Bitcoin Warrior discusses the potential to increase trading liquidity on cryptocurrency exchanges with Alex Wearn, CEO of Aurora Labs, SA — creators of the IDEX token exchange — and Wesley Pryor, general partner at Aenigma Capital and of Liquid Solutions Malta “LSM”.
Bitcoin Warrior Thank you for speaking with us today. To start, what is CCXT?
Alex Wearn The CCXT library is quickly becoming the industry standard for major liquidity providers. It is used to connect and trade with cryptocurrency / altcoin exchanges and payment processing services worldwide. It provides quick access to market data for storage, analysis, visualization, indicator development, algorithmic trading, strategy backtesting, bot programming, webshop integration and related software engineering. It is intended to be used by coders, developers, technically-skilled traders, data-scientists and financial analysts for building trading algorithms on top of it.
The overhaul of our trading API was a major milestone in facilitating growth, but we wanted to do more to capture the massive trade volumes seen on centralized crypto-exchange incumbents.
Bitcoin Warrior What’s stopping centralized liquidity from pouring into IDEX and other decentralized exchanges?
Alex Wearn In their Q2 State of Blockchains report, Outlier Ventures did a great job summarizing the catalysts propelling decentralized exchange adoption, and the technical points of friction that are holding them back. One of the biggest problems they highlighted is lack of liquidity, which warrants the question….why? (Source)
The answer we found is actually quite simple: currently, decentralized exchanges do not offer liquidity providers the necessary tools needed to connect with their APIs to trade on their exchanges. Thus liquidity providers have stuck to centralized exchanges, where connectivity flows with ease. By integrating with CCXT, we can remove this technical friction point, opening the door to algorithmic traders and the additional liquidity they bring to IDEX.
Bitcoin Warrior: Can you give an example of why CCXT is so important?
Wesley Pryor When we think about deploying one of our algorithms on a new exchange, the first thing we do is check to see if that exchange is supported by CCXT. If the exchange isn’t supported by CCXT, that means we would have to deploy additional resources to develop a proprietary integration. Think about it like the difference between adding another ERC-20 token to an exchange versus listing a completely new protocol token. In practice, the difference is huge.
Alex Wearn While we are busy working on decentralizing each remaining component of IDEX with a strategic rollout of the AURA staking network, we have teamed up with LSM to leverage their extensive experience and development resources to concurrently expedite the integration with CCXT. LSM has already completed testing of their integration in Python and will test and commit integrations in JS, and PHP, in line with the CCXT contribution guidelines outlined here.
Bitcoin Warrior What are the implications for AURA stakers?
Alex Wearn Naturally, more liquidity brings more revenue to AURA stakers, which power the exchange. The Aenigma team, which highlighted the valuation mechanics of the AURA network in an interview with Bitcoin Magazine, added that: “given 100% of the fees accrued to the network are ultimately going to be distributed to AURA stakers through crypto economic incentives, an increase in exchange volume would result in an increase in fees distributed to the network.
Wesley Pryor As backers of the AURA staking protocol and success of IDEX, our venture approach is to assist the IDEX team, not only with thinking through the architecture of decentralizing each component of the exchange, but also on driving liquidity and user adoption to the exchange. CCXT integration was the lowest hanging fruit on the path to massive liquidity, but we are excited to leverage our expertise and work with the talented team at IDEX for future developments.
Bitcoin Warrior Do you have any closing remarks?
Wesley Pryor We are considering granting access to one or more of our trading algorithms to the IDEX community to help foster participation and adoption of the AURA staking network. This will enable non-technical traders to experience the excitement of algorithmic trading and become more vested in the AURA staking network through the receipt of participatory market making rewards. This comes as a cost-benefit approach of making quantitative trading tools more accessible to the greater public, which could drive more volume to the exchange and more revenue to the network, but comes at the cost of reducing the pro-rata proportion of awards that we are able to generate internally. This is a decision that we will continue to consider in the coming months as we work through the more pressing issues such as CCXT integration.
- Liquid Solutions Malta: known leaders in quantitative trading and liquidity management and are a preferred market making partner with IDEX
- Aenigma Capital: crypto hedge fund combining VC style investment in early projects and fundamental value investment in liquid markets
- Aurora: decentralized cryptobanking and financial platform
- IDEX: the first high-performance decentralized exchange, provides both real-time trading and on-chain settlement