Best Decentralized Exchanges Cryptocurrency: 0x vs Kyber vs Loopring
Why Centralized Exchanges Suck
Why Centralized Exchanges Suck
Centralized exchanges, where you trust a centralized point of failure with thousands, to millions of your hard-earned crypto gains. Bitcoin hacks are nothing new and started plaguing the exchanges since the moment they popped up. In September of 2012, only 2 years after the creation of the first centralized exchanges, Bitfloor was hacked and lost 24,000 bitcoins worth 250,000 dollars at the time. Then Mt. Gox which lost 850,000 bitcoins worth nearly half a billion dollars at the time.
As most of you know, these hacks are not limited to bitcoin With new cryptocurrencies which have separate wallet codes and structures, comes new vulnerabilities that can be exploited. Prime example, is the recent Bitgrail hack with the loss of 170 million dollars of Nano. Leaving your money on exchanges is risky business, luckily decentralized exchanges are here to save the day.
With Decentralized exchanges, you are in control of your funds, there is no risk of getting it stolen through a central point of failure. Decentralized exchanges also create global order books, they are borderless and can serve anyone from any country. There are no signups, just trading, and they open up a large pool of liquidity to the users.
Today I would like to take a look at the best decentralized exchanges cryptocurrency and their protocols that have inhabited the crypto space. First Let’s take a look at zero x. zero x is not a decentralized exchange, but an open protocol that allow token to token trading on decentralized exchanges and relayers. Its open source and anyone can use it. It is initially being built for the trading of ERC20 token but is working on building integration with other chains in the future.
Zero x is to be used by other projects as a back-end transaction protocol. Zero x uses a hybrid type of implementations. Their model can be described as “a off-chain order relay with on chain settlement. The steps of a transactions with zero x are as follow
1. A maker cryptographically signs orders
2. Makers off-chain broadcast orders themselves or through a relay
3. Counterparty accepts the order and injects it into a smart contract to execute
4. The DEX processes the exchange on the blockchain
For the OX protocol to completely function their needs to be exchanges built. Exchanges that are built with the 0x protocol become relayers. As of right now there 11 exchanges using the protocol, including ethfinex, radar relay, and the ocean x.
Good news for zero x holders, because the coin just got added to bittrex. Also, it looks like zero x is getting their paws into the Korean markets with their listing on upbit exchange too. Could these listing mean they are looking to use the protocol in the future. Could bittrex be working on their own form of decentralized exchange?
The next protocol I would like to get into is Kyber Network, the kyber network provides decentralized on-chain exchange, but removes the order book. According to Kyber, this gives the platform the ability to securely exchange your crypto at a minimal cost. This is perfect for person to person transfers as well as ICOs. The tokens that a person sends doesn’t have to match the token that the receiver wants. Kyber does the exchange during the transfer.
A transaction works through multiple compents in Kyber. Number 1 there is the user. The user sends and receives tokens to and from the network. They can be an individual, merchant, or smart contract accounts. Number 2 is Reserve entities. They bring liquidity to the platform. They can be internal or hosted by a registerd 3rd party. They’re classified as public or private depending on whether or not the public contributes to the reserves.
Number 3 is the reserve contributors. They provide funds to the reserve entites. They’re only associated with the public reserve entities and share profits from the reserve. Number 4 is the reserve manager. They maintain the reserve, calculate exchange rates, and enter them into the network. Number 5 is the kyber network operator. They add or remove reserve entities as well as controls which tokens are listed. Initially Kyber will play this role, but eventually decentralized governance will take over this role.
Number 6 is the kyber dynamic reserve pool. This is just all the reserve entities in one pool, and this is how the network maintains liquidity. Having multiple entities helps prevent monopolization and keeps the exchange rates competitive.
The token of Kyber is the Kyber Network Crystal, and monetization of the platform is pretty simple. Each time a transaction occurs a kyber reserve manager must burn a certain amount of KNC as a fee for operating the network. So the more the network is used, the higher the price that KNC goes.
Now Kyber doesn’t have as much development of their ecosystem as 0x, but 6 days ago the released the mainnet pilot. During the pilot phase, only whitelisted ICO contributors will be granted access to the platform. The pilot runs until April and Kyber plans on scaling up user access in gradual batches to ensure success. Now Kyber is only for ERC20 tokens as of now, but off course they are working on cross chain transactions. Kyber has recently partnered with another crypto pick of mine, ICON to work with their decentralized exchange, and the Ethereum fork Wanchain to explore cross chain transactions.
The final decentralized protocol I would like to take a look at is Loopring. Loopring has the potential to dominate the decentralized landscape with their technology. Loopring is not an exchange, but a code that links together exchanges and wallets and allow for trading between them, managed by smart contracts.
The loopring ecosystem is made up multiple parts. The wallet is where things start. Users hold tokens here and can send them to the loopring network. When an order comes through, a relayer sends it to the most important part of the ecosystem. the ring miners. They determine the most efficient way to fill it. Could be filling it through all through bittrex, or splitting it between poloniex and binance.
The miners then submit orders which are checked by the loopring smart contracts. The smart contracts take care of taking the orders, sending the coins, monitoring the order books, and keeping trade history up to date. This information is fed into the relayers who maintain the order books and trade history.
The ring matching technology is what makes Loopring stand out from others. Instead of making trades one to one…loopring groups the orders into rings, and they loopr through the system until it is matched. This can be 1 to 1, 2-2, all the way up to 10-10. This is much more efficient, and faster than current token matching methods.
The Loopring Wallet and Dex is up and functioning. Loopring’s Ecosystem is not as robust as zero x’s but at least they have a minimum viable product. Now loopring is not an interoperable protocol so their won’t be cross chain order matching. Loopring is developing their protocol not only for Ethereum but also for NEO and Qtum. Loopring holders will be airdropped 60 percent of Loopring NEO and Loopring Qtum. In a medium post they detail the process for the airdrops, and no specific dates have been set, but they said they will announce 2 weeks prior to the airdrop happening.