Introduction

BarterDEX is officially deprecated as of this writing and mm2 is in BETA testing. Click here (opens new window) to learn more

Komodo’s decentralized exchange, mmV1, allows people to trade cryptocurrency coins without a counterparty risk. The protocol is open-source and trading is available for any coin that any developers choose to connect to mmV1. The parent project, Komodo, freely provides mmV1 technology through open-source philosophy. Our service fully realizes decentralized order matching, trade clearing, and settlement. The order-matching aspect uses a low-level pubkey-to-pubkey messaging protocol, and the final settlement is executed through an atomic cross-chain protocol. Like any exchange, our decentralized alternative requires liquidity, and we provide methods and incentives therein.

The current, most practical method for cryptocurrency exchange requires the use of centralized exchange services. Such centralized solutions require vouchers to perform the exchange. Among many dangers present in this system, end-users are under the constant risk of their assets being stolen either by an inside theft or an outside hack. Furthermore, the operators of centralized exchanges an exhibit bias in how they facilitate trading among their users. They can also create fake levels of volume on their exchange. To eliminate such dangers and limitations requires the creation of a decentralized-exchange alternative.

Among all the centralized exchanges, trading tends to coalesce around a few of the most popular. There is a reason for this behavior. Trading via vouchers is fast; a central exchange can swap internal vouchers instantaneously, whereas trading actual cryptocurrencies through human-to-human coordination requires communication from both parties. It requires waiting for blockchain miners to calculate transaction confirmations.

The speed advantage of a centralized exchange, therefore, creates a compounding effect on the centralization of traders. The faster processing time of vouchers attracts more people: the increased presence of traders creates higher liquidity: with more liquidity, the exchange can feature better prices: the higher quality of prices in turn attracts a larger community, and the cycle repeats. This is a classic Network Effect, and it is the reason that a few centralized exchanges dominate with high-volume trading, while smaller exchanges—both centralized and decentralized—suffer from a lack of liquidity.