Introduction

Centralized digital asset exchanges often act as an introduction to the cryptocurrency and blockchain industry for new entrants. Because of the large number of available exchanges, users must carry out due diligence in order to find the one that fits them best. Security, liquidity, and scalability are the main topics to focus on when doing the initial screening. Nonetheless, several other (secondary) factors should be considered in order to avoid the regret of choosing an exchange that is unfit for one’s needs. Usability [1] for example, is one of them. We will now turn our attention to the features that complement the initial process of choosing an exchange: add-ons or extra exchange features.

Add-ons can include a wide variety of features, and although no feature is necessarily better than another, having the opportunity to integrate a majority of them can play a big part in the user experience. 

Main digital asset exchange features

Let us review some of the key complimentary features that make an exchange stand out from its competitors:

• Fiat-to-crypto and crypto-to-crypto support. Most newcomers constantly struggle with the fiat to cryptocurrency gateway. It is not uncommon for an exchange to provide only fiat-to-crypto service in a few pairs, but low crypto-to-crypto trading, or vice versa. Providing an ample and seamless offer to switch between these currencies can make a world of difference. Additionally, the fee cost and time consumed can deter low-balance retail traders from utilizing an exchange.
• Support for multiple platforms. In a world characterized by the use of mobile devices and simplicity, exchanges that can’t adapt to support several platforms besides web format (mobile iOS and Android, for example) run at a disadvantage when seeking to capture new users (or trying to maintain established ones). 
• Margin, options and futures trading. Margin, options and futures trading opens the door to much needed functionalities. The ability to hedge, diversify, and magnify gains are necessary (though not sufficient) conditions for attracting experienced traders to your exchange. Benefits that come with this type of trading include (but are not limited) to liquidity, price discovery, and reduced market volatility. You can find more on margin trading, options and futures on our blog [2][3].
• API Integration. Managing liquidity through the interconnection of exchanges plays a major role in the success of any exchange. Offering API integration serves as an incentive mechanism for more experienced players (institutional investors and market makers) that can leverage their existing strategies in the digital asset space. Similarly, as algorithmic trading emcompasses more and more of the transaction volumes [quote], transaction volume records can be achieved by offering this feature.

Other important features surveyed from customer tickets and other exchanges include: 

Multi functional wallets with friendly navigation	Price analytics like sorting, filtering, and comparing among exchanges	Fees calculator for network transactions
Well laid out information on complex topics (i.e tutorials on products use)	KYC/AML practices for regulated exchanges	Multi-signature wallet authentication for transaction approvals.
Block confirmation tracking & pending transaction handling	UI/UX for a seamless experience

SCALABLE

Needless to say, it is not easy for an exchange to have all of the user-required features; usually, constant trade-offs arise showcasing vulnerabilities in digital asset exchanges. At Scalable we take pride in our search for constant improvement. Our clients have the support of several teams encompassing hundreds of developers, ready to take on any request. In the case of features, we provide a majority of the ones mentioned above and can cater to custom client needs, as well. Our focus is multiple; our robust exchange, deep liquidity and secure custody live harmoniously without disregarding the features that make the user experience a great one.

Request a demo to see the technology for yourself.

 

 

References

[1] “Usability: Is Your Digital Asset Exchange User Friendly?” Resources, Scalable Solutions, 8 March 2021, http://scalablesolutions.io/news/usability-is-your-digital-asset-exchange-user-friendly/. 

[2] “Margin Trading and Why Do We Need It.” Resources, Scalable Solutions, 14 Jan. 2021, scalablesolutions.io/news/margin-trading-and-why-do-we-need-it/. 

[3] “Options and Futures: Good, Bad, Necessary? .” Resources, Scalable Solutions, 15 Jan. 2021, scalablesolutions.io/news/options-and-futures-good-bad-necessary/. 

Whether you have been in the industry for a long time or simply stumbled upon an article or post in social media, you have probably heard something about them or the many people taking advantage of the possibilities they offer, such as the artist known as Beeple selling one for over US$ 69 million [1]. Enter NFTs (non fungible tokens), an increasingly popular type of cryptocurrency that is re-aiming to establish itself as a digital asset class in the blockchain space.

What are NFTs? 

NFT stands for “Non-Fungible Token,” a type of digital asset created on smart contact platforms, such as Ethereum. They are unique digital objects that represent ownership on the blockchain and can be cool to own or even profitable to trade [2]. 

Fungibility

Fungible assets are interchangeable. A clear example of this is paper currency, where all same-currency bills hold the same value and are interchangeable. They can also be (somewhat) divisible, like dollars into cents for instance. Conversely, non-fungible assets are unique and not necessarily interchangeable. Real estate, for example, is a type of unique asset. To its most subtle distinction, no two (otherwise identical) buildings can occupy the same physical space. Both fungible and non-fungible assets can be digitally represented as “tokens” in a blockchain [3]. 

NFT Uses

With artworks as its newest proponent, raising millions through different auctions, NFTs are gaining a share of the spotlight. In fact, “NFTs” Google searches have momentarily overtaken “Cryptocurrency” and “Blockchain” as the most searched words in the space [4]. Notwithstanding, many uses can be found for NFTs. A non-exhaustive list includes:

• Digital artworks
• Music
• Digital collectibles
• Domains
• In-game items
• Tickets to events
  

Where’s the value and how can I acquire NFTs?

Unlike most cryptocurrencies, the majority of NTFs have no palpable use. The transactional, utility, and governance features that characterize most coins are not present in NFTs, so determining its value is a more complex task. NFTs can be a financial investment, a sentimental purchase, a collectible item or a way for the buyer to feel more connected to the NFT creator, like an artist or a brand. It is similar to how people collect baseball cards, stamps, limited edition toys, or sneakers.

As with many (mainly non-financial) asset types, the value of NFTs is derived from its perceived value, assigned by people who want to buy and sell it. It is more comparable to art valuations, rather than financial assets valued through intrinsic models, such as cash flow discount models. Even in a space that can be mostly moved by speculation (reselling above purchasing prices), there are some indicators that can point us in the right direction of the token value, or at least spare us from the wrong path. According to Bankless [5], these indicators -or traits– include i) NFTs chain security, ii) on- (vs off) chainness, iii) age of the NFT, iv) environment around the NFT (who is the creator, what community does it have, etc.), v) scarcity, vi) release pace, and vii) quality richness. 

NFTs are bought and traded on digital marketplaces just like any other cryptocurrency, only instead of buying some amount of tokens, you buy a single token. Nifty Gateway is the biggest one according to Crypto Art, an NFT analytics aggregation platform.

Real-world cases

Some real-world cases of the aforementioned uses for NFT include [6]:

NFT Kred

NFT ticketing: In a world with ticketing systems plagued by a number of issues, NFT ticketing can provide traceability, validity, security, and data confidentiality. Price visibility and controls on secondary markets, as well as fraud management can be born from the supporting blockchain technology. GET Protocol, for example, is a protocol that has recently launched this [7].

 

NBA TopShot

CryptoKitties’ creator DapperLabs has signed on to help the NBA in setting a NFT marketplace. NBA “Top Shot” buyers can purchase ‘packs’ of NFTs that feature famous in-game moments. Similarly, and inspired by this, others have climbed on the NFT sport wagon. NFL star player Rob Gronkowski, popularly known as “Gronk,” is launching his own non-fungible token (NFT) collection [8].

 

Blockchaintd

Even fast food chain Taco Bell created five different NFTs released on Rarible marketplace [9].

Kings of Leon music group will release their new album “When You See Yourself,” along with three types of tokens. The first type of token will be a special album package, the second will offer holders perks like front-row tickets for life, and the third will be for “audiovisual art” [10].

SCALABLE Tokenization

Being able to tap into vast liquidity pools of fungible and non fungible token(ized) assets provides a unique opportunity for a large number of people that have something of value. It doesn’t matter whether you are a painter, singer, or football player, as long as you have something that other people want. 

At Scalable we focus on a small but powerful offering, with Tokenization being one of them. We can help tokenize both fungible and non-fungible, tangible and intangible assets. From world assets like real estate, to intangible but fungible digital currencies and intangible non-fungible assets like patents and trademarks, we can handle anything you throw our way.

Learn more about our tokenization practices here and subscribe for more news and information on the digital asset space!

 

 

 

Resources

[1] Reyburn, Scott. JPG File Sells for $69 Million, as ‘NFT Mania’ Gathers Pace. The New York Times, 11 Mar. 2021, www.nytimes.com/2021/03/11/arts/design/nft-auction-christies-beeple.html. 

[2] Steinwold, Andrew. The History of Non-Fungible Tokens (NFTs). Medium, 7 Oct. 2019, medium.com/@Andrew.Steinwold/the-history-of-non-fungible-tokens-nfts-f362ca57ae10. 

[3] For a more detailed discussion on tangibility and fungibility, please visit our earlier blog entry: “DeFi Apps: Asset Tokenization”

[4] Stein, Leila, and Anirudh Tiwari. “’NFT’ Search Volume Overtakes ‘Cryptocurrency’ and ‘Blockchain.” BeInCrypto, 16 Mar. 2021, beincrypto.com/nft-google-searches-overtakes-cryptocurrency-and-blockchain/. 

[5] Peaster, William M. “Bankless Newsletter.” 17 Mar. 2021. https://bit.ly/3cI3VNb

[6] See theblockcrypto.com for constant updates of NFT uses: https://www.theblockcrypto.com/search?s=nft

[7] Besancia. The Future of Ticketing with GET Protocol. NonFungible.com, 10 Mar. 2021, nonfungible.com/blog/future-of-ticketing-get-protocol. 

[8] McIntosh, Rachel. NFT Revolution: NBA’s “Top Shop” Token Marketplace Rakes in $230M in Sales: Finance Magnates. Finance Magnates, 1 Mar. 2021, www.financemagnates.com/cryptocurrency/news/nft-revolution-nbas-top-shop-token-marketplace-rakes-in-230m-in-sales/. 

[9] “Taco Bell Just Launched and Sold out Its Collection of Taco-Themed NFTs.” The Block, 8 Mar. 2021, www.theblockcrypto.com/linked/97568/taco-bell-rarible-nft-sale. 

[10] More, Saniya. “Kings of Leon to Release Three Non-Fungible Tokens along with New Album.” The Block, 4 Mar. 2021, www.theblockcrypto.com/linked/97066/kings-of-leon-new-album-nft. 

Sources

“Non-Fungible Tokens (NFT).” Ethereum.org, ethereum.org/en/nft/. 

“The Different Types of Cryptocurrency Tokens Explained.” Maker Dao Blog, 11 Feb. 2020, blog.makerdao.com/the-different-types-of-cryptocurrency-tokens-explained/. 

Preview Image by QuantumTrading

This month we have developed a series of articles on the main issues faced by digital asset exchanges. Among the predominant ones we could find Security, Liquidity, Scalability and Usability. We would like to round up by discussing the last major task faced by exchanges, and that is providing not only adequate, but superior customer service.

Client and customer service

Before we start, we should clarify that in our line of business, “customer service” can have more than one connotation. As a white-label technology provider, we distinguish customer service for both our direct “clients” and indirect clients (“users” or “customers”). The former (and the ones we will refer to most throughout this article) include those who acquire our solutions. The latter are the customers of our direct clients (the exchange’s retail users, to be more specific).

Customer support for white-label clients

An interesting -and often overlooked- aspect of customer support lies in its creation. More specifically, the situations that create a need for support to arise. At its core, exchanges deal with two main types of requests (through the form of “tickets”): those related to users’ enquiries and solicited fixes of products that are not working correctly, and business/technical tasks that include feature requests, tests needed, etc. Although time-consuming, the first type of requests can be categorized as being relatively easy and fast to resolve, depending on the size of the support team. Conversely, the second type can be easily funnelled through to the technology provider, that will diligently take care of them. This separation can grant a more efficient allocation of time and resources, leaving the white-label client to take care of simple consultations, while the industry experts tend to the more complex issues, like developing new features or adding new tokens without disregarding operational security. This allows the exchange owner more flexibility and resource efficiency, since they don’t have to hire somebody in-house to develop new features or solve similar issues. 

KYC & AML 

Because customer experience includes not only what happens once you can utilize the exchange platform, but also the time and other resources it takes to access and exit it (like Know-Your-Customer processes, deposits, withdrawals, etc.), it is important to account for everything in order to make the trading experience as seamless as possible.

SCALABLE

Scalable Solutions leverages wide industry knowledge and capabilities within our business model. Having Service Level Agreements (SLAs) that guarantee high-level offerings can assure unmatched service. Systems that have never been breached mitigate hacks and its related customer complaints. From small-scale retail, through to intermediate and professional levels, a 99.99% uptime minimizes (or even reduces entirely) complaints on outages and all the related inconveniences. Even client-requested features create positive externalities throughout all our client portfolio, propelling us to offer the most comprehensive set of tools for our clients’ customers.

Regarding KYC and AML compliance, Scalable has multiple partnerships with established KYC operators like Elliptic, Sum&Substance, Accuant and Crystal Blockchain, ready for our clients to tap into quick, robust, and inclusive KYC/AML compliance platforms.

Contact us here for more information on how we can help your exchange or broker become the best version it can. 

Introduction

With the continuous rise in the number of digital asset exchanges, there seems to be no limit to the amount of venues that can offer trading for the projected massive adoption of digital assets that the space will have in the coming years. Notwithstanding, only a few will remain standing, depending on how they position themselves.

A series of barriers to entry are present in the digital asset space and thus influence this success; technology complexity, investment risk, and poor customer service are some of the main areas to look out for. In our white-label digital asset exchange month, we would like to develop upon the subject of digital asset exchange usability, and its direct impact on cryptocurrency adoption and user-friendliness.

What is usability?

Usability in a digital asset (exchange) context can be boiled down to how a user interacts with a website or product. User Interface (UI) helps with the first step of building credibility through visual design comprehension, while User Experience (UX) takes on the rest; the users’ journey. We believe the first thing digital assets must have is security, but the question of ‘what comes after?” still remains. Cryptocurrency holders need a similar level of security, speed and simplicity as payment solutions from traditional financial institutions. A recent survey carried out by Binance [1] shows that most customers value security (28%) followed by UI/UX (25%) and available trading pairs (23%).

Some of the main hurdles users face in the sense of UX include complex and demotivating onboarding and transaction processes, complicated information formats, as well as incomplete and unclear information access. Common retail traders deserve quick, clear and understandable onboarding and transaction processes that deter them from giving up after months of waiting, as well as clearly laid out technology explanations (like wallet use and how public/private keys work) that make the trading experience more seamless.

While there is no undisputed way of defining which design will ultimately capture the most amount of users, we require a way of systemic thinking and proven practices that can minimize errors and maximize the probability of adoption. According to Yeti [2], we should dedicate a fair amount of time to:

Discovering & understanding the “user persona.” Being capable of answering questions like “What does this user struggle with?” or “What is this person trying to achieve?” is paramount to recognize users’ pain points. Once core users and their needs are identified, it’s time to put in the work to solve them. Gathering and analyzing data as well as having empathy play a huge part in the journey users will embark on.

Use cases

Two exchanges currently focusing on a simple and intuitive UI/UX are Robinhood and Coinbase. Instead of making people carry out their own research for information and overly complex alternatives, they employ user-friendly interfaces and a straightforward buying-and-selling process. As more and more exchanges start to embrace the power of well designed infrastructures, digital assets will no longer be limited to a few marketplaces and investors but will democratize its access (and therefore its benefits).

SCALABLE

Our flagship white-label exchange has incorporated extensive industry knowledge into a balanced blend between security, liquidity, and outright usability to deliver every user with the most comprehensive platform to trade digital assets. We have applied thorough research on how best to harmonize regulatory processes (such as required KYC) with a powerful matching engine, to deliver our users the most absorbing journey into the digital assets world. We also cater for our clients to redesign those processes as they consider, with a highly malleable front-end platform tailored to their brand. 

Schedule a demo to find out more. 

 

 

 

References

[1] Binance Research. “Global Crypto User Index – 2021.” Binance Reseach, Binance , 28 Jan. 2021, research.binance.com/en/analysis/global-crypto-user-index-2021. 

[2] House, Geoff. “The Product Design Process Guide.” Yeti, yeti.co/resources/white-papers/product-design-process-guide/. 

Sources

Scherba, Tony. “The Usability of Cryptocurrency.” UXmatters, 6 Aug. 2018, www.uxmatters.com/mt/archives/2018/08/the-usability-of-cryptocurrency.php. 

“UX & Cryptocurrency: Simplifying Trading For Everyone.” Artkai, artk.ai/blog/ux-cryptocurrency-simplifying-trading-for-everyone. 

Introduction

In the digital asset space, many risks are inherently present. We can think of it as a trade-off between security and usability as a common way of understanding the laws of the jungle. Regulatory uncertainty, volatility and liquidity, as well as business and reputational risks are some of them. On this occasion, we would like to discuss custody and cyber-security, two risks we consider to be top priority for any digital asset exchange.

“Hacks” have been around for a long time, though not always regarded under the same name. In many industries, the very existence of value promotes incentives to extract that value (independently of the legality of the ways used). Think back to the first banks; having vaults and cashiers provided an incentive for thieves to try and steal funds. How many stories have we heard about Bonnie & Clyde, Dillinger, and countless others making their way into history through infamous theft? 

Main security risks for digital asset exchanges

Why do we consider security risks as a priority? As digital assets still navigate a sea of unregulated waters, many of these exchanges aren’t required -nor incentivized- to have systems in place to prepare for bad times. There are no specific legal requirements that protect users from losses born out of security breaches (hacks).

Usually, security teams within digital asset exchange platforms tend to fix issues as they arise, and have strong expertise in some security aspects. Because exchanges built in-house oftentimes also have limited resources, they can experience several cognitive-behavioural biases that can endanger the trading activity. Confirmation bias (the interpretation of recall of information in a way that affirms prior beliefs or hypotheses) is a classic example of a case where the team working on a feature is the same one in charge of testing it. Getting an external pair of eyes or third-party security audits are some great mechanisms to avoid missing critical errors in security development or testing processes.

Hackers have always managed to leverage bleeding edge technologies and algorithms to crack security protocols. Because of their daily volumes and total custodial funds, exchanges are the (cash filled) sweet forbidden fruit, making them constant targets for hackers. In fact, according to data gatherer Chainalysis, the number of theft incidents have been increasing more than linearly, though with lower average for total amounts. US$ 1.3B, US$343M and US$ 523M of users’ funds have been stolen through 2018, 2019 and 2020 respectively; a number that is multiplied when accounting for scams, ransomware, and malicious activity [1].

Cases

• Mt Gox is an iconic case in the digital asset world, where the exchange was repeatedly hacked from late 2011 through 2014. The exchange declared that approximately 850,000 bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million at the time. But the PR and reputational nightmare didn’t end there; because of this, the exchange had to suspend trading and file for bankruptcy protection from creditors [2]. 
• A more recent case involves Coincheck; an exchange that was hacked and didn’t suffer the loss of cryptocurrency, but had a data breach where over 200 users’ personal identifying information data was obtained illegally. The exchange, which previously suffered the “largest digital currency exchange theft in history” (over US$ 533 million) in 2018, continues to lose its credibility because of its repeated errors and negative impact it has on its users [3]. 

SCALABLE and security risk mitigation

With SCALABLE you can find a balanced mix between in-house and outsourced teams that can control and respond to cyber threats in advance, preventing any loss to the user data or information that could lead to a major hack. We manage this through strong monitoring and state-of-the-art machine learning analytics, as well as by carrying out thorough (robustly compliant) KYC/AML verifications. Furthermore, we can establish a series of controls for insiders, software security controls (like 2FA) and wallets buckets (cold-warm-hot wallets) in order to mitigate to a minimum the risk of compromising users’ funds. Our battle-tested security engine has not lost a cent of user funds and provides a standard rarely seen in the industry. 

With Scalable, you can avoid any damage to your digital asset exchange brand or users through leading technology, whether it be our white label exchange software, or blockchain security audits. 

Contact us today to increase the security of your digital asset exchange or broker.

 

 

 

 

 

References

[1] Grauer, Kim, and Henry Updegrave. “The 2021 Crypto Crime Report.” Blog.chainalysis.com, Chainalysis, 16 Feb. 2021, go.chainalysis.com/2021-Crypto-Crime-Report.html.  

[2] “Mt. Gox.” Wikipedia, Wikimedia Foundation, 17 Feb. 2021, en.wikipedia.org/wiki/Mt._Gox. 

[3] Thompson, Patrick. “Coincheck Exchange Pauses Remittances Following Data Breach.” CoinGeek, 4 June 2020, coingeek.com/coincheck-exchange-pauses-remittances-following-data-breach/. 

Sources

A Comprehensive List of Cryptocurrency Exchange Hacks. SelfKey, 13 Feb. 2020, selfkey.org/list-of-cryptocurrency-exchange-hacks/. 

Xia, P., Wang, H., Zhang, B., Ji, R., Gao, B., Wu, L., … & Xu, G. (2020). Characterizing cryptocurrency exchange scams. Computers & Security, 98, 101993.