Tag: Blockchain

3 types of decentralised exchanges

On By mehranmuslimiblogIn Bitcoin, Blockchain, EthereumLeave a comment

Image result for decentralised exchanges

Cryptocurrencies are making steady progress in the traditional financial system. Their ascendance shines a spotlight on exchanges where people trade crypto assets and a number of them have been found wanting, due to a ‘single point of failure’ that allows hacks to occur.

The solution is decentralised exchanges (DEX), because this type of exchange allows users to keep control of their funds throughout the trading procedure. As might be expected there is more than one type of decentralised exchange to choose from, and there are three formats that are considered the most likely to be the exchange models of the future.

At the moment, decentralised exchanges are being developed in three modes:

  1. On-chain order books and settlements
  2. Off-chain order books with on-chain settlement
  3. Smart contract-managed reserves

On-chain order books and settlements

These are entirely blockchain based and are really the first generation model. With this DEX, every new order or adjustment to an existing order updates the state of the blockchain.

What’s the problem with this type of DEX?

Although it protects user privacy and security this form of DEX makes exchanges illiquid, slow, expensive and unable to operate with other DEX.

Off-chain order books and on-chain settlement

The Ox protocol is good example of this model. It is built on the Ethereum blockchain’s solution for off-chain orders. Execution of the trades happens on the Ethereum blockchain,which means users have control of their funds until the exchange takes place. The order books are hosted by a third party called Relayers. This enables the exchange to maintain liquidity and create a more robust infrastructure for traders. For example, after submitting an order to the Relayer, a market maker waits for an order to be filled, at which point the trade is trustlessly executed on the blockchain.

Smart contract-managed reserves

This model connects the buyer and seller function when there is low liquidity. With smart contract-managed reserves, instead of having to find a buyer for the bitcoin, a user can trade with an external reserve, depositing bitcoin into the reserve and receiving ether in return. Bancor is an example of this model.

Although the existing decentralised exchanges need work to bring them up to a comparable speed with the traditional centralised exchanges, there are several innovative entrepreneurs working on finding the best solutions, and hopefully we will see them next year, if not in 2018.

 

The case for decentralisation

On By mehranmuslimiblogIn Bitcoin, Blockchain, FintechLeave a comment

Image result for decentralisation

Centralisation came in the second phase of Internet development. In the first phase of the web, Internet services were built on open protocols, but by the time of the new millennium this was rapidly changing to centralised platforms. Firms like Google and Amazon, Facebook and Apple (GAFA) designed software that outpaced the open protocols, and once smartphones arrived, the trend picked up speed.

The centralisation effect

What then happened is that startups found it much harder to grow their businesses online, because of the dominance of centralised platforms that could change the rules at any moment and take away the newcomers’ audience. Innovation has been stifled and the Internet environment is less dynamic because of it. Furthermore, centralisation has aided the rise of fake news and the numerous debates over privacy and biased algorithms.

One response to centralisation might be to impose government regulation on the largest Internet companies, but the problem here is that the web is software based, which means the networks can be redesigned to exploit market forces. So, this type of solution is not of much benefit.

Decentralisation is the answer

Cryptonetworks are a decentralised solution. They are governed by communities and have the potential to outperform centralised platforms.  The reason they are an answer is that they behave in a different way to those platforms that are centralised. For example, when a  centralised platform starts up they do everything they can to recruit users and third-parties like developers, businesses, and media organisations to give the service added value. Facebook is a good example of this. As platforms like this move up the adoption S-curve, their power over users and third parties steadily grows. Again, look at Facebook.

Cryptonetworks operate in a very different way. These decentralised networks “ use consensus mechanisms such as blockchains to maintain and update state, 2) use cryptocurrencies (coins/tokens) to incentivize consensus participants (miners/validators) and other network participants,” as Chris Dixon suggests.

Other advantages are that they also stay neutral as they grow, and use open source protocols, whereas centralised platforms use a ‘bait and switch’ approach. Users have a voice via the community that governs the decentralised network and users work together towards a common goal – community growth and strengthening the token’s value.

Ultimately, the question of whether decentralized or centralized systems will win the third era of the Internet depends on who is going to build the most compelling products. The entrepreneurs working on decentralised platforms are up against the strong cash flow of Google etc, but on the other hand they also have a growing fan base that will provide robust support.  Decentralisation also provides a more level playing field for third-party developers and businesses, and that could well be one of its biggest advantages.

 

 

 

The Rise AI-based app for crypto trading

On By mehranmuslimiblogIn AI, FintechLeave a comment

Резултат с изображение за ai crypto

Removing volatility from the cryptocurrency market would most likely make it a more attractive mainstream investment. That is the hope of Rise, a fintech software company based in Germany. It plans to use its artificial intelligence (AI)  trading technology in the cryptocurrency markets in a way that will allow users to trade across multiple exchanges.

Currently, Rise algorithms are being used in stock markets, forex and commodities trading and since its foundation in 2012 it has grown its user base, with in excess of $50 million in assets under management. Hedge funds and insurance companies are among the big financial institutions using its products. More importantly, its consumer facing app, UpTick, which is focused on cryptocurrency, has been downloaded 100,000 times since it became available.

Its white paper explains: “The playing field is being levelled for all who join Rise, as well as bolstering the cryptocurrency market itself with data-driven investment strategies that are free of emotional human bias, ignore hype, and avoid the pump and dump marketing or boom and bust cycles that inevitably bring unnecessary risk to the market.”

Rise also believes that human traders looking to make a profit from cryptocurrencies are pretty much running out of time. The firm believes that this sector will go the way of the traditional stock market, where gains are primarily made by using “machines to which access is restricted to a small population of the uber-wealthy.” The Rise app will bring more democracy to the crypto trading environment and enable small investors to participate.

AI in the Rise app

This detailed explanation of how AI will be used in the app comes from the whitepaper (see link above): “In addition to trading manually on multiple crypto exchanges, the Rise platform will also allow users to subscribe to automated trading strategies with Autopilot, powered by the Rise AI. Users will be able to choose algorithms across a variety of risk classes, pick an allocation across any of their connected exchanges and then enable the Rise engine to automatically execute trades. A key feature is that users’ funds will never leave their wallet, which will allow for full control and protection of assets. Users can track returns and start, stop or pause algorithms at any time, directly via the application. Furthermore, users are able to define custom stop-loss levels for each algorithm to match each user’s individual risk preference. The vision with Autopilot is to become the trusted, automated trading companion that allows users to invest like the sophisticated trading elite, right on their mobile phone. “

Rise has a strong team with a competitive edge, so no wonder the company is upbeat about its forthcoming STO in November. What is more we won’t have to wait very long to use the AI-based Rise app – it is launching in the first quarter of 2019.

A blockchain revolution in Accountancy

On By mehranmuslimiblogIn BlockchainLeave a comment

Blockchain technology is heralded as the game changer in so many fields: banking, currency, logistics just being a few of them, but there is one service area that nobody has talked about so much and that is accounting.

Most people would agree that accountancy isn’t quite as ‘sexy’ as banking, hence the lack of excitement about how the blockchain may completely revolutionise a service industry that is centuries old. As much as we like to make jokes about accountants, their services are invaluable to businesses and to entrepreneurs.

History shows us that double-entry bookkeeping, the foundation of all accounting, can be traced back to medieval Jewish merchants in the Middle East, and later picked up by Genoese merchants in the 14th century. From there it became the standard method and it is relatively simple — for every intake of money in one account (credit), there must be an equivalent outflow in some other account (debit).

Overall, accountants focus on managing risk. It allowed businesses to keep track of a number of transactions at the same time, and in a range of currencies. Accountants have a specialist skill set, but as John Katsos argues, the blockchain could potentially make many in the profession unemployed.

In traditional accounting there is room for errors and fraud, as many famous cases have shown. When a mistake happens, more accountants have to be brought in to correct it, and that leaves rooms for more errors. Katsos claims that the blockchain is not double-entry bookkeeping; it is “potentially infinite bookkeeping.”

As he says, “blockchain technology can give every user in a system an automatically updated list (a “chain”) of all transactions (“blocks”) that have occurred within that system.” Plus it has validators: designated members of the system who come to “consensus” over a transaction. The only limitation is the number of users and the amount of computing power available.

There is also the potential to use permissioned blockchain to avoid fraud. In this system, people using the blockchain have been verified in advance and limits imposed on what they can do on the system, such as ‘read only’. Add in AI to detect fraud and we may have an even more robust accounting system. Is it the end of the accountancy profession? The answer is probably not, but there could be some big changes.