Exchange infrastructure

Note that this is a second article from the series. I highly recommend reading part 1 first. In the previous article I have explained what Digitex actually tries to accomplish and how the underlying DGTX token will work. I the Whitepaper Breakdown Pt.1 I only scratched the surface of the exchange’s infrastructure, a hybrid semi-decentralized and semi-centralized model. It’s time to get a little deeper now. Let’s take a look at the team’s motives and desired outcomes behind such a decision.

Current problems of decentralized exchanges

There are currently some unresolved problems regarding decentralized exchanges. The biggest issue (from my point of view) is the on-chain latency. The transaction itself cannot be executed before it is hashed into a next block. That’s simply the nature of the Blockchain. The need to wait (in best case scenario at least 3 seconds) can very easily result in a possibly uncomfortable user experience or even a bad trade (for the situation on the market can change before the platform accepts your command).

Another problem is the lack of privacy. Due to the nature of the Blockchain, everyone can see trade details in individual accounts, which transactions (actions) they executed and how much wealth they are or were holding. Even though the technology used by privacy tokens such as Monero could be utilized to solve this issue, it might prove to be way too much resource-exhausting method.

Another huge problem is unsolved reliability problem. Down time is an absolutely unacceptable problem for an exchange. On platforms like Steem one can expect occasional downtimes and adjust the voting strategy accordingly (keeping the VP a bit lower in order for it not to reach 100% when no action can be executed) in order for the stake to be used effectively. Whereas on the exchange a downtime can mean a huge loss due to the inability to deposit/withdraw funds or execute transactions.

Centralized proprieties

Digitex solves all the above mentioned problems with their centralized part of the platform. The exchange will use a centralized off-chain order book and matching system. There will therefore be no on-chain latency. Any trader’s action will be absolutely instantaneous. If Digitex has powerful enough servers, user won’t experience any downtime too. The required computing capacity for such a task is much lower using centralized servers. Nevertheless we can’t be absolutely certain whether the centralized servers will be powerful enough or not. I personally have experienced latency and downtimes even on huge exchanges such as former GDAX or Bittrex. We will have to wait till the platform launches and attracts a significant amount of users in order to validate such a claim. The platform will use Erlang/OTP stack which should significantly ease the effort of solving the latency problem. Erlang/OTP stack is a programming language used for example by apps like WhatsApp. It enables the app to handle millions of simultaneously active users without latency spikes. I do not understand the tech deeply, so feel free to do your own research about the programming language.

I’m not entirely convinced that the centralized proprieties of the platform are going to solve the privacy issue. I might be mistaken somewhere in my logic so feel free to debug me if you uncover the flaw. Truth be told, decentralized projects are 100% transparent if the platform doesn’t decide to throw more resources into additional encryption in order to “hide” the data (privacy coins such as Monero). But what does it mean when the data will be kept “private” on centralized server? It means that the data won’t be seen by ordinary users (thus the platform seemingly becomes privacy-friendly), but the data is not encrypted for everyone. Therefore Digitex employees and basically whoever will get access to their data storages will see the data, thus gaining unfair advantage over the “ordinary” users. If decentralized ecosystem taught me anything it’s that real privacy in an online environment can only be achieved through decentralized encryption (otherwise random third party owns the data).

Decentralized proprieties

On the brighter note, Digitex does utilize Blockchain where it truly counts. As I said in the previous article, the worst thing about centralized exchanges BY FAR is the fact that they own your keys, or in other words, you don’t own your tokens. That is a huge problem for multiple reasons. I guess that there is no need to speak about why it is a problem not to own what should be ours, but it could be useful to speak about its implications. Because centralized exchanges gain control over our funds as soon as we deposit them, they actually gain huge holdings over time. Such a concentrated wealth is then attracting hackers. There will be very little incentive for hackers to attack Digitex, if the only possible information that could be gained is the holdings of individual accounts, but not the funds themselves. Moreover, when the Digitex won’t own the tokens, there is no way any authority could force them to do anything with the funds.

Users’ funds will be located in smart contracts. There needs to be a way for traders to be sure that they will receive their funds if they managed to complete a profitable trade and on the other hand to make sure that the one that made a bad trade will truly yield his funds. Whenever a trade will be executed the whole Blockchain will be scanned for all the previous funds movement in order to validate that the user is truly operating with an amount of funds that he owns.

Additional platform features

There are still some neat features provided by the platform that didn’t really fall under any described category yet. Let me introduce them now.

DGTX peg system

Since the platform will not support fiat currencies, there might be a problem for potential investors that wouldn’t want to have significant amount of DGTX as a part of their crypto portfolio. As DGTX will be as unstable as the rest of the cryptocurrencies, it could be driving investors away from the platform. That’s why the platform will come with a pegging system. Investors could basically buy a futures contract, pegging the current DGTX value for any amount of their tokens. They could then be sure to have a stable value on the commodities they want to trade with. In order to make up for potential loss, traders will have to lock in the margin payment.

Sovereign platform

Since all the actions are going to be executed in DGTX, no government authorities have any power in that ecosystem. By that the platform completely eluded potential KYC/AML shenanigans that almost all the exchanges currently have.

Market makers

In the previous article I also stated that 20% of the DGTX supply will be given to the market makers. Market makers will be bot traders programmed to break more or less even. Due to their huge stake they will be able to provide much needed liquidity from the very first seconds the platform will be online. New exchanges have usually very low volumes even for years after their initial launch. I believe that market makers will make a huge competitive advantage over the competition.

Pairs and leverage

The platform will come with BTC, LTC and ETH pairs. The leverage will be up to 100x and there will be no auto-deleveraging that other exchanges use in order to not lose too much money.

Potential Sources

* Project Website: https://digitexfutures.com/

* Products & Services:

https://digitexfutures.com/exchange/

[https://digitexfutures.com/dgtx/https://digitexfutures.com/dgtx/)

* Digitex Team: https://digitexfutures.com/about-us/

* Digitex Story: https://youtu.be/Bbz_uqstEgY

* Facebook: [https://www.facebook.com/DigitexFutures/https://www.facebook.com/DigitexFutures/)

* Medium: [https://medium.com/digitex-futures](https://medium.com/digitex-futures)

* Twitter: https://twitter.com/digitexfutures

* Youtube: [https://twitter.com/digitexfutures?lang=en](https://twitter.com/digitexfutures?lang=en)

* LinkedIn: https://www.linkedin.com/company/digitex-futures-exchange/

**DISCLAIMER**

The information contained within this post shall not be taken as a financial advice. I am not a financial advisor and none of your investment decisions should be carried out based on any information presented here. You can lose all of your money by investing. The information presented in this article is for educational and entertainment purposes only.