Aside from a much-anticipated insight into NEO 3.0, the most talked-about topic coming out of last weekend’s NEO DevCon in Seattle was the announcement of the Nash Decentralized Exchange’s (NEX) beta launch. With the beta launch scheduled for March 31, Nash is aiming big with a global trading platform that hopes to secure a license for trading securities.
Nash has been built on Neo, but it aims to offer trades between all major crypto and fiat currencies. Zero-knowledge proof password management is used to allow users to access a range of cryptocurrency wallets without their private keys being stored on a central server. It also aims to be as user-friendly as possible, avoiding the difficulty barrier that has put users off other decentralized exchanges (DEXs.)
Nash’s NEX token is also registered as a security, and the platform is in the process of obtaining a license that will also this – and, potentially, other securities – to be traded on the platform. The token will reward users with a share of the platform’s trading fees.
DEXs have long been an attractive proposition to many in the cryptocurrency space, as they eliminate many of the risks associated with storing tokens on a centralized exchange. These risks have been featured heavily in global headlines recently, with Canada’s Quadriga losing access to $250 million in users’ funds following its founder’s death.
But Nash is not the only decentralized exchange, with Binance also recently announcing the beta launch of its own DEX. So what exactly is Nash and how is it differentiating itself from Binance’s offering?
The Road to Launch
Nash was recently rebranded from Neon and the project has been in development since October 2017. In August 2018, NEX was registered as a security token with Lichenstein’s Financial Market Authority. The exchange’s official website at nash.io describes the NEX token as ‘Europe’s first digital security.’ Users will be able to purchase and stake these securities tokens through the platform and then receive a share of all trading fees. The default rate will be 25% of exchange fees, raising to 75% if users pass Know-Your-Customer (KYC) compliance checks and stake their tokens for a two-year period.
Development on the project began with seed funding from Badwater Capital, Connect Capital, Flybridge Capital, KR1, and NEO Global Capital. NEX then completed its initial coin offering (ICO) in September 2018, raising almost $22 million of its $25 million goal. According to nash.io, 50,000 users have already started using its browser-based crypto wallet.
Like NEO, Nash is aiming to be what its website describes as “maximally compliant.” This includes KYC whitelisting for smart contracts and anti-money laundering (AML) measures for trading on the platform.
While the platform isn’t yet accessible to ordinary users, screenshots from its website seem to match its goal of providing an attractive and intuitive interface. This includes simply laid-out portfolio tracking tools and straightforward fund management and trading tools.
The Right Time for DEXs
Long talked about within cryptocurrency spaces, decentralized exchanges may be an idea whose time has come. The recent drama surrounding Quadriga underscores the dangers of storing tokens on a centralized exchange. Quadriga’s CEO Gerald Cotten was declared dead in India on December 9, leaving the company without any way of accessing $250 million in users’ funds. Quadriga was one of Canada’s largest and most trusted cryptocurrency exchanges, being in operation since 2013. The fact that this incident could befall an exchange as a large and trusted as Quadriga in a country as regulatorily trusted as Canada has underscored the risks associated with storing digital assets on a centralized exchange.
The most famous example of a centralized exchange imploding was the fall of the Tokyo-based Mt. Gox exchange. By 2014, Mt. Gox was handling around 70% of global bitcoin transactions, making it by far the world’s largest cryptocurrency exchange. Early that year, it was announced hackers had stolen around 850,000 BTC from the exchange’s funds, resulting in losses that were equivalent at the time to $450 million.
Mt. Gox and Quadriga are far from the only examples of centralized exchanges falling apart. Mt. Gox was surpassed as the largest cryptocurrency heist by another Japanese exchange, Coincheck, in January 2018. The Coincheck hack resulted in the loss of 500 million NEM tokens, worth around $533 million. Soon after the Coincheck hack, Italian exchange BitGrail announced the loss of 17 million NANO tokens, with a value of around $195 million. A report from Ciphertrace claimed $927 million worth of cryptocurrency was stolen in the first three quarters of 2018, with the bulk of this figure being comprised of hacks of centralized exchanges.
Proponents of decentralized exchanges claim that they offer an enormous security advantage over centralized exchanges by allowing users to retain complete control over their funds. Nash’s website touts the fact that users’ private keys “don’t come near our servers.”
Nash is far from the first decentralized exchange, but those that have been launched so far have struggled to capture much trading volume from centralized exchanges. Many decentralized exchanges sacrifice simplicity for giving users a greater range of trading options. While this may be attractive to the most dedicated and knowledgeable crypto traders, it creates a large barrier of entry for new users. As this Hacking Distributed article on the Ether Delta and 0x DEXs explains, this also creates a range of new security issues particular to decentralized exchanges. The perceived difficulties in using decentralized exchanges has given most traders little reason to switch from established centralized exchanges.
To achieve success, decentralized exchanges need to be as intuitive as centralized exchanges. This is an issue that Nash is actively trying to solve, describing its user interface as being “accessible to anyone, even people who have never used an exchange before.” The Nash UI offers both a simplified view that lets users “buy and sell with one click,” along with an advanced view providing “all the features traders know and love.”
But Nash is not the only decentralized exchange aiming for ease of use. Its stiffest competition by far will be Binance, which has generated a lot of headlines with the recent announcement of a beta launch of its own DEX. Binance’s DEX will offer the same trading interface as its established exchange platform. As we explained in a previous article dissecting Binance’s success, Binance has long established itself as the most trusted and widely used cryptocurrency trading platform. Binance’s enormous userbase will provide a huge advantage over Nash that will be extremely difficult to overcome.
NEX vs Binance DEX
Nash has a few unique features that set the exchange apart from Binance’s DEX. The key differences are:
- The NEX Token – while Binance also has its own native BNB token, the tokens differ in that staking the NEX token will allow users to collect a portion of trading fees generated by the platform.
- Fiat gateways – this is an area Binance has recently expanded into, with its Jersey-based service offering conversion directly from Euros and British Pounds into cryptocurrency. Nash is aiming to go beyond this, with a stated aim of offering a fiat gateway for all major fiat currencies.
- DApp Integration – the Nash mobile wallet aims to integrate seamlessly with mobile DApps, allowing users to make payments from any Nash-based cryptocurrency wallet within a DApp interface. The official website describes this feature as offering zero fees and instant conversion from any currency. The demonstration screenshot looks similarly effortless to using Facebook or Google accounts to log-in to a third-party app or website.
- Licensed securities trading – as the NEX token is a registered security, Nash will require a securities trading license to allow users to acquire it. Nash seems to still be in the process of acquiring this license, but if its granted, it creates the possibility that the exchange could offer trading of other similar securities.
The last point could be a big factor in the long term. We recently delved into Coinbase’s launch of a US dollar-pegged stablecoin, and how this could enable converge between cryptocurrency trading and more traditional financial instruments. We’ve also looked into the potential of Security Token Offerings (STO), which many are predicting will be a major area of growth for crypto trading platforms in the near future. By setting itself up as a licensed securities trading platform from launch, Nash will be in a good position to establish itself as a market leader in this area.
But the biggest difference between Nash and Binance’s DEX will be Binance’s ability to leverage its large established userbase. Exchanges live and die on trading volume, and no exchange has the consistent trading volume attained by Binance. Nash will have to go all-out to win over enough users to make the platform a viable alternative to the Binance DEX.
To this end, Nash has launched a referral program to incentivize attracting users to its platform. $100,000 in Bitcoin will be distributed to users who participate in this referral program, and you can expect to see referral links popping up in any online discussions related to the exchange. This is a good way of generating some grassroots interest in a project, but spamming of referral links also has the potential to cause irritation and harm the project’s image. In the short term though, it is probably an effective way of raising Nash’s visibility.
Nash has a long way to go to eat into Binance’s enormous market share or Coinbase’s dominance as a fiat-to-crypto gateway. But it is a project that many will be watching closely as it prepares for its beta launch at the end of March.