Decentralized Exchanges and Peer-to-peer Trading
Interest in investing and trading cryptocurrencies has caused large amounts of wealth to be centralized on exchanges. While this allows for trades to happen quickly on the markets, with multiple buyers and sellers available, and easier price discovery, there is still risk related to volatility and security of these exchanges. If the exchange does not take care to use proper security, centralization leaves users of the exchange exposed to risk. The blockchain community has discussed and started working on peer-to-peer trading platforms or through exchanges entirely on the blockchain. Two ConsenSys projects have started to tackle this problem and their solutions are linked below, in case you are interested.
Introducing AirSwap - AirSwap Blog, 2017 [2 min read]
The two forces behind our design are decentralization and peer-to-peer. Decentralization allows users to exchange value in a “trustless” way rather than depending on the security, ethics, and diligence of a central entity. Peer-to-peer allows users to quickly and privately trade with known counterparties, rather than posting orders to a public order book.
Introducing Omega One - ConsenSys Media, 2017 [4 min read]
This blog post introduces the Omega One platform as a decentralized broker between two traders. Members who want to trade will lock some of token A in a smart contract and send an order to trade to token B. Omega One will then take on a token B position in the market using our own exchange accounts and funds, then trade directly with the member as a simultaneous swap of tokens in the smart contract.
What is exciting about decentralized exchanges and peer-to-peer trading (and why we have devoted a short section to them in this e-book) is that it once again returns power to the individual to interact with any other individual. Engineering ways to do this safely allows for more individuals to participate in markets worldwide.