Thanks to our revolutionary new protocol – the initial version of our BTC state channel and settlement system – we are the first exchange to offer safe Bitcoin trading with high-performance markets and order books that can rival the speed of centralized exchanges.
Nash’s unique architecture offers further security advantages. Decentralized API keys, powered by secure multi-party computation, give algorithmic traders the same functionality as centralized exchanges but with even greater security, such as withdrawal address whitelisting. This allows traders and institutions to significantly lower the risk profile of their trading servers while interacting in non-custodial fashion.
According to Forbes, hackers stole over $4 billion in cryptocurrency during 2019, up from $1.7 billion in 2018. For security reasons, it is essential that cryptocurrency traders move to non-custodial exchanges. With Nash, a practical solution is now available.
Existing decentralized exchanges can’t handle Bitcoin
Cross-chain is a huge problem for decentralized exchanges (DEXes), as we discussed in our article on cryptocurrency trading. Bitcoin is especially difficult to integrate into DEXes since it lacks full smart contract support.
One solution is so-called “token wrapping”: creating a representation of Bitcoin on another blockchain, such as “wrapped Bitcoin” on Ethereum.
When you trade wrapped Bitcoin, your real Bitcoin is left with a custodian outside the wrapped Bitcoin smart contract. If a custodian is compromised, the Bitcoin that backs the wrapped token could be stolen, whether the custodian is a centralized party or not. Alternatively, an attacker could mint unlimited amounts of the wrapped token to destroy its value. Wrapped tokens are effectively derivatives. They have different security profiles from the underlying asset, Bitcoin.
Atomic swaps are another proposed solution. These are non-custodial, but cannot scale to large, fast-moving markets with order books.
For an atomic swap to be safe, both trading parties must monitor chains closely throughout the entire transaction, meaning that a user needs to know in advance when exactly an order will be filled. This defeats the point of orders placed above or below the current price level, which constitute most of the volume on a large exchange.
Atomic swaps are more like an over-the-counter deal, which is more suited for infrequent block trades, not day-to-day user activity. Their speed disadvantage means market efficiency is compromised and true market price is hard to achieve. The resulting setup can be very discouraging for price-sensitive traders.
Bitcoin trading on Nash
Nash has implemented an initial version of a non-custodial protocol based on state channels. This allows users to trade real (not wrapped) Bitcoin at speeds that compete with centralized exchanges, offering genuine markets with order books. We focus on providing secure, compliant, high-performance markets.
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. This avoids speed bottlenecks that result from blockchain architecture. User balances can only be updated when they have provided cryptographic signatures for individual trades, so their funds are always under their control.
This is a non-custodial system that bypasses the speed and compatibility limits of individual blockchains while making small sacrifices in decentralization. To counteract these, Nash employs a provably fair system. Our system is deterministic and input events are cryptographically linked to output, meaning auditors can reconstruct the state of the system and mathematically verify that FIFO matching rules have never been broken.
Bitcoin does not support full smart contracts, but it does offer more simple hashed time-locked contracts (HTLCs) and other scripting primitives. These form the basis of the Lightning Network, a state channel solution for Bitcoin allowing faster asset transfers.
Nash has created a purpose-built state channel solution designed to integrate with our matching engine for trading purposes. While using the same technical primitives as the Lightning Network, Nash is not presently seeking to promote its proprietary solution for general multi-channel transfers within the Bitcoin ecosystem. We will seek integration with the Lightning Network in the near future for cheap and fast personal transactions.
Our solution represents a revolutionary new Bitcoin trading protocol that allows for much greater security with no significant performance cost. Nash processes thousands of trades per second, so once a Bitcoin trading state channel is open, the experience is like trading on a centralized exchange. This system is non-custodial and planned updates will improve it further to enable even safer and more efficient settlement, following the Nash tradition of continued innovation.
Individuals and institutions looking to trade Bitcoin no longer have to exchange security for speed and liquidity. For the first time, with Nash, they can enjoy them all.
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.