buyer forces a liquidation they receive the entire reserve, which in our example is 2 DAI per contract. This motivates the buyer to force-liquidate as soon as they can as it produces an instant profit. Challenges This solution is by no means production ready. Its main purpose is to demonstrate the groundbreaking capabilities of blockchain and smart contracts in automating settlement and collateral management of option contracts. Traditionally these services are performed by an intermediary, require manual work and cost fees. While our solution shows great promise, there are several potentially significant challenges that we see: Bancor protocol is not battle tested. It uses a deterministic price formula that converges to exchange prices via arbitrage. It is not clear how this mechanism will work in times of great volatility and/or price gaps. The collateral management mechanism is not immune to violent price gaps. It is theoretically possible that a writer’s liability can become greater than the reserve, in which case they can be motivated to default, and the buyer will not be fully compensated. This can be mitigated by increasing the minimum reserve. Alternatively, as it’s done in traditional finance, users of such a system can contribute to a shared “insurance pool” that is used to automatically cover reserve shortfalls under extreme scenarios. Since Bancor uses a deterministic price formula it can be manipulated in order to provide a better payoff for one party in the option contract at the expense of the other. This is feasible only if the Bancor converter reserve is low (i.e. its price sensitivity is high) relative to the size of the options position. In this case the cost of manipulating the Bancor price can be lower than the payoff from options achieved by such a manipulation. However, this problem is not specific to crypto and exists in traditional markets (e.g. burning a house to collect insurance). Regulatory uncertainty. We haven’t done any research into the regulatory side as we have no plans to pursue this other than as a research project as of now. If you see other issues not listed here, please let us know in comments. Summing it up The described solution gives a preview into the scope of the fundamental change that blockchain will bring to finance industry in the coming years. Not only will it make settlement and collateral management more efficient, it can provide transparent, self-enforcing rules that are applied to all market participants in the same way. At 8base we’re not focusing on specific niche solutions or protocols as described in this article. We anticipate an explosion of similar disruptive technologies in the coming years as we continue to ride the wave of digital transformation. Instead, we focus on building the next layer of infrastructure that gives business users easy access to these technologies and the ability to incorporate them in enterprise software to drive business results.

On-chain derivatives: solving $500T problem and getting prize at Consensus 2018 Hackathon

What Crypto insiders are reading on Asia. We added a “Deals” section to bring you the latest relevant Crypto deals from Asia, funded by the top US and Asian Crypto investors. 🌟 Top News from Monday through Wednesday , issue a cryptocurrency, dubbed “Jeju Coin,” and use the raised funds for the residents of the island. Korea’s Jeju Special Self-governing Province Governor pledges to make Jeju a blockchain hub city http://bit.ly/2OhGlZS for dealing with related businesses. Bank of Thailand passed a resolution to allow local banks to set-up cryptocurrency-focused subsidiaries http://bit.ly/2OgeE3M *China Media* Binance announcement — looking to launch 3 cryptocurrency exchanges this year. Can launch decentralized exchange in as little as a half a year. Google translated with its Cross-Border Payment Protocol built on Stellar, and a Credit Scoring Protocol built on ethereum_,_ has raised $15 mn private sale from Matrix Partners China, Fenbushi, Node Capital, Kenetic, FBG Capital, AlphaCoinFund and IOST. Singaporean blockchain startup Rate , http://bit.ly/2MqFTbr Japan’s primary financial regulator is looking at . updating its regulatory framework for the cryptocurrency sector to curb speculative investments http://bit.ly/2Mbeihv Michael Arrington, the Founder of Techcrunch and the Partner Arrington XRP Capital . said that XRP is better than Bitcoin and Ethereum in terms of transactions http://bit.ly/2M6wdWF *China media* . INBlock along with several Chinese firms released a The Blockchain Game Industry Whitepaper in 2018 Google Translated 💰 Crypto Deal News Singapore-based , has raised $60mn from notable investors including BlockTower Capital, Pantera Capital, Kenetic Capital from Hong Kong, DNA Fund, Andromeda from Switzerland. ODX Pte. Ltd. a global decentralized marketplace to deliver free internet access to consumers in emerging markets, http://bit.ly/2OUp222 has received millions of dollars in financing, led by Fenbushi capital, Yuandao Capital, Qianfang Fund, Shuimu Fenghua Fund. *China Media* EveriToken, a blockchain technology built on EOS and used to digitize real-world certificates and tickets, Google translated , Uber’s biggest shareholder, as investors in a pre-IPO financing round. Bitmain has reportedly secured China’s biggest technology company Tencent and Japan’s Softbank http://bit.ly/2Ms8Dk3 led by Goldman Sachs alumni, completed its Series A and launch of its offshore Cayman fund, led by FBG Capital. Crescent Crypto Asset Management, a cryptocurrency index fund manager https://prn.to/2Omhh4b led by Fenbushi, partner Shen Bo will also be the project strategy consultant. The blockchain payment platform EPC has received strategic investment of US$30mn http://bit.ly/2MpXsYY 💰 Coin and Token News to repurchase up to $5 million of currently circulating ICX + new open source release schedule. New ICON (ICX) repurchase program authorizes the foundation http://bit.ly/2Mr1T61 In China, , has been hyped up to 800Rmb or $115. a MacCoin, a physical token which is given away with the purchase of a Big Mac in McDonalds http://bit.ly/2OfrrmW Blockchain platform . NTT Docomo is Japan’s largest telecom company with over 76mn subscribers. VeChain has been selected to be among the first batch of partners for NTT Docomo’s 5G Open Partner Program http://bit.ly/2OiCLi2 Roger Ver has recently . sent the governor of Jeju Island of South Korea $100 worth of Bitcoin Cash at a public event http://bit.ly/2Ok6JlV in TRON’s Super Representative Elections. BitTorrent has been elected as a Super Representative http://bit.ly/2OQoOZY 💸 Exchange News In India, exchange and Zebpay has enabled Trueusd (TUSD) trading, deposits withdrawals. http://bit.ly/2Okc7We . Huobi streamlines Token listing application process http://bit.ly/2MqZ3xN UPbit, currently the biggest crypto exchange in South Korea, . came out clean in an audit report which proved the exchange had 100% of the amount its balance sheet demonstrated http://bit.ly/2Mo5CRO Da Hongfei and Erik Zhang on NEO from last week’s Reddit AMA. http://bit.ly/2Mvkqhe The Korean . government announced a new set of tax amendment which will strip away substantial tax benefits for bitcoin exchanges http://bit.ly/2Ofop2b 💼 Business News Director-general of the Institute of Digital Money of the People’s Bank of China shared his thoughts the . Chinese central bank’s two-layer Digital Fiat Currency model in a New York Conference http://bit.ly/2Oj0VZM , led by the Hong Kong Monetary Authority. 7 large banks in Hong Kong are working together to promote the development and launch of a Hong Kong trade finance blockchain platforms http://bit.ly/2MrvagE China’s Fudan University creates decentralized exchange for unused power. http://bit.ly/2MoyDg5 Korea’s Macrogen, Bigster to create blockchain-based medical data platform. http://bit.ly/2OkDvmP 🎌 Regulation News Japan Virtual Currency Exchange Association, a body comprised of all 16 licensed cryptocurrency exchanges, have . formally applied for certification from the country’s financial regulator to form a self-regulatory body http://bit.ly/2Ok6mI3 , a subsidiary of UCF Group, to jointly establish a financial regulatory sandbox system. The Financial Services Bureau of Sichuan Free Trade Zone has cooperated with blockchain startup PrimeLedger http://bit.ly/2MrxFj2 in a bid to promote technology in local business processes. NEM.io and the Cagayan Economic Zone Authority looking to build Philippines’ first blockchain hub http://bit.ly/2MozOfv The Central Bank of the Philippines is exploring the possibility of issuing the central bank’s digital currency. http://bit.ly/2MvsSwY A national digital currency is an experiment worth trying. How to end Japan’s deflation? Abolish cash. https://bloom.bg/2MnmEiO occupying two floors of a shophouse at Uni Central Commercial Centre for stealing electricity. Malaysia authorities raided an illegal cryptocurrency mining center, http://bit.ly/2OkiGYP 🎊Our third podcast is out in the iTunes store. ! 🎊 Check it out , our guest will be who will be sharing his observations of the Southeast Asia Crypto markets- Singapore, Thailand, Malaysia, Indonesia, as well as his insights on the Cryptocurrency market evolution and adoption. Be sure to follow him on to learn more about Pundi X. In our upcoming podcast episode Zac Cheah, CEO of Pundi X , Twitter 💖If you haven’t already, please help our podcast get discovered by rate on . Also share it with your friends on Facebook, Twitter, or Linkedin. THANK YOU! Apple Podcasts 🌹🌹🌹 Check our past 6 weekly pieces on , , , , , and A Guide to Asia Crypto funds/investors Takeaways on Asia Crypto from Techcrunch Zug Cryptokitties Binance Bitmain China’s Crypto winners Subscribe now

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