Direct CFD trading based in blockchain
We present a platform of Dirtrex, a peer-to-peer CFD trading network designed for the secure, private and censorship-resistant trading of crypto-currency for national currencies and other cryptocurrencies.
How P2P trading evolve?
Online Broker's such as Bitstamp, BTC China, Kraken, and others, have been fulfilling that need as the most popular place for trading Bitcoin and other cryptocurrencies for fiat money and vice versa.
The downside is that, unlike crypto-currency itself, these exchanges are run by companies. This means that they have staff, they oversee and manage all the interactions between their users, they serve as arbitrators in cases of disputes, and they collect fees for doing all that.
How are trades performed on P2P trading?
The exchange software is used to automatically connect buyers and sellers with each other, based on the terms they prefer.
First, let's sum up how a 'regular' cryptocurrency exchange works. People looking to sell Bitcoins specify the amount and the price they'd like to sell them at. All those requests, known as 'orders', are placed in a common ledger, called the 'order book.'
When another person wants to buy Bitcoins, they either look for a satisfactory offer in the order book or, if none can be found, create their own 'buy order', specifying the terms of the deal as they like. Whenever possible, the exchange matches buy and sell orders by price and processes the trades.
Now, Bitcoin transactions can take a long time - from five to 10 minutes at the least, and up to several hours. Fiat money transfers usually take even longer; in some cases, international payments may take several days to complete. In order to speed up the process of trading, the exchange serves as a trusted intermediary: it settles all trades immediately, even though the actual transactions might have not yet been finished.
In order to remove the need for a third party, P2P trading operates in a different way.
Instead of matching orders in the order book, they match the people behind those orders. That is, whenever a matching buy and sell orders are found, the exchange software does not immediately process the trade, but instead, it connects the buyer with the seller, allowing them to conduct the deal without any intermediaries.
Still, third parties may be involved as arbitrators in case of possible disputes, but no human involvement from the exchange is required by default.
What are the advantages of P2P trading?
P2P trading offer high resistance to transaction censorship, are cheap to use, private and secure; at least when realized properly.
All advantages of decentralized cryptocurrency exchanges arise from not having a single company in charge of things. A single point of authority offers some advantages - primarily, the faster trades. However, it also works as the single point of failure, meaning that every bit of damage to it affects the entire system.
So here are the advantages of the P2P exchanges, achieved by removing that single point of failure.
Transaction censorship resistance. Regular cryptocurrency exchanges are run by people - they are vulnerable, and may be exploited by governments by imposing regulatory restrictions. Case in point: the recent intervention by the People's Bank of China, which lead to two of the largest exchanges in China freezing all Bitcoin withdrawals for a month. As a user, you wouldn't want that to happen to your funds.
On the other hand, P2P exchanges are practically invulnerable to government interference, because they don't have any central point of authority which could be coerced. Even if some parts are forced to cease their operations, the rest of the system remains unaffected.
Cheap operations. Again, regular exchanges are operated by people, who have to be paid for their work. P2P exchanges are run by software, so there's little to no corporate overhead, and, by extension, very small fees for the users, if any.
Privacy. Over the recent years, governments around the globe have been successfully enforcing AML and KYC regulations on cryptocurrency exchanges. This oversight forces the companies running those exchanges to collect as much info on their users as possible: names, places of residence, ID numbers and more.
It goes without saying that government cannot impose those regulations on P2P exchanges, which means that trades can be conducted in a much more private manner there.
Security. P2P exchanges do not hold Bitcoins for their users - instead, they connect traders, allowing them to conduct deals directly. Not having to entrust your coins to a third party makes the process much safer. If nobody holds your funds but you, then nobody can steal or lose them - intentionally, or accidentally.
In their current state, these exchanges can only be useful to people interested in the specific advantages they offer - the increased resilience, privacy, security and freedom of payments.
If there is no authority in charge, how is fraud prevented?
In order to prevent such instances, P2P trading platform introduces all kinds of security features. For example, it's a system of obligatory deposits: before a trade begins, both counterparties have to deposit a certain amount of Bitcoins. If all goes well and the trade completes uncontested, those deposits return back to the users.
If a dispute does take place, an arbitrator appointed by the community hears both sides and resolves it. The deposits are then used to compensate the victim of the fraud and the arbitrator's services. A reputation system for arbitrators is also in place to ensure that they do not abuse their powers.
Overall, the peer-to-peer cryptocurrency trading is vivid examples of the decentralization philosophy.
We offer the DIRTX token that has will be designed to achieve this goal and we analyze the risks inherent to rolling them out.