A proposal published this morning by Jake Yocom-Piatt, one of the project leads behind the Decred cryptocurrency, has outlined the architecture for a new trust-less cryptocurrency exchange platform.
Acknowledging the pain points and frustrations of both existing centralised and decentralised exchanges, Yocom-Piatt is proposing a client-server model for hosting currency pairs with servers then integrating P2P atomic swap nodes to ensure users retain control of funds at all times.
The proposition essentially outlines what is a hybrid model with traditional centralised web architecture taking responsibility for cryptocurrency pair listings and buyer/seller matching, whilst trades themselves are executed with atomic swaps that allow for P2P cross-chain cryptocurrency trades.
The blockchain era is still waiting for a successful decentralised exchange platform to emerge – and whilst there are existing architectural solutions in place, fully decentralised models such as EtherDelta suffer from blockchain transaction latency.
It is the reason for which exchanges such as Binance and Bittrex have emerged as the leading platforms for managing cryptocurrency trades – but these charge fees and/or often exorbitant listing fees. As centralised architectures, they are also prone to security breaches.
It can be argued that the Yocom-Piatt proposition therefore seeks to combine the best of Binance and the best of EtherDelta in order to offer up an architecture which retains responsiveness whilst allowing users to exercise control over their own funds at all times.
Yocom-Piatt makes a further suggestion of removing the FIFO (first-in-first-out) traditional trade execution model which exposes the market to high volume trading and thus price manipulation, and proposes a reputation-based mechanism for ordering trade sequences instead.
Conceptually, the proposition appears to be a sound one but will likely not satisfy decentralised tech purists. It is also predicated on the growth of atomic swap technology which, at the time of writing, appears to be limited to a small number of cryptocurrencies such as Bitcoin, Litecoin and Ethereum.