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Comment by leoplct | Hacker News Reader

Why should I launch an exchange when there are already hundreds of existing exchange?

As a entrepreneur: Exchange services is very difficult to differentiate. It’s a commodity service. Why should I invest in marketing to promote my new exchange?

As a customer: Why should I buy tokens? - Most of existing tokens have not active project behind - Many times the token is useless for the project and it will not increase in value if project succeed (just see ZRX token. It’s down -76% from 52wk high while your team is working actively on the project. Why investors have to buy tokens?

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If you want to list the same assets as everyone else with the same interface in the same markets, then yes, it's hard to compete. However, we see a world of tokenized assets coming online that will need unique markets for exchange. Something like Radar Relay (https://radarrelay.com/ for ERC-20 commodities) is totally different from Veil (https://veil.co/ for prediction market shares) is totally different from BoxSwap (https://boxswap.io/ for trading collectibles). Even within ERC-20 commodities exchange, there are many different models of exchange within different markets that are sufficiently differentiated.

We think of 0x more like Stripe: an under-the-hood technology that allows entrepreneurs to move more quickly and easily add exchange to their product. The concept of "tokens" and "exchange" will become very abstract in the near future.

> We think of 0x more like Stripe: an under-the-hood technology that allows entrepreneurs to move more quickly and easily add exchange to their product.

One’s velocity should always be slightly less than their SEC defense attorney. If you're legit, take the time to make sure your paperwork is legit.

https://news.ycombinator.com/item?id=18185701 (Top comment by Animats should draw your attention)

Launch Kit is not an ICO or promoter, it's a platform for crypto exchanges. Could you elaborate why you're referring to a comment detailing the SEC going after ICO scams?

Not that I have any interest in launching an exchange, but I do see what you mean by the possibility of an exchange becoming quite abstract. If housing deeds are traded then a housing marketplace is an exchange. If cars ownership is traded then a car marketplace is an exchange. If in-game items are traded, it's an exchange.

Could one think of stores as one-sided exchanges, where resale is just not natively possible? Does Google operate an ad exchange? Is iTunes an exchange? If digital goods ownership were on a blockchain then resale would be possible... What about physical goods?

I'll give you my answer because I have a project which could have used this.

I created a dapp that allows people to do [stuff] which generate some erc-20 token for users. They can then use this token to access special features on the dapp.

It's easy to let users send and receive the tokens they have. But I want the token to have a value outside the dapp itself.

Unfortunately I cannot get this token accepted on coinbase and other exchanges. Just because it is not important enough.

I still want people to be able to sell or buy these tokens. The next best idea is to create a small exchange platform on my dapp: let people trade the token for ether or for other tokens. It's time consuming to code so I gave up.

Now this is where this thing would have been great.

Hope this helps.

> Exchange services is very difficult to differentiate.

Because financial markets are very globally fragmented. The hardest part about opening an exchange is banking, clearance and KYC/AML. For example the chance that a citizen of say Benin or Uzbekistan could open safely and easily open an account at one of the major crypto exchanges is essentially zero.

There's a lot of parts of the world where there's a captive audience with high demand for crypto trading, but no decent service available. There are pre-existing traditional brokerages and forex shops that have the local banking and KYC/AML infrastructure place, but don't have the tech for the exchange itself.

Think more broadly about what an "exchange" could be. You're thinking crypto forex, but consider a crypto-kitty bidding platform or a virtual game item marketplace.

Or market for insurance policies. Or bonds. Or stocks. Regulation is clearing up and there are many biting at the bit for this. The disruption of financial markets may not happen tomorrow, but once it does it will go fast in each market. If there are more efficient venues, competitive market participants will start moving once they realize that they will be at a competitive disadvantage if they don't. When I say efficiency, I am not talking in technical terms and not necessarily on the kind of environments we see on public permissionless chains. So let's keep transaction finality and computational efficiency out of scope for a moment.

Think of chains as subnets on the internet. The gaps will be bridged to allow seamless transfers between them.

I've been wrong before but to me this is bound to happen. How many businesses in competitive areas have fax as a preferred method of communication today?

Don't take what I'm saying as an argument in favor of buying ZRX tokens. I do think it's a cool project, albeit IMO could have done better without the utility token as an inherent component. But that's more about the business model than the tech. It will probably be another boom and bust before we see the leading protocols emerging.

> Regulation is clearing up and there are many biting at the bit for this.

In what way is regulation actively harming your ability to purchase shares of a legitimate operating business without overextending yourself financially? Please be specific.

By "clearing up" I mean that we are starting to see how regulation is being applied, not that it is being relaxed.

I actually don't see how your question relates to what I wrote at all..? Sorry, English not native language etc. Please clarify if I wooshed.

To clarify, many, especially investors, bigger businesses and financial institutions have been cautious because of regulatory uncertainty.

There's still ways to go, but it's happening. The sky is far from blue but the wind is blowing, so to say.

The ability to compensate someone who is creating value in a network with ownership of said network (eg giving an early uber driver, or Airbnb host, options or equity.) this is currently not possible to do in the US, but is possible with crypto networks.

> How many businesses in competitive areas have fax as a preferred method of communication today?

Oh just large legal and healthcare companies[1].

[1] https://www.popsci.com/why-fax-machines-still-exist

I'm thinking a database.

If you're willing to trust the entity holding your assets, then a database will suffice. The non-custodial features of 0x enable exchange without reliance on third parties.

The reliance on the severely distorted plutocratic ownership of 0x, Ethereum, and most of the cryptocoin supplies is a huge risk factor that is often conveniently swept under the rug.

By building on 0x, or other cryptocoin software it's essential to be aware of the elephants/whales in the "economy" of cryptocoins and tokens.

Agreed, especially with respect to Ethereum's governance. The ETC/ETH fork is still fresh in many peoples' minds.

Yeah that was brutal; the definition of oh, you lost a few thousand dollars? That sucks ETH transactions are irreversible. Now I lost a few hundred million so all of a sudden it’s reversible, no harm no foul -- and most importantly, no lessons were learned that day.

Yea I mean, if we're going to go down the hole of "cryptokitties" and other asset exchange, let's be honest, we're reliant on a third party to create the value in the first place already.

judging a cryptocurrency projects usefulness on cryptokitties is like judging a front end frameworks usefulness on “TODO MVP”: it’s just the example of a tradable asset that everyone uses BECAUSE it has no value and anyone can just set it up to test.

substitute crypto kitties with something more real, like say a government starts to issue ownership information for cars (pink slips in the US i think? idk exactly) on the blockchain... there’s live, traceable ownership information, duties can be calculated and applied automatically, and traded on a platform like this. this is an asset that has real value because it exists in the real world; it’s not the bit of paper that has value, it’s the significance that it constitutes ownership of an asset

*EDIT: and i’m not saying that this idea has value either; it was just an example of something with intrinsic value rather than “third party created value”

> judging a cryptocurrency projects usefulness on cryptokitties is like judging a front end frameworks usefulness on “TODO MVP”

If you sold one of your TODO notes for $170,000 [1] frankly I think that'd be a fair judgement to make.

> substitute crypto kitties with something more real, like say a government starts to issue ownership information for cars (pink slips in the US i think? idk exactly) on the blockchain... there’s live, traceable ownership information, duties can be calculated and applied automatically, and traded on a platform like this. this is an asset that has real value because it exists in the real world; it’s not the bit of paper that has value, it’s the significance that it constitutes ownership of an asset

You know you can do that with a database right? Literally, a database. Like we have today. That's how it works today. You're trying to introduce complexity and inefficiency into the US government. It's like trying to sell ice blocks in the arctic, but somehow dramatically less efficient.

I already trust the government to allow me to drive my car. Why on earth does this need to be decentralized? It's the definition of centralized. A vehicle registration reflects the governments acknowledgement that you own that vehicle and are allowed to drive it at the governments discretion. If they revoke it your blockchain entry will be totally worthless and just out of sync with reality. The value is created by the government.

[1] https://ethereumworldnews.com/worlds-expensive-cryptokitty-6...

> If you sold one of your TODO notes for $170,000 frankly I think that'd be a fair judgement to make.

Other than the fact that people spend stupid money on stupid things [1], I'm not sure what your point is

> You know you can do that with a database right? Literally, a database

Yes, and this is a generic solution that applies to any kind of asset, and then software like 0x can plug in to trade said assets. Generic cases are always more complex than specific cases

> trying to introduce complexity and inefficiency into the US government

Well actually I'm trying to do nothing of the sort: As I said, it was an example of asset trading of something with intrinsic value, and not a valid use-case

> I already trust the government to allow me to drive my car. Why on earth does this need to be decentralized?

It has nothing to do with trusting the government, or driving a car. It has to do with transferring ownership information of an asset with intrinsic value between 2 parties, ensuring payment without relying on (possibly expensive) escrow

You seem to be conflating a number of examples that I made to explain specific points to be a proposition of things that should actually be done

[1] https://mentalfloss.com/article/54308/9-most-pointlessly-exp...

> It has nothing to do with trusting the government, or driving a car. It has to do with transferring ownership information of an asset with intrinsic value between 2 parties, ensuring payment without relying on (possibly expensive) escrow

The government is the entity that recognizes the change of ownership, it's not something you can do without their approval. Your change of ownership is being filed with the government and is available at their discretion - they can choose to block it. Car registration isn't for your benefit. If you require the government's approval you may as well store it in their database. I just saved you a blockchain :)

And yet again you've missed the point... So I don't understand how the ownership and transfer of ownership of vehicles works in the US (where, BTW, I do not live, and have no need to understand).

Let me say it again so it's really obvious:

It has to do with transferring ownership information of an asset with intrinsic value.

Stop arguing the specifics of the admittedly flawed example that I came up with between starting to type, and ending typing the sentence.

I respect that may have been a poor example, but I think you’re missing my point, which is that the information on the blockchain isn’t relevant if it’s not in sync with state off the blockchain, doubly so when not backed by law.

Ok your car is registered on the blockchain and you fail to pay your bills. Now it belongs to your lender. Well, the blockchain says one thing but the lenders tow truck says another. So what good is it? Blockchain technology does not address this critical component which is the faith that reality reflects the consensus on chain.

The reason the only thing that has any traction at all is cryptocurrency is that the entire concept is encapsulated on chain. The second the chain becomes a record of the real world it falls over because the world won’t change to reflect the blockchain and the blockchain won’t change to reflect the world. Only cryptocurrencies have intrinsic value captured on chain, and I am being generous when I say value.

Answering why is up to you, the builder; differentiation is key to why 0x has created this protocol.

"Tokens" can be a special kind of object which can be "exchanged" for other kinds of objects. It is not always about purchasing or swapping; this interaction can solve many different kinds of coordination problems.

The exchange can create a context around users interacting via various types of tokens, enabling new kinds of services and communities to form. This could lead to enormous value for users.

> This could lead to enormous value for users.

In what way? I think that was the parent poster's question. I think it's fair if we're going to be making huge broad-strokes claims we should at least attempt to justify them.

The properties of the general medium and of exchanges themselves would provide value if built upon. At the core of of the value proposition is the value derived from more efficient human coordination.

- Giving certainty about the properties of the token asset to the user. Whether trading the exchange or in use at a service which accepts the token, the user verify what the token actually does. And what might change! Reduces risk of policy-change by owners and managers of services.

- Giving control of the token asset to the users, or at least a verifiable level of control. Reduces risk of interference.

- Securing the token asset, protecting the asset and related data. Reduces risk of loss.

- Enabling easy integration or migration to other smart contract systems, due to token standards like ERC-20 and ERC-721. Reduces risk of vendor lock-in. Powers beneficial second-order effects.

- Enabling composability. With primitives like various kinds of tokens and "exchange" addressed and standardized, new layers can be built, new configurations found. Creates value by reducing steps for users as they engage with each other within token-based smart-contract systems.

Different jurisdictions have different compliance requirements. Not sure, but my guess is the goal of this project is to allow regulatory arbitrage with a single unified interface.

Capabilities to enforce regulatory compliance on permissionless chains is coming. You could, say, have zero-knowledge proofs in smart contracts that enforce that tokens representing security X can only be transferred if the receiving account has performed KYC and confirmed as an accredited investor in jurisdiction X, Y or Z, without leaking any PIIs that went Intl the verification.

Or more trivially, TPL for account tagging.

Microsoft's initiative on decentralized identity leveraging on the Bitcoin blockchains could be a component in this. Excellent podcast episode here: https://letstalkbitcoin.com/blog/post/what-bitcoin-did-107-m...

Not to say you're completely wrong, just that smart contracts can be used to enforce regulation rather than skirt it - like any tool the outcome depends on the intentions of the one wielding it. :)

I sincerely hope permissionless solutions make such permissioned solutions obsolete. There are people, who by accident of their place of birth, are not permitted to use permissioned financial systems.

Yes. What many of the well-intentioned people (many with libertarian/cypherpunk/anarchist ideals) in the blockchain space are building now might become enablers of the perfect control system.

Zero-knowledge proofs or RingCTs? Great, require disclosure and reporting of proofs or view keys to the man, who will enforce it for all interacting parties.

"You can't enforce bans on running nodes"? Well, start enforcing strict control of the public IP space so everyone address has a responsible individual behind it and put severe penalties on unlicensed crypto/privacy enabled assets/what have you.

I am thinking more and more we need to seriously consider moving the web to something like I2P or Freenet before it's too late.

You have it the wrong way around.

As a customer I want an exchange so that the tokens I buy have some liquidity, at least in theory. You're not going to be listed on an exchange initially and those exchanges that do list smaller tokens tend to be sketchy.

As an entrepreneur, you figure out how your use-case benefits from tokens. For example, let's say you provide a product/service. You can sell tokens that can be redeemed for the product/service to investors at a "wholesale price".

There's no need for tokens to go "to the moon", just to serve as a medium of exchange and ideally provide some margin to you and/or your investors. You could also offer a company ownership structure for tokens, but now you're in securities regulation territory, which nobody wants to deal with right now, at least at the moment.

Of course a lot of crypto projects are garbage, just like most businesses fail and wipe out investor money in the process. The hype surrounding crypto certainly has massively underpriced risk, but the same could be said about stock like Tesla, Lyft or Uber.

>> Why should I launch an exchange when there are already hundreds of existing exchange?

Maybe you have the on-off ramps sorted out, a friendly bank and a regulatory environment, licenses, legitimate AML/KYC measures and can do it properly?

While there are many exchanges already, how many can say they're that above board?

The market has ridiculous demand really, at times. But it highly depends on timing, location etc. And also resilience. If you run the exchange for long enough time, you will collect customers who will be coming back.

Re: Why launch an entrepreneur...

There's actually several use cases here that are worth noting. As technology improves, more and more centralized crypto exchanges (where the majority of trading volume currently lies) are creating decentralized counterparts - yielding lower custodial risk among other benefits. Also, newer blockchains that don't have DEX's yet are completely untapped markets for developers. Lastly, there are a variety of different use cases beyond just an exchange that benefit from basic exchange templates: prediction markets, decentralized lending, etc.

Disclaimer: I work for Hydro (https://hydroprotocol.io/), a competing product.

In a worldview where communities, orgs, products, countries, states, provinces etc. all have their own tokens, there will be need for niche, localized exchanges and 0x makes a lllot of sense.

It's there perhaps an angle with inter-exchange trading?

Why should I launch an exchange when there are already hundreds of existing exchange?

Because you can steal the assets, like about half of Bitcoin exchanges to date.

You can't with 0x, at least not in the way you could at say Bitfinex or Binance. All of the assets remain in your personal Ethereum wallet until a trade is matched up.

That's the genius of the 0x protocol. The Relayers that LaunchKit lets you create are effectively just order books or other matching-engines that exist as a website or other service. They expose completed trades to the 0x smart contract, which atomically swaps the tokens of the trade. (Official 0x people can correct me here, I've done just a bit of research.) At no point does any organization other than you actually have control of your funds, nor can they receive them without giving you equivalent funds under the terms of the trade.

I've said before that the real use-cases for blockchains will be in doing stuff that nobody in their right mind would want to do because it's currently foolhardy. This is a good example. Giving money to a fly-by-night exchange is foolhardy - unless you don't have to give money to them. And that's what 0x enables: tradable assets without trust.

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