J3 SAY 05 Don Mosites Building a Global Marketplace on Token Trade

good afternoon everyone I'm dawn mastitis co-founder of a company called air swap we are a peer-to-peer aetherium token trading network based in Brooklyn I've been based in Paris for about a year and a half it's been incredible meeting people from throughout the community in Paris and France and and you're up in that time we are a team of deep experience in financial technology and trading and product development I myself come from a background of early stage technology startups and today I'm here to talk about the the promise and opportunity of building a global marketplace on blockchain technology and what it's going to take to get us there first if we think first if we think of trade as a platform where blockchain has provided a new economic foundation we can now tokenize all kinds of assets so we can bring them online and make them available for trade and it's this trade that enables us to construct a new global marketplace without borders and therefore its risks to trade that risk the integrity of this marketplace and what do I mean by risk primarily the risk of centralized trust so trading systems today are largely centralized what that means in the crypto space is that they play roles of bank broker and Clearing House all in one and as a bank we trust them to not fall victim to theft and mismanagement mismanagement because they're holding your funds as a broker we trusted not to collect exorbitant fees when the Connect traders and as a clearinghouse we trust in to settle trades and not act on insider information so if centralization is a risk to trade why is 99% of Trade and centralized first because it's good for market makers and centralized order books offer predictable instant execution and settlement and it's free to place in canceled orders and they have low transaction fees second it's good for market coverage centralized order books can easily list disparate markets between ether Bitcoin and US dollars and these are the largest most liquid markets so knowing what gives these these systems strength we got this let's let's decentralize trade so where do we start first we must eliminate risk blockchain itself enables personal asset asset custody which is incredibly powerful that is in part facilitated by our friends at Ledger who I believe are presenting shortly after this and also trustless settlement which means to say that between two parties you can actually settle a given trade or transaction without the intervention of a third party and and the performance and interoperability of those those settlements is underway but we must maintain parity and what I mean to say is that in order to compete with the centralized trading systems you must at least meet market making and market coverage parity that is to say that it must be good for market makers we must offer predictable execution and settlement and there must not be costs to placing or cancelling orders also market coverage we must support many markets and quickly add new markets and blacklist those that are fraudulent regulated or malicious so those that purport to be tokens that they're not for example and of course market coverage parity actually requires cross chain in fiat trading in order to cover those larger markets but if there is a great place to start because ninety one of the top hundred tokens are here so if we decompose if we decompose this a little bit into the types of liquidity they would like to support for our market place we can think in terms of both fungible and non fungible fungible is to say that a given unit is interchangeable with another like a dollar or any other currency and non fungible like like a chair or a microphone or something or an asset like a crypto kitty fungible highly liquid assets are for faster more popular markets more likely fungible low would be slower possibly newer markets functional block are for larger trades and non fungible being those actual pieces of property that people can trade if we compare those to the types of trading systems that we have to to employ we have order books which we consider local to be locally operated more likely to be regulated because they actually handle orders they provide shared liquidity and public pricing which are both very important and peer-to-peer and auctions which we consider to be global and less likely to be regulated because they don't actually handle price price orders in most cases and offer tailored liquidity which means to say that a given trade is actually for a given counterparty and the case of peer-to-peer private pricing which is also powerful and in the case of auctions competitive pricing which is of course powerful in its own right so if we match these system types and liquidity types we can imagine that order books serve highly liquid fungible markets very well and we imagine that given their likelihood to be regulated there will be winners in each jurisdiction across the world they do not serve lower liquidity or block trades or non fungible assets nearly as well and I'd be happy to talk more about that after the talk peer-to-peer and auctions we believe have given their global nature there will likely be one or a few winners in these types of trade and peer to peer itself does offer excellent capabilities in both high and low liquidity assets and block trades auctions we imagine are more for larger trades you not going to necessarily auction off a smaller amount of a given asset and for non fungible assets we believe that in peer-to-peer and auctions there will be winners in each kind of asset so that means to say that there might be a winner in a home auction network or there might be winners in a peer-to-peer trading network for video game items so another way to visualize this is to imagine an important concept we think and many in the room will be familiar with the long tail that has to say that on the on the left at the head you have more popular but in this case higher liquidity markets and as the tail grows out you have or lower liquidity markets order books themselves can only get you so far because adding new markets to an order book takes assessment of each asset it takes manual work we do believe that the scalability into new markets is a very important part of building a global marketplace and imagine that peer-to-peer and auctions can certainly take us all the way because providing liquidity for a given market just means entering that market and making trades so this is the this is the thinking that we had when we were designing air swap and we we focused on peer to peer we are a peer-to-peer trading network we do not run order books we do run on our own protocol called the swap protocol and we believe peer to peer truly embraces the power of blockchain itself which is ultimately a peer-to-peer networking on our networked peers announce their intent to make and take markets to an indexer which is basically a search engine which makes them available for trade other peers can find them by searching and exploring the indexer you can imagine that if you run a search on an index or get a list of prospective counterparties and ask for orders from each one of them you can actually get competitive pricing which is also very powerful for peer-to-peer if we take a step back on our network the indexer serving as a discovery mechanism between market makers and market takers makers sorry takers being represented by apps and the the people that use their applications market makers announcing their intent to serve liquidity to given markets so they can say they're trading token a any taker given one of these apps can search for token a and this counterparty will show up and they can connect directly peer to peer taking an even further step back both sides of the market between market makers and market takers we see this as the growth engine where makers are actually announcing their intent to trade given markets and takers can actually announce their intent to take given markets to signal that they desire liquidity in new markets in the center you'll see the what we call the fill incentive which is a bit understated there we consider that to be the super charger of this system where an individual market maker can price on a given order what they consider the value to have that filled and so a maker can say on this order I would like to pay X amount if an app actually facilitates that order with one of their users the app is compensated for that and so makers have a very valuable tool in being able to pay for trade flow and apps are incentivized to join the network and make trades so this ultimately takes us from one market to many today we have a front end on a single back end this is a third-party market maker that we're working with right around the corner we are opening up into a marketplace with multiple makers we recently announced that we have three professional market makers joining the system and we provide providing liquidity to 24 new markets and later when we talk about additional interfaces in additional apps and the ability for this network to actually grow around the world and into new markets and of course we are still based on aetherium this is this is a great place to be but reaching true market coverage parity means trying to either represent despaired assets as aetherium tokens this can be done for example with die by by attempting to peg to the dollar or wrapping the native token of ether as an A or C 20 token representing some kind of redeemable voucher for another asset on another network we're exploring many technical solutions to do this it's certainly an interesting conversation to have and then also portrayed atomic swaps which I think are a little bit a little bit more cumbersome but they certainly are good for likely peer-to-peer block trades and things like that so there is a bright future for trading beyond aetherium and we believe that it's actually pulling more and more assets into aetherium but second we still have to make sense for market makers and to reach true market making parity for peer-to-peer and auctions because execution and settlement is generally between peers it is naturally decentralized on an order book though execution itself we believe must be performed by a central authority in order to preserve price time priority and therefore or I mean alternatively some kind of consensus mechanism but it would be orders of magnitude slower and and so that's why we believe that trustless order books are likely impossible and to well that that does include every implementation of a xerox relayer but but many others as well if you're trying to build an order book on a block chain they still have a role as semi trustless venues for establishing market value which is certainly a very important role in a global marketplace so knowing the the opportunities and the roles and the the possibility of working in tandem between peer-to-peer and order books and auctions we certainly are and will continue to be working together to determine the the best designs going forward for decentralized trade to fully understand market making needs and behavior because without market makers there likely are not markets and something is very important to us as a community I believe is maintaining a shared market blacklist and that is to say these are the assets that are unfit for trade that they're fraudulent and misrepresenting themselves or in some other way malicious and very importantly because this was mostly a technical talk and I'm actually a user experience guy myself but establishing best practices in usability and user experience will certainly be very important in making this accessible to a global audience so together we believe we can truly unleash a new global marketplace certainly welcome any conversations about this and about trade systems and trade liquidity we and air swap fully believe in the power of peer-to-peer and would love for you to join us thank you so from a user experience what is the difference between an index or an order book so a user would for example run a search on an indexer which would pull up counterparties that are trading the tokens that they seek to trade and then either could manually or your software it actually go off and fetch orders for the amounts that you you desire and so you are actually going off and asking the indexer who is trading these tokens and then it would come back and say these guys are trading these tokens and then it would give you orders for each one of those that you can choose so these orders are made for you peer-to-peer because you've connected directly to a counterparty after having discovered them on the indexer so it's actually so you're actually communicating an order between two peers and then that that order is created for that specific counterparty i'm konstantine from changing the instant exchange we are a bit competitive maybe on the market maybe deprived what are main competitive advantages before the centralized since the instant exchange services because I understand that you are the much less liquidity but it's maybe trust or something else because it's as I understand the order box is ill centralized what is your main competitive advantages competitive against which competitive advantages before they are centralized instant exchange services like shape-shift or changeling well for any one of those you're you're trading against a specific counterparty and there's actually only one counterparty so pricing is is what you get and obviously if that service goes down you're out of luck I mean you're basically at the whims of the counterparty in that case but in the system like this if you're a peer-to-peer and you actually have a whole network of peers that can serve your needs you can actually request orders from many counterparties and likely get competitive pricing that way a market blacklist that we should maintain it as the market so how do you imagine that and what do you mean by by it well we just mean to say that that ought to be a collaborative effort that we could all gain from so if there's a singular referenceable list of known to be just bad assets for whatever reason they're just unfit for trade or maybe specifically regulators within a given jurisdiction decided they don't that XY and z are securities for example we believe that rather than sort of singularly self-contained managing what's good and bad for trade this would be something that would would gain collectively as an ecosystem so we so I'd speak in terms of blacklist because I want to maximize scalability there of course is alternative view in a whitelist to say these are the only tokens that we can trade but that of course has a very limited effect what exactly is wrapping your your head sorry well what is meant by a wrapping either oh yes so I kind of buzzed her for that so ethers of of course the the native coin or token of of aetherium but in order to trade it in a when we talk about etherium tokens we generally speak of kind of the the granddaddy of fungible asset standards which is er C 20 and so what we could do is standardize a contract that actually performs the trade between two ER c 20 compliant tokens and so in order to convert your ether into something that's compatible with that ecosystem you wrap it into an e or C 20 compatible token if that makes sense thank you [Applause]