[Note: this article has been updated to reflect the fact that four originally reported exchanges — Poloniex, BunkerDEX, Dacplay, and BTer — are not proving their solvency via the BitShares blockchain. Apologies for the error.]
Today, several exchanges — ranging from boutiques offerers of just four or five coins to larger players offering dozens — are proving their solvency on the BitShares blockchain. To find out who, how, and why, Bitcoin.com nabbed an interview with Ken Code, founder of “crypto coaching” firm BitShares Munich.
Ken explains that he trades amongst the 10 exchange’s offerings without giving up his private keys, why he thinks it’s beneficial for exchanges to open their books this way, and how he deposits his fiat paycheck directly to OpenLedger for trading.
Bitcoin.com (BC): You report that OpenLedger (CCEDK), BlockTrades, MetaExchange, Yunbi, BTC38, and BANX — among others planning the move — are currently “proving their solvency” via the BitShares blockchain. What does this mean?
Ken Code (KC): All exchanges in the BitShares Exchange Network keep their order books on the same BitShares blockchain, where everyone can see them. That means that I don’t actually give control of my assets to the exchanges and am therefore not exposed to exchange counterparty risk.
“My assets remain in my wallet while I’m trading like I was on their exchange — because the exchange is actually inside the blockchain, accessed via my wallet.”
BC: So you keep your private keys while trading — how does that work?
KC: Each member exchange competes by providing a unique front end interface (web wallet), user training and support, and specialized products and services. But they all use the same back-end trading engine – the one inside the BitShares blockchain. (The same one any individual can use if they download their own BitShares wallet and bypass all the exchanges.)
But casual users can access their own funds via the custom web wallet provided by the exchange, which looks like the web interface of any familiar centralized exchange. No matter whether you use the web wallet of any member exchange or your own downloaded full wallet, you have access to the same blockchain.
BC: What do you see as the benefit of deciding to share your order books as an exchange?
“BitShares lets each exchange ‘keep’ the customers they sign up by routing the fees from those customers to that exchange. the customers gain access to deeper markets and more liquidity by participating in a shared marketplace with customers from all the other exchanges.”
Thus, each exchange appears bigger than it really is. Eight small exchanges can look like one medium exchange, which is great for bootstrapping new players in specialty markets.
This week alone, BitShares has small exchanges in eight countries expressing an intent to join, each providing a unique experience customized for their language and culture. More are joining all the time, so the composite network is going to start being one of the biggest
exchanges over time. As it does, it makes more sense for other medium exchanges to join to take advantage of the shared network effect and market depths. Like a rolling stone…
BC: You’ve founded BitShares Munich. What is this group for, exactly?
KC: We offer global solutions at a local level. BitShares Munich brings Smartcoin and Bitcoin products and services to investors, businesses, and anyone who wants to give crypto a shot. As a Crypto Coach, it’s our job to find the best solutions out there and help the client integrate them. We build POS [point of sale] systems, ATMs, wallets, even implementations of decentralized media platforms like Qora and Muse.
BC: What attracted you to the BitShares platform?
KC: I love to build successful companies and part of that requires efficiency, low overhead, a global reach, and proper marketing.
“What Bitcoin did for money, BitShares is doing for business.”
BitShares is a platform that provides the tools and the community to help you to automate and decentralize every facet of your business including payroll,
legal, accounting, marketing, fundraising and of course remittance.
BC: What steps does an exchange have to take to prove their solvency with BitShares?
KC: Give me an hour and I’ll walk them through it.
“Exchanges don’t have to do anything [special] to prove their solvency, because all the assets are visible on the BitShares blockchain, which takes responsibility for the accounting just like Bitcoin does for its on-chain coins.”
The one thing that still has counterparty risk is any exchange-issued assets that are backed by their reputation. The blockchain can’t see what’s backing those particular
assets, but the network lets them trade against counterparty-free assets on the blockchain in a completely free market. You get the best of both worlds.
BC: You report that you have your fiat paycheck deposited directly to CCEDK via a SEPA transfer. Do you change it all into BitShares at that point, or is your process always different depending on the market and your investment goals?
KC: I don’t use banks much anymore since CCEDK came out. Any fiat currency that I receive goes via direct deposit to CCEDK and then I can trade into whatever crypto I want like bitEUR, bitUSD, Bitcoin, Qora or whatever.
I can use the OpenLedger web wallet or my downloaded wallet, it doesn’t really matter since the funds are instantly secured in crypto. At some point, I’ll probably just automate it too so the Euros go right into bitEUR the moment the fiat arrives.
“In my opinion, traditional banks better add these features too or they’re screwed.”
Those seeking more information can reach Ken by visiting the BitShares Munich website.
If you get paid in fiat, would you consider direct-depositing your paycheck to an exchange like OpenLedger, the way Ken does? Why or why not? Share below!
Image courtesy of TotalPayments