Market Exchange

Last modified Sep 8, 2022
Market Exchange

Decentralized Finance Revolution

Let’s take a quick look into the history of market exchange. It has existed in many forms. The earliest one was barter: direct, or peer-to-peer, exchange of goods and services. This had a serious problem of inefficiency since supply and demand between two parties had to be exactly matched. Gradually, money was introduced as a medium of exchange, whose initial types were uncentralized such as stones or shells. Then specie money appeared, with the currency having tangible value. Now we have fiat currency, controlled by central banks. The financial markets have evolved to become increasingly complicated with the essential roles of intermediaries who serve as agents and brokers of trust, liquidity, settlement, and security. Advances related to financial technology (fintech) have helped reduce costs spent on intermediaries to some extent but still rely on the backbone of the current financial infrastructure. However, the 2008 Global Financial Crisis and more recent events including GameStop short squeeze have cast a spotlight on the fundamental downside of this whole legacy system: structural inequalities, slow settlement cycles, and inefficient price discovery among other shortcomings.

Decentralized finance (DeFi) is believed to be the next development step of financial markets: it creates innovative services that can improve efficiency by leveraging the power of blockchain and building upon the work done in fintech. It manages to connect people instantly without intermediaries and aims to minimize friction while maximizing value to users.

To briefly explain, immutability is a key advantage that blockchain brings to DeFi. Any modification to data previously appended to the chain is costly and drastically changes the whole network; thus, attempts to update transactions for fraud purposes are prevented.

Moreover, in order for a transaction to be included in a block and appended to the chain, it must pass the consensus phase, conducted by a number of independent machines running algorithms deployed in smart contracts. Therefore, the activity relies on the whole network, instead of any third-party organization, to be performed. Trust and efficiency problems of centralized finance are solved.

Besides, a blockchain network operates on multiple nodes, each of which keeps its own synced copy of the network and allows transactions as well as data to be queried and displayed anywhere, anytime. As a result, transparency property is enhanced with the help of the decentralized nature of blockchain.

In short, with blockchain, DeFi improves reliability, optimizes calculations, utilizes computational resources, and decreases the cost of performing transactions.

Incumbent financial institutions have already been advised about the growing significance of cryptocurrencies, other digital assets, and DeFi in general; the idea of embracing this disruptive change is gaining popularity even among the big names. If that future is inevitable and irreversible, we had better familiarize ourselves with it, starting from owning a wallet of digital assets.


Challenges and Ready’s Approach

It is worth noting that DeFi poses its own challenges. To bring convenience together with security and privacy, Ready is designed to offer the optimal solutions to users.


Types of Wallets

Having a wallet of crypto assets is necessary to enter the decentralized world. The two main types are custodial and non-custodial.

  • Custodial wallet: The private key to a user’s digital assets is kept by a centralized custodian. This means that the user does not ultimately own his assets; instead, the centralized custodian holds, has access to, or can even stop the access to the private key to the user’s funds. Such a relationship creates counterparty and regulatory risks. Users of this wallet type need to make sure that the vendor they choose is reliable.
  • Non-custodial wallet: The private keys are owned by users themselves. Therefore, they have complete control over their crypto assets. A non-custodial decentralized custodian does not hold users’ private keys and cannot interfere with their transactions although it may help them to create their wallets in the first place. Ready is such a custodian.

Ready users can import and manage their wallets on multiple chains in one Ready wallet interface.

Ready also enables users to create their own non-custodial wallets and use these to transact on different exchanges. The private keys to the wallets are generated with the ECDSA algorithm, which is a common algorithm for networks built on the Ethereum platform. Accordingly, the wallets created are compatible across Ethereum-based blockchain networks.

With Ready, users can easily create many non-custodial wallets and do not have to worry about the problem of duplicates since the algorithm can generate an extremely large number of wallets. With a world population of around 8 billion people, each person can own roughly 1.45 x 10^67 wallets; yet, every wallet will still be unique.


Wallet Use and Protection

One main challenge of non-custodial wallets is that users are solely responsible for the management of the private keys to their funds. If the private keys are lost, users will lose access to their wallets and crypto assets as a consequence.

However, private keys are hard to remember, store and retrieve. Even when a wallet address is known, it is nearly impossible to recover the corresponding private key due to the nature of the ECDLP algorithm associated with the Elliptic curve cryptography - the mathematical fundamental of private key generation for non-custodial wallets.

To mitigate this concern, Ready collaborates with third-party applications such as Locker Password Manager. Built upon Zero-Knowledge and End-to-End encryption, Locker is a secure place to store the private key and the passphrase for each wallet, along with the password for each Ready account. This ensures that only users can read their own data; no one else can do so, not even the Locker servers. In fact, Ready allows each user to choose a vendor like Locker from a list of suggestions.


Smart Contract Validity

Smart contracts are publicly traceable coded agreements designed for implementing consensus algorithms and executing transactions on blockchain networks. They are self-verifying, self-enforcing, and tamper-proof. They need to achieve certain standards to perform accurately and efficiently; otherwise, the whole application performance will be adversely affected.

The smart contracts applied for Ready must go through rigorous testing during which criteria such as security and efficiency are carefully assessed. Along with that, when a connection to smart contracts of any third party is needed, Ready only chooses those that have successfully passed similar tests. These measures ensure that all transactions through smart contracts are delivered up to users’ expectations in a safe and intact manner.


Complex Transactions

In many cases, a transaction on blockchain networks is not simply a request to a specific smart contract; instead, it is comprised of multiple requests to different smart contracts. Manually calling for such transactions makes DeFi operation cumbersome and inconvenient. Moreover, separate calls also escalate the transaction cost, eventually discouraging user activity on the application or even in DeFi as a whole.

Ready addresses the problem by directly interacting with the nodes of the corresponding chains, rather than going through any third party to handle transactions. Ready also designs a pairing system where users can execute multiple orders in one single and simple call. At the same time, complex procedures are optimized with the best numbers of calls and the most efficient routes. As a result, Ready users can have a fast, cost-effective, convenient, and secure experience.


Rates on DeFi

Transactions on DeFi can take place 24/7/365 and exchange rates change constantly. This leads to slippage: the settled price is different from the requested price because of market movements during the time gap between order and execution. Calculations to reduce this risk while trading are usually complicated for crypto owners.

For that reason, Ready builds smart algorithms that continuously update rates and suggest the optimal exchange routes. Users can also customize their own parameters to get the desired rate and slippage tolerance. All are designed into a simple-looking but powerful conversion feature with intuitive visual aids, making it easy and efficient for Ready users to make decisions.


Oracle Problem

The Oracle problem, also referred to as the “garbage in, garbage out” problem, is a major challenge for developers not only in DeFi but also in blockchain in general. Simply put, bad inputs result in poor quality outputs. A user can enter a transaction X but after going through an intermediary such as an application or a server, X is changed into X' before being appended to the chain. In this case, blockchain is incapable of detecting errors and it will store X’ permanently on the network, leaving X’ unalterable. The application or the server itself now is at the risk of becoming a concerning point of failure.

To alleviate the Oracle problem, all features in Ready are always exhaustively tested before release. Furthermore, Ready runs bug bounty programs to leverage the power of the expert community in finding vulnerabilities and improving the product. We also welcome users to participate in testing and contributing to the development of Ready.


More details on Ready’s key features and main technical processes are available in the Key Features and Process Description sections.