This post was originally published on my Medium blog and can be found here. I hope you enjoy and find this helpful!
I’m happy to report that Ethereum has a new decentralized exchange (DEX) participant on-chain: The Aurora DAO. Those of us who have been trading in the crypto space for at least the last six-months to a year and are savvy to the Ethereum blockchain understand how bad the community has needed an EtherDelta alternative.
EtherDelta Exit Scam?
I’ll be honest with you, I haven’t even looked at EtherDelta for the past 2-weeks because I lost interest in using the exchange after their cash-grab of an ICO they had. It was very strange as EtherDelta had mentioned their GitHub repository had been breached a couple months back. The exchange never really recovered in terms of working properly and they launched their ICO before making sure the exchange was working— huge red flag in my mind.
Exploring their Twitter doesn’t give me a better feeling as it looks like all of their Tweets from the past were deleted up until February 10th, 2018. Part of me wonders if EtherDelta’s original team ever recovered the account information or if the hackers still have full control over everything. Beats me and I’m not sure we’ll ever know considering the exchange is not operational and the EtherDelta Token (EDT), which I did pick up after the ICO for pennies, is not on CoinMarketCap anymore.
This Twitter users summed up my feelings best in one status — EtherDelta was the best DEX the Ethereum chain had. While I have yet to use ForkDelta or UberDelta, I am a major fan of IDEX and have had absolutely no problems using their DEX. Let’s check out what’s going on with the Aurora DAO ecosystem.
Brief Context Into The Decentralized Exchange Concept
The whole point of a decentralized exchange is that nobody controls the coins/tokens besides the user which is only possible because the user controls their private key. On a centralized exchange, like Poloniex or Bittrex, the company running the exchange holds the private keys to your account.
At the beginning of the year, Japanese cryptocurrency exchange, CoinCheck, was hacked for for 523,000,000 NEM coins which is worth approximately $532.6 million. Shortly after in February, Italian exchange, BitGrail, was hacked for 17,000,000 RaiBlocks (re-branded into Nano) which is worth approximately $233 million today. Aside from those two, take a look at the image to the left — 26 other Bitcoin hacks since 2011.
The cryptocurrency community obviously needs a DEX solution in order to protect from bad actors in the space. The worst part about these centralized exchanges is that when a hacker breaches their system, they can more easily gain access to all of any particular coin being traded on the exchange. What started with Bitcoin exchange hacks will only continue to happen to blockchain-specific exchanges as new networks emerge — EtherDelta was hacked and they are a DEX.
Giving us full, sole control over our account address private key puts the responsibility onto the user as opposed to an exchange. When an exchange controls the private keys of all traders on their platform, they become a bigger target to hackers as they grow and a bigger risk to our community.
Aurora DAO’s Decentralized Exchange, IDEX, Here To Stay
Now that I’ve given some context into the importance of a properly functioning DEX to blockchain ecosystems, let’s dive into IDEX and what Aurora DAO has cooking for us!
Aurora DAO launched their Initial Coin Offering on December 11th and closed it out January 11th, 2018. This ICO was a bit different than others I have seen, primarily because of the multi-token structure they have developed with their DAO.
The token model includes IDXM, the membership/fee-share token; AURA, the Snowglobe staking token that supports their multi-exchange protocol; and the Boreal, their stablecoin. This can be compared closely to the DAI token used on other exchanges like newer exchange, Bibox. The Boreal will also enable decentralized P2P lending on the Ethereum network while acting as a safe store of value during volatile market shifts.
IDXM memberships were sold during the ICO and backers received 50,000 AURA with their IDXM membership for their contribution. Definitely a different style of token sale launch with these guys. More details about the tokens in their whitepaper — just providing a few details here, but there are a lot more important details that play into creating stability for the Boreals as well as supporting their lending system, among other things. I recommend giving it a read.
_"IDXM members are able to choose from the following membership benefits:
- Free trades and no AURA rewards
- 2x Market Making rewards and full trade fees
- A proportional mix of both"_
The cool thing about IDEX exchange is that it’s already a better decentralized exchange than EtherDelta had ever been, at the perfect time too. IDEX rewards ‘market makers’ with AURA every month and no gas fees while ‘takers’ pay gas fees. A maker places a buy/sell order and the taker is the one that executes the buy or sell order instead of placing their own.
The Aurora DAO team continues to make improvements to the IDEX exchange every week it seems the past couple months — very promising to see the swiftness at which they upgrade/update the platform. IDEX is also the only place to purchase their native staking AURA token which we’ll learn more about in the next section.
The time has come to chat about the Snowglobe protocol within the overarching Aurora DAO project! As you can see in the image above from their website, Snowglobe will play a critical role in the scaling of the Aurora DAO ecosystem. Snowglobe will do this by creating a second network of childchains that link exchange partners together in order to create more market liquidity between exchanges, starting with IDEX and adding others like blocks in a blockchain, but as childchains. I believe each exchange in the Snowglobe network must have their own native token, but am not 100% sure about this detail.
AURA stakers will secure the Snowglobe network and, in turn, be rewarded with Aurora DAO network banking fees for their token commitment. Their intention is to plug Snowglobe into a distributed computing network like Golem or build their own if they feel it is a more viable option.
AURA’s bottom line (Whitepaper):
"Similar to other blockchain networks, Snowglobe requires a well-designed incentive structure to ensure that the integrity of the order book and transaction sequence are not compromised. AURA staking aligns the economic interests of the operators with the health of the network, and makes it extremely costly for any would be attacker to disrupt operations."
Last component I’ll explain is Decentralized Capital which will ultimately be responsible for providing users with free banking and loans in the form of their stablecoin, Boreals. These are required to repay loans and are also used as an incentive to pay exchange fees with at a discount. The ultimate goal of Decentralized Capital is to create a price stable Boreal for the Aurora DAO ecosystem to trust and rely on as a stable store of value, specially in times of market turbulence as these new technologies emerge.
The very interesting part about the Boreal is that because it is used to repay loans, anytime it drops under $1 (or target price floor), those who have outstanding loans in the network have an incentive to purchase the Boreal at a discount since it is under the targeted unit of value. This is another force acting to stabilize the price.
Another cool part about Decentralized Capital is they are focused on building the tools necessary for users to manage their loan repayment in this environment. The tools they create for users to enhance the user experience and platform functionality can really play an important role in stabilizing the value of the Boreal and further supporting the growth of a stable network.
Can you imagine they created and installed a widget in a dashboard that allowed the user to arbitrage the Boreal markets when the price is under $1? This would surely help stabilize the price of the token because arbitrage is a major reason for market price stability — keeps price points closer together, reducing price volatility. At the same time, this would help their borrowers repay the loans at a lower cost. Innovation we’re unlikely to see from the traditional banking system.
Wrapping It Up
In closing, Aurora DAO is inspired by free banking and aims to create a stable banking network for anybody in the world to access, on the immutable distributed ledger that the Ethereum blockchain. Regardless of geographic location or class status.
Below are some links to their official website and other resources if you’re interested in learning more about the project:
Below are some resources for beginning cryptocurrency enthusiasts or others interested in something new:
- History of Cryptocurrency Exchanges — insightful look into the token-based exchange model and how exchanges have evolved.
- CoinPayments — Receive and make payment via 70+ different cryptocurrencies — the crypto-PayPal.
- CryptoPay — Spend your crypto. Can order a Euro, US Dollar or Pound crypto-debit card. Get 25% off using this link.
- CoinTracking — Your personal Profit / Loss Portfolio Monitor and Tax Tracker for all Digital Coins or cryptocurrency. Bitcoin, Ethereum, Litecoin, altcoins, etc.
- Changelly — the ultimate fiat-cryptocurrency exchange to buy/sell instantly with credit cards, for anybody, anywhere.
- HitBTC — great exchange for trading various cryptocurrencies and operational since 2013.
- Bit-Z — Newer Top 20 cryptocurrency exchange adding new, ICO coins all the time.
- Gate.io--Cryptocurrency exchange listing new coins - get 10% off trading fees if you register with this link.
- LinkCoin — Your ticket to using LinkCoin, Bibox, and Bibox365 exchange products and ICO’s — mainly Asian cryptocurrencies that are not available on other exchanges.
- CEX.io - Buy Bitcoin w/ credit card, ACH bank transfer, SEPA transfer, cash, or AstroPay. Credit purchases are instant.
- CoinMama- purchase Bitcoin and Ethereum w/ credit/debit cards & using cash through WesternUnion on their platform. Best for Euro purchases.
- Cryptocurrency Resource Telegram Channel - Telegram channel dedicated to providing beginners or experienced cryptocurrency traders with alternative resource options. Exchanges, hardware wallets, tax resources, etc.
- Ledger Nano S — multi-cryptocurrency cold hardware wallet supporting Bitcoin forks. Keep your coins safe and offline. Cold storage.
- Kucoin Exchange - Binance's 'little brother.' Very similar with trading competitions and whatnot. Revenue share token as well!
- Exmo Exchange - just launched their own coin and adding robust features to the trading platform.
- Binance — the up-and-coming cryptocurrency exchange that has truly entered as a leader among exchanges. Tons of benefits, a trader’s must-see.
- CoinMate — great Bitcoin Exchange for those who reside in Europe, the EU and surrounding area. Very easy to understand.