6 ms·

I'm surprised that Nasdaq, BATS, or some other conventional equities exchange operator hasn't gotten into the cryptocurrency exchange business. A lot of the is

by sna1l 9y ago

I'm surprised that Nasdaq, BATS, or some other conventional equities exchange operator hasn't gotten into the cryptocurrency exchange business. A lot of the issues with current exchanges is a combination of scaling issues, scaling/trust, and regulation. I feel like conventional equities exchange would be able to deal with those issues quite easily

avenoir 9y ago
Curious, how much of these scaling issues are due to limitations of blockchain tech rather than conventional exchange architecture. I feel like that would be a different area of expertise.
- deleted 9y ago
  [deleted]
Klathmon 9y ago
In my opinion it's a completely different area that isn't as similar as you'd expect. For starters, cryptocurrency exchanges need to know the crypto they trade with VERY well. It's an area where the law won't help you if you mess up. If someone steals a bunch of bitcoin from your exchange, a police report isn't going to get it back, it's gone for good. Then add in that crypto exchanges are 24/7 (not just during business hours), and I'd argue that scaling them is much harder, nobody knows if cryptocurrencies will double (or more) in usage over the next few months, or if they will halve (or more) in that same time. A single runup could cause 10X the trading activity overnight. I do think that we need more legal, regulated competition in this area, but I don't think for a second that the answer is Nasdaq trying to shoehorn cryptocurrencies into their current systems, they are just too different.
- saosebastiao 9y ago
  > For starters, cryptocurrency exchanges need to know the crypto they trade with VERY well. It's an area where the law won't help you if you mess up. If someone steals a bunch of bitcoin from your exchange, a police report isn't going to get it back, it's gone for good. With good KYC regulation and enforcement many "hacks" can be mitigated. The Bitgrail hack, for example, was performed by customers taking advantage of shitty code. Presumably they know which accounts withdrew funds, but if they knew who the customers were that belonged to those accounts, they could go after them. This stuff is a big reason why I support exchanges being regulated as money transmitters.
  - tudorconstantin 9y ago
    KYC wouldn't help if hackers breach into legit users accounts.
  - Klathmon 9y ago
    All the KYC laws in the world won't help when someone in another country transfers a bunch of bitcoin from the exchange account to theirs. Or even worse in some cases, someone that maliciously "burns" all of your bitcoin irrevocably destroying it forever by sending it to a bad address. Even if you catch the person that did it, that bitcoin is gone forever, and you can't just bring it back without concensus of the extreme majority of all miners and users (which isn't going to happen in bitcoin, it barely happened in Ethereum when it was much smaller with the DAO hack)
  - russdpale 9y ago
    I disagree. KYC means nothing after the hack has happened. I dont care about people being retroactively punished, I want my coin back.
    - deleted 9y ago
      [deleted]
- overcast 9y ago
  A few years ago, a police report made on the other side of the country, got my cryptomoney back from some punk scammer kid, who was dumb enough to give me his friends real address to ship an item to. I gathered so much intel on his internet habits that it didn't require much police intervention to sort out. His Mom and Dad weren't pleased :)
  - jiggunjer 9y ago
    a mail order scam isn't the same as a server hack.
  - atm0sphere 9y ago
    Tell the full story!
- sitepodmatt 9y ago
  Fair points but you have to consider that many of popular Bitcoin exchanges until recently were some nasty PHP/mysql based matching engines. The non-crypto exchanges already have the matching engine technology to easily handle volume of trades that main exchanges see today and probably with greater reliability and latency guarantees (internally). The work on the tech side would be building the infrastructure around the matching engine, clients to move crypto in and out of the exchange, supporting margin trading, cold storage of significant part of client reserves, KYC/AML auto reporting, infrastructure for top tier clients - cross connects to matching engine, trade phone support, but this isn't rocket science (although I don't downplay the work involved)
JustAnotherPat 9y ago
Crypto exchanges are completely unregulated and are dominated by behavior that wouldn't be legal on actual security exchanges. Because of this, a legitimate exchange would never really gain traction. Just look at Gemini.
- DINKDINK 9y ago
  >Crypto exchanges are completely unregulated Cryptocurrencies are far from unregulated[1]. [1]https://coincenter.org/entry/cryptocurrencies-are-far-from-unregulated https://coincenter.org/entry/cryptocurrencies-are-far-from-u...
  - JustAnotherPat 9y ago
    Being licensed as a money transmitter has nothing to do with with crypto trading regulation. In fact many of those licenses explicitly state such: >Coinbase, Inc. is licensed by the Virginia State Corporation Commission as a money transmitter, but such license does not cover the transmission of virtual currency On top of that, we're talking about the big players like Bitfinex, who created USDT simply so they didn't have to comply with any sort of banking laws, let alone securities trading regulations.
    - DINKDINK 9y ago
      Your claim was that cryptocurrency exchanges "are completely unregulated" which by own you admission isn't accurate because there are many exchanges that are mandated by regulations to register with FinCEN as a MSB. It's correct that there are many exchanges where the exchange clearing / trading isn't regulated.
      - JustAnotherPat 9y ago
        Ok, trading is completely unregulated. When we are talking about exchanges we are generally talking about what they are designed to do (trade) not details about how a small amount get USD onto their platform. Even so, these so called regulations you point to don't exist on the biggest exchanges like Bitfinex, Binance, or even Poloniex. Poloniex pulled out of states once licenses started being required to deposit USD.
andrewla 9y ago
I think the biggest problem is that nobody is working in the clearing and settlement areas. Nasdaq, BATS, etc., do not touch that aspect of it, although Nasdaq has tried their hand at clearing in the past. The big players that you'd expect to move first in traditional financials would be the clearing houses, notable The Clearing House and Apex, with Apex, as the scrappy upstart, seeming to be the obvious candidate for offering vaulting/clearing facilities for cryptocurrencies. I'm surprised they haven't made a move into it, though I've heard rumbling that they've been dipping their toes into the space.
Blackthorn 9y ago
It's not exactly the same but some futures exchanges offer crypto futures for Bitcoin and Etherium. They're cash settled though. That's really nice because at least you don't have appreciable risk from the exchange itself when you use CFE from your usual broker.
- sitepodmatt 9y ago
  You kind of do have some risk that doens't exist in trading normal equities etc.., there's usually an unexpected drop in BTC price once a bitcoin exchange hack is frontpaged.
  - Blackthorn 9y ago
    There's plenty of risk inherent in Bitcoin itself, but at least with Bitcoin futures there isn't the risk of the exchange itself just running off with your money or your goods (as has happened many, many times in the history of Bitcoin).

by sna1l 9y ago

avenoir 9y ago

Curious, how much of these scaling issues are due to limitations of blockchain tech rather than conventional exchange architecture. I feel like that would be a different area of expertise.

deleted 9y ago
[deleted]

Klathmon 9y ago

In my opinion it's a completely different area that isn't as similar as you'd expect. For starters, cryptocurrency exchanges need to know the crypto they trade with VERY well. It's an area where the law won't help you if you mess up. If someone steals a bunch of bitcoin from your exchange, a police report isn't going to get it back, it's gone for good. Then add in that crypto exchanges are 24/7 (not just during business hours), and I'd argue that scaling them is much harder, nobody knows if cryptocurrencies will double (or more) in usage over the next few months, or if they will halve (or more) in that same time. A single runup could cause 10X the trading activity overnight. I do think that we need more legal, regulated competition in this area, but I don't think for a second that the answer is Nasdaq trying to shoehorn cryptocurrencies into their current systems, they are just too different.

saosebastiao 9y ago
> For starters, cryptocurrency exchanges need to know the crypto they trade with VERY well. It's an area where the law won't help you if you mess up. If someone steals a bunch of bitcoin from your exchange, a police report isn't going to get it back, it's gone for good. With good KYC regulation and enforcement many "hacks" can be mitigated. The Bitgrail hack, for example, was performed by customers taking advantage of shitty code. Presumably they know which accounts withdrew funds, but if they knew who the customers were that belonged to those accounts, they could go after them. This stuff is a big reason why I support exchanges being regulated as money transmitters.
- tudorconstantin 9y ago
  KYC wouldn't help if hackers breach into legit users accounts.
- Klathmon 9y ago
  All the KYC laws in the world won't help when someone in another country transfers a bunch of bitcoin from the exchange account to theirs. Or even worse in some cases, someone that maliciously "burns" all of your bitcoin irrevocably destroying it forever by sending it to a bad address. Even if you catch the person that did it, that bitcoin is gone forever, and you can't just bring it back without concensus of the extreme majority of all miners and users (which isn't going to happen in bitcoin, it barely happened in Ethereum when it was much smaller with the DAO hack)
- russdpale 9y ago
  I disagree. KYC means nothing after the hack has happened. I dont care about people being retroactively punished, I want my coin back.
  - deleted 9y ago
    [deleted]
overcast 9y ago
A few years ago, a police report made on the other side of the country, got my cryptomoney back from some punk scammer kid, who was dumb enough to give me his friends real address to ship an item to. I gathered so much intel on his internet habits that it didn't require much police intervention to sort out. His Mom and Dad weren't pleased :)
- jiggunjer 9y ago
  a mail order scam isn't the same as a server hack.
- atm0sphere 9y ago
  Tell the full story!
sitepodmatt 9y ago
Fair points but you have to consider that many of popular Bitcoin exchanges until recently were some nasty PHP/mysql based matching engines. The non-crypto exchanges already have the matching engine technology to easily handle volume of trades that main exchanges see today and probably with greater reliability and latency guarantees (internally). The work on the tech side would be building the infrastructure around the matching engine, clients to move crypto in and out of the exchange, supporting margin trading, cold storage of significant part of client reserves, KYC/AML auto reporting, infrastructure for top tier clients - cross connects to matching engine, trade phone support, but this isn't rocket science (although I don't downplay the work involved)

JustAnotherPat 9y ago

Crypto exchanges are completely unregulated and are dominated by behavior that wouldn't be legal on actual security exchanges. Because of this, a legitimate exchange would never really gain traction. Just look at Gemini.

DINKDINK 9y ago
>Crypto exchanges are completely unregulated Cryptocurrencies are far from unregulated[1]. [1]https://coincenter.org/entry/cryptocurrencies-are-far-from-unregulated https://coincenter.org/entry/cryptocurrencies-are-far-from-u...
- JustAnotherPat 9y ago
  Being licensed as a money transmitter has nothing to do with with crypto trading regulation. In fact many of those licenses explicitly state such: >Coinbase, Inc. is licensed by the Virginia State Corporation Commission as a money transmitter, but such license does not cover the transmission of virtual currency On top of that, we're talking about the big players like Bitfinex, who created USDT simply so they didn't have to comply with any sort of banking laws, let alone securities trading regulations.
  - DINKDINK 9y ago
    Your claim was that cryptocurrency exchanges "are completely unregulated" which by own you admission isn't accurate because there are many exchanges that are mandated by regulations to register with FinCEN as a MSB. It's correct that there are many exchanges where the exchange clearing / trading isn't regulated.
    - JustAnotherPat 9y ago
      Ok, trading is completely unregulated. When we are talking about exchanges we are generally talking about what they are designed to do (trade) not details about how a small amount get USD onto their platform. Even so, these so called regulations you point to don't exist on the biggest exchanges like Bitfinex, Binance, or even Poloniex. Poloniex pulled out of states once licenses started being required to deposit USD.

andrewla 9y ago

I think the biggest problem is that nobody is working in the clearing and settlement areas. Nasdaq, BATS, etc., do not touch that aspect of it, although Nasdaq has tried their hand at clearing in the past. The big players that you'd expect to move first in traditional financials would be the clearing houses, notable The Clearing House and Apex, with Apex, as the scrappy upstart, seeming to be the obvious candidate for offering vaulting/clearing facilities for cryptocurrencies. I'm surprised they haven't made a move into it, though I've heard rumbling that they've been dipping their toes into the space.

Blackthorn 9y ago

It's not exactly the same but some futures exchanges offer crypto futures for Bitcoin and Etherium. They're cash settled though. That's really nice because at least you don't have appreciable risk from the exchange itself when you use CFE from your usual broker.

sitepodmatt 9y ago
You kind of do have some risk that doens't exist in trading normal equities etc.., there's usually an unexpected drop in BTC price once a bitcoin exchange hack is frontpaged.
- Blackthorn 9y ago
  There's plenty of risk inherent in Bitcoin itself, but at least with Bitcoin futures there isn't the risk of the exchange itself just running off with your money or your goods (as has happened many, many times in the history of Bitcoin).