Bitshares is the perfect place to build an exchange if you don't feel like building an exchange. Think about it. All the hard work is done. Sure, you still have to create wallets for native coins and secure them, no small task, but if you were building your own exchange, you'd have to do that anyway.
Bitshares is a true Exchange engine. Fork the UI, establish a prefix like PIMP.BTC for your tokens and stake your claim. Openledger, Rudex and CryptoBridge all understand this and are valuable partners in the Bitshares ecosystem.
This got me thinking about arbitrage and liquidity. It's been difficult to create meaningful volume in part because arbitrage is so cumbersome. I think the core reason arbitrage is difficult is the lack of a FIAT gateway. I equate this to a river very little water in it. FIAT unable to gain entrance into an exchange is like a dam with no outlet. The water just sits there. once FIAT can flow, the river gains strength.
So, while Openledger has a FIAT gateway, it's not really an automated process like say Coinbase. In my opinion, the next best thing to a FIAT gateway is BTC. BTC is the gateway drug for crypto currency. It's got brand recognition and history. For all reasonable intent, it's our gateway. We must make it simple for users to bring BTC into the DEX. This article will not go into detail on how to do that, but we are working on some new deposit modals that will be more intuitive than the current method.
The real reason I wrote this article is to drive home my original point that the Bitshares DEX is an engine for building branded exchanges. One of the most frustrating aspects of this is that each exchange has its own token representing the same crypto currency. Stop and think about this...
- CryptoBridge bridge.btc
- Openledger open.btc
- Rudex rudex.btc
- DEX bitBTC
So, we have 3 BTC coins and none of them trade on the same market. We even have bitBTC which is borrowed into existence. These three exchange tokens are almost never at parity due to lack of liquidity and ultimately lack of trust. Why should these tokens have the same value. Each is just a token handed to you by an exchange who is promising to hold your real BTC while you trade theirs on the DEX. While pondering this, I realized that it's possible to simply send these assets between the exchanges via Deposit/Withdraw in addition to trading them on each exchange. This is arbitrage and it's dead simple to do. If BRIDGE.BTC is trading low relative to OPEN.BTS, buy some, withdraw it to Openledger. Sell that OPEN.BTC for BTS on that market. You can even keep it really simple and just maintain a buy order of .995 and a sell order of 1.005 on the OPEN.BTC:BRIDGE.BTC market and perform a Deposit / Withdraw operation if one side of the trade is getting more action than the other.
I hope this article prompts some enterprising types to start:
- Adding more exchanges
- Manually arbitraging between exchanges
- Building Bots to arbotrage between exchanges
Thanks for tuning in.