New to Nash? Looking for an overview of our project and technology? This FAQ covers the basics and clears up some common misconceptions.
- What exactly is Nash?
- What is wrong with centralized exchanges? How is Nash different?
- What about other decentralized exchanges?
- How does Nash’s solution work?
- What’s so special about API keys on Nash?
- What is Nash’s solution for payments? Why will it be attractive to merchants?
- What does the Nash Exchange token (NEX) do?
- Why isn’t NEX listed on Nash yet?
- Why is legal compliance important?
- Why does Nash make me do KYC?
- What is the difference between a “non-custodial” exchange and a “decentralized exchange”? Is Nash fully decentralized?
- Why hasn’t Nash built a 100% decentralized, “serverless” solution?
- How do I know the code that runs in my browser is the same audited code that appears on the Nash public GitHub?
- If Nash is down, I can’t withdraw funds from the state channels! Isn’t it just like centralized exchange?
- How can Nash achieve significant volume with relatively few trading pairs?
- When will Nash be adding more trading pairs?
- Why doesn’t Nash have USDT base pairs?
- When I account for transfer fees into and out of the exchange, doesn’t trading on Nash become expensive?
- How do I know the volume on Nash is real, rather than bots?
- Is Nash based on the NEO blockchain?
- When will Nash integrate with hardware wallets?
What exactly is Nash?
Nash is an all-in-one platform for digital assets that never takes control of your funds. The technical term for this is “non-custodial”, and it means Nash is considerably safer than other platforms. We let users invest in digital currencies, store them securely, trade on high-performance markets and make payments without giving up custody of their assets.
Nash is more secure and transparent than the centralized exchanges that currently dominate the cryptocurrency space. At the same time, thanks to our revolutionary technology, Nash offers better performance than other non-custodial platforms, as well as intuitive interfaces designed to be accessible for beginners.
What is wrong with centralized exchanges? How is Nash different?
There are three main problems with centralized exchanges:
- They are insecure
- They are not transparent
- They stand in the way of blockchain adoption
Centralized custody of funds brings security risks. Since centralized exchanges concentrate user assets in one place, they represent a lucrative target for hackers. According to Forbes, hackers stole over $4 billion in cryptocurrency during 2019, up from $1.7 billion in 2018. With Nash, only users have access to their assets, which makes our system much more secure.
Centralized exchanges are also black boxes. It is not possible to know if an exchange is matching trades fairly. For example, front-running user trades is a straightforward possibility. Additional transparency concerns arise when the party with custody over assets is the party matching trades. In traditional finance, this is avoided. Stock exchanges like Nasdaq are non-custodial. Not only is Nash non-custodial, but we are constantly being audited by the Financial Market Authority of Liechtenstein (FMA), ensuring our trading practices are safe and fair for users.
Finally, centralized exchanges obstruct the adoption of real blockchain solutions. One of the key properties of digital currencies like Bitcoin is that users are always in control of their funds. Centralized exchanges take custody of users’ assets to make trading coins much easier. Trading only happens in their internal database, rather than between real blockchains. However, by doing so, these exchanges undermine the purpose of blockchain technology. For people really to benefit from blockchain (examples here and here), it must be used as the basis of financial infrastructure. The solutions Nash is building work towards this goal, whereas centralized exchanges obstruct it.
You can read more about these issues in our article on cryptocurrency trading.
What about other decentralized exchanges?
Other attempts to build non-custodial, decentralized exchanges on the blockchain face the following problems:
- Blockchains are too slow to support high-performance markets
- Blockchains are not compatible with each other, so trading across chains requires either custodial solutions (token wrapping) or slow “over the counter”–style trades (atomic swaps); this is especially problematic when it comes to trading Bitcoin, the most popular crypto asset
- It is hard to build accessible user interfaces for such exchanges
- API trading is insecure, since a single private key controls all user assets – a problem that, so far, only Nash has solved
How does Nash’s solution work?
Nash uses state channels across multiple blockchains, managed by an off-chain matching engine. This allows users to trade real (not wrapped) tokens at speeds that compete with centralized exchanges, offering genuine markets with order books. We focus on providing secure, compliant, high-performance markets.
When using a state channel, users deposit the funds they wish to make available into a smart contract (or, for Bitcoin, a Lightning-like system). This is designed to interact with an off-chain system, which keeps track of transactions between parties using secure cryptography and periodically writes balances back to the blockchain. Such a system allows many transactions to be processed rapidly before being written to the chain in a single update, thus overcoming the blockchain bottleneck.
Nash employs a fast off-chain matching engine that manages state channels across different blockchains. Users make trades and the matching engine updates their balances for each blockchain, which are periodically written to the chain itself. User balances can only be updated when they have provided cryptographic signatures for individual trades, so their funds are always under their control.
Our solution overcomes the speed and compatibility issues faced by other decentralized exchanges. At the same time, it offers us the flexibility to provide accessible user interfaces and revolutionary decentralized API keys.
What’s so special about API keys on Nash?
Nash offers decentralized API keys based on secure multi-party computation (MPC). We are the first non-custodial cryptocurrency exchange to offer the kind of API keys institutional and algorithmic traders need. The result is an unparalleled security profile: for the first time in the trading industry, funds are not at risk even if both your and our servers are compromised!
On other decentralized exchanges, a single user private key controls all assets. No limits can be placed on transaction sizes and there can be no address whitelist. This is not acceptable for institutional traders.
Institutions employ many individual traders who interact with exchanges through APIs. Each trader is given an API key offering only partial access to the institution’s master account. Such a setup is easy to implement on a centralized exchange, but not on decentralized exchanges.
By splitting the generation of cryptographic signatures into two parts, Nash is able to enforce security policies like address whitelisting for individual API keys. You can read more about our solution here.
What is Nash’s solution for payments? Why will it be attractive to merchants?
Nash is currently developing a solution to make it easy for merchants to accept cryptocurrency payments. At present, merchants are discouraged by the technical hurdle of integrating with blockchains and are concerned about the volatility of crypto assets (including potentially high transfer fees).
Nash also protects merchants from surprise fees and volatility by agreeing cash amounts with them in advance and managing associated risk ourselves. Merchants can simply specify their price and relax.
What does the Nash Exchange token (NEX) do?
NEX holders who stake their tokens are entitled to a proportionate share of exchange revenue, which increases if they lock their tokens for longer periods. The lowest share is 25% (locked for 1 month), the highest 75% (locked for 24 months). You can find more information on the dividend structure here.
The NEX token was created to raise funds for Nash while at the same time giving revenue from the exchange back to the cryptocurrency community.
Since NEX is a profit-sharing token, it must legally be regarded as a security. As such, we took the step of registering NEX officially in Europe. Investors in projects offering similar, unregistered tokens run the risk of losing money should securities laws be enforced. Investors in Nash are protected against this risk.
Why isn’t NEX listed on Nash yet?
Since NEX is a registered security, we are not able to list it on our own exchange without obtaining the appropriate licenses. Acquiring these licenses is a long and costly process and may not be profitable for Nash in the near term. We are hence focusing on other business goals while looking into alternative solutions for listing NEX on Nash, either through a partnership or by acting as the sole maker for NEX markets.
Why is legal compliance important?
If digital assets are to become mainstream, and if the world is to profit from the security and efficiency benefits of blockchain, an environment of legal compliance is necessary. Businesses will not use these tools if they do not have legal safety. Nash takes these consequences seriously because we believe blockchain can help people around the world, empowering both investors and producers.
We facilitate the matching of trades, purchasing of cryptocurrency and distribution of staking dividends. This means we have legal obligations to meet, some of which require KYC checks.
EtherDelta is a good example of a decentralized platform facing legal consequences for its activities.
Why does Nash make me do KYC?
Nash offers trading without KYC up to a $1,000/day limit. As with other exchanges, KYC is only required if users wish to increase their daily trading volume. This is necessary to comply with global anti-money-laundering laws.
Moreover, no sensitive user identity documents are stored with Nash. Instead, these are held by our third-party KYC provider Jumio, who have many years of experience in the industry and an excellent reputation for security.
Nash is significantly more secure and transparent than centralized platforms, which also require KYC.
What is the difference between a “non-custodial” exchange and a “decentralized exchange”? Is Nash fully decentralized?
Nash contains both decentralized and centralized elements. Our decentralized elements allow us to provide non-custodial trading with an unparalleled security profile – significantly better than that of today’s centralized exchanges. However, aspects of Nash are also centralized, like our matching engine and web/mobile clients.
Not all centralized elements are bad. In fact, they are important for performance, compliance and providing a smooth user experience. Traditional stock exchanges like Nasdaq are non-custodial. This is necessary to avoid transparency concerns when the party with custody over assets is the party matching trades. However, these traditional exchanges are not totally decentralized either. We already discussed the problems faced by decentralized blockchain solutions above.
Nash aims to drive blockchain adoption by making it easier for business and retail customers to interact with this technology. Our solutions are designed to overcome pain points within blockchain infrastructure so as to provide the key features required for wider adoption:
- Advanced security (including self-custody of assets)
- High-performance cross-chain markets
- Legal compliance
- Simple, accessible user interfaces
To this end, we have made some small sacrifices in decentralization. However, we have also taken steps to make these elements as secure and transparent as possible:
- We are constantly being audited by the Financial Market Authority of Liechtenstein (FMA), ensuring our trading practices are safe and fair for users
- We have open-sourced our client protocol and SDK
- We use a respected third-party KYC provider
In both our vision and our technology, Nash is very far removed from today’s centralized cryptocurrency exchanges.
Why hasn’t Nash built a 100% decentralized, “serverless” solution?
Ideological proponents of “full decentralization” claim that other properties are even more important than those listed above, including absolute anonymity and the impossibility of shutting down server infrastructure.
We do not believe systems with such properties are practical at scale:
- On a technical level, they face throughput limitations for trading that could not adequately replace existing financial infrastructure
- On a legal/political level, they underestimate the power of state actors to influence the tools used by consumers and businesses
- On the level of accessibility, they remain too complex for the majority of users
Nash is committed to blockchain as a tool for expanding economic freedom and encouraging growth. We support the goals of Bitcoin expressed in self-custody, borderless transfers and enforced protections against hyperinflation. Motivated by this vision, we are pursuing solutions we believe to be compatible with wide adoption.
How do I know the code that runs in my browser is the same audited code that appears on the Nash public GitHub?
Nash is concerned with achieving the wide adoption of blockchain technology. We hence strive to provide elegant web and mobile clients accessible to any potential user. To encourage both transparency and innovation, we have made the protocols used by these clients publicly available.
If you are afraid of malicious code, feel free to create your own client using our protocol – or simply interact with Nash via our TypeScript API. We may also eventually make it possible for the browser to check a hash of the frontend code to ensure it hasn’t been swapped, offering additional assurance to users.
If Nash is down, I can’t withdraw funds from the state channels! Isn’t it just like a centralized exchange?
No, Nash is not like a centralized exchange. If a centralized exchange is down, it is still in control of your funds. Those funds are still vulnerable to hackers. By contrast, Nash cannot do anything with funds at rest in your personal wallet or the trading contract – whether it is online or not!
We recognize that it may be inconvenient for some users when Nash enters maintenance. Not only have we updated our maintenance procedures to keep funds functionality online, but we will also be releasing an offline tool to enable manual withdrawal from our smart contracts for non-technical users.
How can Nash achieve significant volume with relatively few trading pairs?
Nash already supports Bitcoin trading against a stablecoin, by far the most popular choice for traders. We have also opened a USDT/USDC market, allowing USDT traders to move their funds to Nash easily.
Besides our BTC/USDC pair, we support a number of tokens on the Ethereum and NEO blockchains, with ETH/BTC and ETH/USDC being very popular pairs. Since the majority of cryptocurrency trading volume is focused on these pairs, they are sufficient for Nash to cater to a large number of traders.
When will Nash be adding more trading pairs?
Because of Nash’s non-custodial architecture, new blockchains must be integrated manually – we can’t just get by with a wallet. However, Nash is now set to add more tokens to the exchange on a regular basis. Our Bitcoin protocol can be adapted to related chains like Litecoin, Bitcoin Cash and Dogecoin. For chains that do support smart contracts, our existing code is highly portable.
Why doesn’t Nash have USDT base pairs?
At present, Nash prefers to offer only USDC markets owing to the coin’s stronger focus on compliance. We provide a USDT/USDC pair so Tether traders can convert their assets into USDC for trading on Nash and discovering arbitrage opportunities.
It is possible that we may add USDT base pairs in future.
When I account for transfer fees into and out of the exchange, doesn’t trading on Nash become expensive?
Transfers fees on Nash are lower than the withdrawal fees required by most centralized exchanges.
It is also worth noting that the “Maximum network fee” in the transfers window only shows the maximum possible fee that will be charged for a transfer. In reality, these fees are much lower than the theoretical maximum. To improve user experience, we hope to add a more accurate estimate of fees in future.
If you are transferring funds to Nash from an external wallet, you may also consider using your Nash personal account as your main cryptocurrency wallet. It is a secure storage solution and offers convenient funds management tools for multiple blockchains. This will reduce the number of transfers required to trade.
We are constantly working to keep fee costs for our state channels as low as possible – and it may also be technically possible in future to deposit to state channels from external wallets.
How do I know the volume on Nash is real, rather than bots?
All volume on Nash is real.
Bots are real users who make real trades. Algorithmic trading represents a huge amount of cryptocurrency trading activity. For this reason, it was crucial for Nash to provide MPC-based API keys as soon as possible. We are already in a position to market Nash to firms that carry out automated trading on the basis of our unique security profile.
At the moment, there are a number of bots being run on Nash by liquidity providers and investment funds who are partnered with Nash, often carrying out arbitrage between exchanges. The trades they make are very real and are intended to generate profit, as well as provide liquidity on Nash.
Is Nash based on the NEO blockchain?
Nash is not based on the NEO blockchain. Although the Nash Exchange token (NEX) is a NEP-5 token, Nash itself is independent of any blockchain. Our matching engine is off-chain and manages state channels across a number of chains.
The NEO blockchain has a number of advantages that made it the right choice for the NEX token. First and foremost, NEO’s dBFT algorithm achieves finality in a single block. Avoiding forks is especially important for a token that is a registered security.
When will Nash integrate with hardware wallets?
Hardware wallets are an excellent solution for secure long-term storage. However, they are expensive and still too complicated for first-time users.
At Nash, we focus on providing the simplest possible solutions to encourage wide adoption of blockchain technology. Our first priority has been to design a funds management system that is secure, easy to use and accessible to anyone. We will soon provide user wallets based on our MPC API protocol, allowing for address whitelisting and transaction limits. This upgrade will offer security on the level of hardware at no cost to the user.
For users who still prefer hardware wallets as their primary storage solution, Nash may in future release specialized apps to make those devices compatible with our platform.
You can stay up to date with Nash by following our Twitter and Instagram. We also encourage all Nash Exchange token (NEX) holders to join our community platform, where they can talk directly with the team and receive reliable answers to questions.