The Blockchain Board of Derivatives (BBOD) will launch its multi-asset, non-custodial derivatives trading platform with an unprecedented level of exchange transparency to provide the highest level of trust and security for its users.
Why Transparency Matters
Despite bitcoin’s move into the mainstream, the cryptoasset trading ecosystem is still in its nascence. There is an absence of regulations in most jurisdictions, which means limited exchange oversight and a lack of insight into how exchanges operate, how well they are funded, what fund security means they put in place, and whether they even segregate client funds from their own funds.
The number of exchange bankruptcies and hacks that have occurred in the past decade has led to widespread mistrust of centralized digital asset exchanges. Over one billion dollars were stolen from exchanges in 2018 alone, which highlights the acute need for improved exchange infrastructures and security measures.
The lack of transparency and adequate fund security at centralized exchanges have laid the foundation for the increasing demand for decentralized, non-custodial exchanges that enable traders and investors to hold their funds in their personal wallets as opposed to on a (potentially vulnerable) third-party exchange account.
The more transparency and security an exchange can provide, the more users will flock towards it.
While enhanced cybersecurity measures, fund insurance, and the use of cold wallets to store user funds enable exchange users to sleep a little easier at night, the reality is that there is still little insight into how exchanges are managing user funds. There are (currently) little to no rules in place for the segregation of customer and exchange funds in the cryptoasset markets nor are there reporting requirements for exchanges in most jurisdictions.
In light of the insecurity of today’s digital asset exchange infrastructure, it is evident that a new type of trading platform is required that ensure that traders can focus on generating a profit without having to worry about losing their funds due to outside factors.
BBOD Goes the Extra Mile
At BBOD, trust, security, and transparency are ranked very highly. As a result, BBOD will provide a never-before-seen level of exchange transparency combined with the user-friendliness of a centralized trading platform and the security and privacy of a decentralized exchange.
Non-Custodial Accounts
As part of BBOD’s hybrid architecture, the exchange will not hold client funds. Instead, the platform provides non-custodial accounts. Every user has complete control over their funds, which are held in smart contracts while trading on the platform.
The exchange holds no user private keys, so there is a zero chance of loss of funds due to operational errors or a hack.
On-Chain Settlement
BBOD provides a high level of transparency by publicly showing the funds held by clients within trading smart contracts wallets as well as all transaction fees and the other exchange accounts. All of this information will be recorded on the Ethereum blockchain in an immutable and full autonomous manner for anyone to see and audit.
This transparency feature is coded into the exchanges smart contract to provide a daily update of all client’s blockchain balances.
Ultra-Fast Off-Chain Trading
While custodianship and trade settlement occur on the blockchain, the platforms matching engine is held off-chain to enable ultra-fast trade matching. There will be no need to wait for the blockchain to verify transactions. Instead, trades are confirmed on an off-chain ledger and are then sent to the blockchain for a daily settlement.
Insurance Fund
Finally, BBOD also maintains an insurance fund that covers all losses of bankrupt traders. The fund’s balance is fully transparent and viewable on the blockchain.
Through the combination of non-custodial accounts, highly transparent on-chain settlement, and its insurance fund, BBOB can provide a new level of trust, security, and transparency for crypto derivatives traders.
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