Last week I had the pleasure of being invited to present on at the Moscow Blockchain & Bitcoin conference.
Blockchain Conference Russia | Moscow Blockchain Conf
Unique conference in Russia that reveals the very notion of "Blockchain- cryptotechnology of the future". | Moscow…moscow.bc.events
My topic was
The Need for a Paradigm Shift in the Exchange Business
- The problems with the Centralized Exchange Paradigm; - Centralized vs. Decentralized exchanges (CEM vs DEM); - The Asset Gateway Model; - Roadmap and Next Steps.
It was interesting to present to 500 people about the issues with the centralized model only to come back and have 10 people forward this NY Times article to my inbox.
Warning Signs About Another Giant Bitcoin Exchange
In the latest blow, on Tuesday, an alternative virtual currency that is owned and operated by the same people as…www.nytimes.com
The other key reason for the trip was to get out and meet the large and active Russian OAX Community and introduce new people to the concept behind OAX. In both regards, the trip was a great success, and I was impressed by the vibrancy of the CIS blockchain scene with a lot of new projects and significant interest in how things are developing.
Many of the people I spoke to who were new to OAX were impressed by the scope and ambition of the project, with the majority of questions around three areas. I have added my answers to each below.What if I like to trade anonymously?
The OAX central concepts are around educated choice, and inherent protection for users. By asking Asset Gateways to post ETH collateral for potential future disputes, we allow users to evaluate the risk of any potential trade with a gateway. This gives consumer protection.
Each gateway decides its level of KYC and client onboarding, so certainly there will be gateways that allow for anonymous access. The challenge will be in coming out into fiat with no KYC, again, individual gateways will determine their policies in this regard. The Project will provide new gateways with standards and guidelines for best practice KYC and by following these there is the potential for KYC interoperability. If a gateway chooses to support a lot of relatively anonymous users, it may not be fully “plugged in” to the KYC inter-operative potential. However, anonymous users of this gateway will still benefit from protection in terms of the ETH based collateral posted by the gateway.
2. How can we understand asset gateways?
The simplest way to think of an asset gateway is to understand that every time you go from one asset class to another, you need to go through a gateway. If you go ETH/BTC, you need to go through a gateway. If you go ETH/BTC/Cash (fiat) you may go through one gateway (if that gateway works with both those) or through two gateways. A gateway is essentially any entity that has an order book that integrates with the wider platform aggregated order book or has the ability to mint tokens. Any potential user who holds an asset that he wants to trade with some volume could potentially become a gateway. Existing exchanges could easily become gateways.
In terms of the general market, centralized exchanges pay around $20 to $70 USD to onboard a new client depending on staff ratios, payroll, etc. This is outside the cost of IT, security and KYC systems. By decentralizing the trade matching engine and providing guidelines in terms of KYC/AML, we see considerable cost saving for existing centralized or decentralized exchanges that plug into the system. In addition, existing exchanges that enter the OAX ecosystem gain the ability to mint/issue new tokens and gain new revenue flows by aggregating their order books. Most importantly, many exchanges that currently cannot offer stable fiat on/off boarding will gain access to to the platforms channels for this if they work to the platforms KYC/AML standards, which are shaped with meeting the broader banking and financial industries best practice in mind.
3. Do you think the market will be regulated globally soon?
There is certainly a move in many markets toward regulation. Any market/industry that goes through a 500+% increase in a year attracts opportunistic investors and the attention of regulators. Some kind of regulation in many markets is inevitable, you can either welcome it or try to resist it and a frank look at other sectors which have tried to resist regulation shows that usually does not end well.
At OAX, we welcome well considered regulation. We think that the meteoric growth has attracted bad actors and unless we in the industry make efforts to self regulate, we will never shed the image of cryptocurrency being the “go to” channel for drug dealers, criminals and money launderers. These bad actors exist in every industry as they pursue new opportunities aggressively. Do you know which asset class is used most frequently by bad actors? Cash. However the general populace understands cash and therefore it does not have a stigma attached to it.
If we want crypto to become widely adopted and accepted, we need to look at other markets and expect similar sorts of interventions by regulators, especially during a boom time like the one we are in. If the industry does not look at some self regulation is not attempted, then the “heavy hand of the government” will intervene, likely heavier and harder than it needs to.
However, there are positive signs everywhere that the industry is trying to take this challenge seriously, Project Transparency, ICO governance, code and smart contract audits, companies like Smith + Crown are all making an excellent start in this regard. At the OAX Foundation we believe that we are approaching the same challenge in a different way. Our approach is not the only one, but we think that our approach is unique enough and valuable enough to warrant serious consideration.
I have inserted both my Russian and English presentations below in their entirety if anyone wishes to go through them in detail.