openANX’s Multiple Asset Gateways
By Byungwoo Sohn
The current Centralized Exchange Model (CEM) utilizes one central gateway platform to buy/sell tokens and exchange them for other assets. This poses many problems. First and foremost, the CEM holds custody of customer digital tokens (private keys). Because of this, there is significant financial risk for users in the case of security breaches and hacks. Numerous “big-game” CEM platforms such as Bitfinex have been hacked, resulting in large financial losses for customers.
In the openANX platform, Asset Gateways will only have custody of a single set of keys, rather than both the crypto and fiat keys. For example, with a fiat gateway, the gateway will only hold onto the fiat currency in a transaction, and the user will retain crypto custody. The vice versa applies for crypto gateways. Although ANX International (one of the foundation backers of openANX) has never had a major security breach, having the user retain custody of one set of keys significantly reduces risk even in the event of a security breach.
Another benefit of using openANX is the availability of choice. The ability to choose is a key factor in any healthy economy. Instead of having just one centralized asset gateway, users have multiple asset gateways to choose from based on their preferences. For example, users have different levels of risk tolerance and amounts of money they want to spend. Due to openANX’s belief in transparency, users will be able to look at each Asset Gateway’s collateral in the form of locked Ethereum.
A user might want to buy 1 Bitcoin for around $3,000 USD. Gateway A could offer 1 Bitcoin for $3,200 USD for and be 100% collateralized. Gateway B could offer 1 Bitcoin for $2,700 USD but only be 30% collateralized. Does the user pay an extra $200 for the safety? Or is the user okay with facing the potential risk that Gateway B presents? Obviously, this is a highly-simplified example. The actual platform will have many more options and things to consider, such as speed of transaction, but this example is a small window into how the platform will operate. openANX doesn’t pretend to provide the user with a correct and definite answer. It does however, give users the relevant information that is needed to make an informed decision.
So far, we’ve only compared the openANX Asset Gateway system to those of a CEM. In comparison to the Decentralized Exchange Model (DEM), openANX also provides a few key differences. The biggest issue with DEM is perhaps the fiat currency problem. Most current DEMs lack fiat currency bridging, meaning that users can only trade digital assets and cannot trade them in for real world currency. In openANX, certain Asset Gateways will offer crypto-crypto exchange and others will offer crypto-fiat / fiat-crypto exchange, so this won’t be a problem. Users will be able to easily trade in crypto for real world assets.
Another issue with existing DEX’s and the DEM model is a lack of liquidity across most of the current iteration of platforms. Many of these struggle to break five figure daily trade volumes, which drives away the professional traders and other market players, lowering overall market liquidity and validity.
We should also consider how openANX stacks up to “old school” P2P fiat-to-crypto exchange methods. There is also significant counterparty risk involved in P2P. The majority of non-crypto-only exchanges are done through peer-to-peer (P2P), often in person. This poses a fairly obvious problem in being able to trust the counterparty. What happens if you decide to meet someone at a park for an exchange, and the other guy brings a gun to steal your assets? What happens if you reach an agreement, and send through your assets online, only for the other party to disappear anonymously? Without collateral and a centralized dispute resolution process, all of which openANX provides, these will continue to be significant risks for the user.
The benefits of the openANX Asset Gateway system are numerous. It provides competition in the form of multiple Asset Gateways, giving users the option of choosing based on their needs and preferences. By providing relevant, transparent information with multiple Asset Gateways competing against each other, openANX truly hopes to create an open and fair ecosystem for its users.
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