DAEX
DAEX (Digital Assets Exchanges) is an open and distributed cryptocurrency clearing ecosystem. DAEX aims to provide clearing solutions for centralized cryptocurrency exchanges, based on distributed ledger technology and smart contracts.
Since January 2017, the cryptocurrency trading industry has experienced tremendous growth when the total market value rose from 18 Billion USD to over 500 Billion USD, and the average daily trading volume rose from 162 Million USD to 20 Billion USD. The rapid growth of the trading industry has raised the need for more effective and secure trading exchanges.
There are currently two types of cryptocurrency trading exchanges, centralized exchanges and distributed exchanges. Each type has its advantages and disadvantages.
1. Centralized exchanges provides a centralized order matching mechanism for traders. It receives trader’s cryptocurrencies as deposits, and holds these cryptocurrencies in its own storage. While current cryptocurrency centralized exchanges have strong advantages in providing liquidity, matching speed and flexibility, they are inherently flawed in their current infrastructure. There is no way to guarantee an exchange’s objectivity in being an unbiased matching mechanism. In fact, security incidents keep happening to centralized exchanges in recent years, from Mt.Gox to the most recent Yubit. Such incidents will for sure keep happening because of the basically flawed infrastructure of centralized exchanges.
2. Distributed exchange is usually based on distributed ledger technology. It runs on its own. It does not need people to maintain its operation. Trader’s asset on a distributed exchange is held in his own account. The exchange does not have access to it. The advantages of, distributed exchange are very obvious. Trader’s asset is well protected; trading and clearing costs are low; traders can freely join and leave,and they can trade with anyone in the world as long as the other party also uses the same exchange. Despite of all these advantages, however, distributed exchanges also have serious disadvantages, particularly in terms of liquidity, matching speed and flexibility.
The goal of DAEX is to provide a better infrastructure for the cryptocurrency trading industry by taking the reasonable parts of the mainstream securities trading industry and by taking advantages of new opportunities brought about by the distributed ledger technology.
DAEX ecosystem aims to provide value in four layers:
- Security. DAEX provides a secure trading infrastructure, where the user assets are all held on the public blockchain and cannot be moved without their permission.
- Resource allocation. Since each exchange has to do its own clearing work, the whole trading industry is not making good use of its resources. By using the clearing service, industry resources are used more effectively.
- Trust. All operation and assets are transparent on the DAEX blockchain. The transparency provides more certainty and decreases the distrust between the users and the exchanges.
- Exchanges. The separation of trading and clearing helps exchanges to focus more on their core competencies. Moreover, DAEX help to reduce the operational costs by selecting and listing new cryptocurrencies so that participating exchanges can trade.
DAEX Participants:
- DAEX Foundation. Its mission is to develop the DAEX solution and promote its use among cryptocurrency exchanges in the world. The Foundation also manages the fund contributed by global investors. It is registered in Switzerland.
- Wallet Users whose identity have been certified can use various functions such as trading and asset delivery.
- Exchanges. Provide cryptocurrency and derivatives trading services for wallet users. Counsel member of the clearing union. Provide a node on the clearing blockchain.
Clearing Solution:
- Clearing Chain - core of the DAEX clearing ecosystem. It is an open sourced cryptocurrency clearing solution based on distributed ledger technology. It provides clearing and settlement services to both individual and institution users. This chain is deployed on multiple nodes on a public cloud. It uses one kind of POS consensus mechanism to validate transactions.
- Clearing Protocol specifies the communication mechanism between exchanges and the DAEX clearing service. It is a critical element of the DAEX ecosystem. The clearing protocol uses lightweight stateless remote communication mechanism.
- Atomic Settlement. Using the atomic settlement, DAEX wallet users can safely and directly transact different types of digital assets, the underlying clearing chain perform all the necessary work such as encrypting and consensus reaching.
- DAEX Wallet is the client system of the clearing chain. It is an unmanaged and distributed wallet that supports multiple types of cryptocurrencies. It has the following characteristics:
• Multiple-part private key: Uses three parts private key. Needs any two parts to be used together to access assets in the wallet;
• Private key can be restored: A private key can be restored if a user loses his part of the private key;
• Complete autonomy: User has full autonomy over digital assets in his own wallet.
The DAEX tokens are to be distributed in exchange for private and community donations. There is no public sale. During the initial offering phase, the DAEX token will be an ERC20 compatible token. When the DAEX solution is in production, those original ERC20 tokens will be repurchased and destroyed, and new native tokens will be issued with a 1 to 1 ratio.
DAEX tokens will be used to pay the clearing and the settlement fees in the DAEX ecosystem. Those fees can be paid solely using the DAEX tokens. Such a token economy ensures that DAEX tokens will play a central role in the clearing chain, as the driver of the ecosystem.
DAEX aims to utilize an existing service, instead of creating a new one. By collaborating with centralized exchanges, DAEX might be able to swiftly penetrate the market and capture a sizeable market share. DAEX allows exchanges to decrease their operational costs and at the same time, creates a relativity trustless environment while decreasing the distrust between traders and exchanges. Hence, it is reasonable to expect that such collaborations will be made. The project has already established alliances with strategic partners such as the Qtum foundation, and is currently in discussions with several high-volume exchanges.
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