EtherEx, the decentralised exchange platform on Ethereum, is looking beyond the concept of trading cryptocurrencies, towards a tokenised future of yet to be imagined types of value transfer.
The team behind EtherEx have released a live demo on the Ethereum testnet and are looking at going live around Q3 2016. They are also mulling a crowdsale with ETX token, and are proud to have DigixGlobal helping with an audit of their code.
In building the platform, which has been self-funded since inception, the team has encountered some interesting problems, with the best solutions expected to come from the community – as one would expect with a truly decentralised peer-to-peer application that benefits everyone.
One such avenue is to instantiate a crowdsale of an ETX token. The reason for this is to address the gas imbalance from operating exchange transactions on Ethereum. The team realised that placing an order (storing) cost a lot more gas than filling. This in turn creates a type of inverted maker/taker model, which could have a large impact on the liquidity of the exchange.
EtherEx co-founder Eric Conner told IBTimes: "The gas fee imbalance kind of creates an anomaly of an inverse maker-taker model, and this would be seen on any decentralised exchange on Ethereum. So our idea was an ETX token to balance this.
"This way the fee imbalance is taken and stored in a contract on Ethereum, which any ETX token holder would be able to redeem for their share in the contracts.
"At the same time it gives us the ability to do a crowdsale, which would help fund current and future development."
The cryptocurrency community generally, and Ethereum perhaps in particular, are highly receptive to a worthy crowdsale. For example, DigixGlobal, the gold trading platform on Ethereum, had to close its recent DigixDAO token sale after 24 hours.
People understand fully that this is like the internet 25 years ago: everything that's happening now is ground-breaking. When EtherEx tentatively floated the idea of a ETX they were inundated with responses and their Slack channel grew fivefold.
John Calabrese business advisor, EtherEx, said a crowdsale also keeps the team motivated and gives the community a way to invest in these ideas. "What we are hearing in response is that this should be a core capability of Ethereum to help it really grow. There are many tokens in the environment, so if you have a decentralised trading platform, it allows for all of those tokens to be exchanged. So it's been really well received in that regard."
Eric Conner added: "You have to see it as outside of what people normally think of as cryptocurrency trading; Bitcoin or Ethereum, and the price going up and down. We see it more than that. It's really an exchange of any token that's on the entire platform."
The team is still really working on the details and the economics around the ETX token. "It's complicated," said Conner adding that part of the idea was ETX tokens would possibly be created with each trade on the exchange.
He pointed out that typically fees at exchanges come in around 0.2% every trade, which is pretty high. Solving the EtherEx gas would be a fixed fee which would be a great deal smaller."
He also made the point that something like 14% of all ether is sitting in Poloniex. "It's a centralised exchange, right. It seems like a very legitimate exchange but again, we are trying to solve the problem where you take that risk out of the cryptocurrency world."
With ground-breaking ideas being flown on Ethereum come uncharted regulatory territories. The hope is that regulators will see that decentralisation in this context removes the possibility of another Mt.Gox.
Conner said: "This is something we are looking into and something a good deal of the proceeds of the crowdsale will likely go towards. It's not the best use of our resources, in our opinion, since it's not directly adding value to the technology, but the regulatory environment is a reality we have to deal with."
"I think the best thing we can say right now is that this is really a new frontier of ungrazed land and we are learning it as we go."