Leverj, built by the team that created Coinpit, is preparing to launch a decentralized exchange for cryptocurrency derivatives. The platform aims to address security and usability gaps that plague tod
Leverj, built by the team that created Coinpit, is preparing to launch a decentralized exchange for cryptocurrency derivatives. The platform aims to address security and usability gaps that plague today's crypto trading infrastructure. Ethereum will serve as the foundation for a system where traders can manage derivatives positions without handing over their funds to a centralized intermediary. Users will trade crypto derivatives, futures contracts on major stock indices, and single-stock futures in a fully decentralized environment.
The motivation is straightforward. Centralized exchanges have become prime targets for theft. They maintain sensitive data, including user identities, account balances, and transaction records, that make them valuable to hackers, litigants, and state actors. Research from a year ago documented that over a third of bitcoin exchanges have been compromised. Nearly half of all exchanges operating in the market's early days have since shut down. The problem has intensified. South Korean exchanges have drawn sustained attention from attackers. FireEye's security team documented that North Korean state hackers compromised at least three South Korean platforms since May. Previous breaches at MtGox, Bitfinex, and Bitstamp showed thieves could extract millions despite the prominence of these operations.
Leverj CEO Bharath Rao, a former Wall Street trader and GE Research engineer, frames the problem in stark terms. "Previous efforts to establish markets for leveraged cryptocurrency derivatives have focused on centralized exchanges, which traders must fully trust to custody their funds," he said. "In an environment where even the biggest and most security-conscious exchanges experience loss of funds through hacks, a focus on security using the original principles of bitcoin and decentralized financial systems becomes more important than ever."
The platform will use decentralized identity to prevent exposure of personal information. Multi-signature accounts give traders control over their own assets. A trader's identity exists as a public key that controls their coins, keeping transaction data private while it sits on the blockchain. Since users can generate fresh identities at will, they scatter their trading histories across multiple addresses and obscure how much capital they hold at any moment.
The Leverj interface will incorporate stops, detailed reporting, and historical data pulled from Brave New Coin. Traders can run simulations, replay past trades, and watch other market participants to learn from their decisions. The team will launch its ETH and ERC20 spot-trading platform in early 2018, with the fully decentralized futures system going live in the second quarter.
Rao sees a market need that rivals have overlooked. Using ether as the settlement currency across all major tokens addresses a critical gap. "The ability to get exposure to the top tokens without the need to manage multiple wallets is highly appealing for speculation and hedging," he said. "The Leverj platform eliminates security issues with wallets and nodes of new tokens. Based on our research and customer demand, we have developed a modular, easy-to-use UX with trustworthy, reliable APIs that will make the exchange appeal to all traders."
The broader derivatives market, valued at 1.2 quadrillion dollars, grows at 30 percent annually. The cryptocurrency sector itself expanded tenfold during 2017. Centralized crypto derivatives exchanges currently process 500 million dollars in daily notional volume.
Decentralized exchanges have prioritized protocol innovation and academic research. Rao is taking a different approach. "In the past, decentralized exchanges have been more concerned with academic discovery and protocol research while generally ignoring the quality of the user's experience," he said. "Leverj stresses the importance of usability."
