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Republic Protocol Announces Crypto Dark Pool
Traders Magazine Online News, January 19, 2018
As the cryptocurrency trading frenzy continues, one firm is now committed to creating one of the first dark pools where traders can buy and sell their currency anonymously.
Republic Protocol, a new blockchain project with ties to Kyber Network and other well-known projects in the space, has announced they will be building a decentralized dark pool for the trading of crypto assets. Initially, the company will allow large-scale trading between bitcoin, Ethereum and Ethereum based tokens on a hidden order book, while on a public blockchain, to not affect the pricing of those assets.
In equities, dark pools are estimated to represent approximately 10-15% of the trading volume of all US stock trades.
Cryptocurrency trading has exploded recently, as daily trading volume has reached approximately $50 billion with a total market cap over $750 billion in upwards of 100 cryptocurrencies. With institutional investors arriving into the cryptocurrency market, the development of alternative trading systems is critical for trading large blocks of cryptographic assets while maintaining minimal price slippage and market impact.
Republic Protocol is proposing a decentralized open-source dark pool protocol facilitating atomic swaps between cryptocurrency pairs across the Bitcoin and Ethereum blockchains. Trades are placed on a hidden order book and are matched through an engine built on a multi-party computation protocol. This provides order execution without exposing market sensitive information such as price and volume at a certain position, which would provide an advantage to other traders.
Republic removes the need for a trusted intermediary to operate a dark pool and provides crypto-economic incentives through a protocol token for governance; enabling the development of a secure, decentralized, scalable dark pool protocol capable of handling billions in trading volume daily.
“Dark pools represent a large percentage of daily trading in traditional financial markets for a reason,” said Taiyang Zhang, CEO of Republic Protocol. “A dark pool enables institutional traders to protect their hand from public view while not adversely affect market prices when they are buying and selling large orders. We feel like there is an incredible opportunity to apply this proven concept to the world of cryptocurrency trading while also utilizing the inherent security of the blockchain.”
The report continued to note that Republic Protocol proposes using the Shamir Secret Sharing Scheme to break down orders into a large number of order fragments, and distributes them throughout the network. Orders cannot be reconstructed unless a majority of the order fragments are recombined. To prevent this from happening, the Republic Protocol de?nes an Ethereum smart contract called the Registrar, that organizes nodes into a network topology that makes it unreasonably di?cult for an adversary to acquire the enough of the order fragments to reconstruct an order. As long as traders respect the network topology de?ned by the Registrar, their orders will be safe. If they fail to do so, only their own orders are at risk of exposure.
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