Decentralized Peer to Peer Trading
source
- Cryptocurrency introduced a new concept, which brought the user great power and great responsibility.
- The great power was absolute control over your money, digital money, and absoluet freedom to trade it, use it to buy, send it to friends or relatives with no governmental control and no payments to so called intermediates or middlemen.
- The great responsibility was keeping your private keys private, secure and your seed phrase, which allows you to create a new wallet, secure.
source
Thorchain
source
- A unique cryptocurrency project called Thorchain was in the news lately, for someone using it for bad things. Unfortunately tools are sometimes perceived as bad, when the humans using them are doing bad things. Hopefully we grow intellectually as a society to the point where we lay the blame on the humans, and not the tools.
- Thorchain is an amazing, groundbreaking project, which is very important to the future of cryptocurrency.
- But to understand it’s importance, first I first must explain to you the problem it solves.
Centralized Commerce
source
- One of the biggest problems of cryptocurrency as a tool of decentralization, is that developers created centralized commerce, which demanded the user give up cryptographic protection of their assets and deposit it with third parties.
- It's important to emphasize that the cryptograpic protection of cryptocurrency exists only for the assets in your wallet.
- Once you send your assets to another wallet, be it an exchange, like Coinbase, be a token wrapper, like Leobridge, that helps you transfer the value of your cryptocurrency from one blockchain, like Hive, to another blockchain, like Binance Smart Chain, your control over your cryptocurrency ended when it left your wallet. The cryptographic security you enjoyed also ended.
- This is the ..achilles heel of cryptocurrency, as cross chain commerce, which is the majority of cryptocurrency commerce, requires Trust. Ironically, trustlessness is one of the core principles blockchain, which protects you.
- So ironically, the majority of cryptocurrency commerce requires trust, forgetting trustlessness and surrendering cryptographic security, requires the surrender of this core principle: trustlessness.
- What an irony and paradox... and when you look at the great hacks, scams or disasters like FTX, 3Arrows Capitol, BlockFi, Celcius, and all the way back to Mt. Gox. The reason those investors lost their cryptocurrency was that it was no longer under the protection of their private keys.
Back to Thorchain
source
- So now that I have briefly explained the problem, in simple and understandable terms, I hope. I can simply explain the potentially historic role of Thorchain.
- Thorchain, in few words, allows peer to peer trading, across blockchains, without an intermediate exchange or token wrapper.
- Thorchain allowws you to treade peer to peer, tokens from different blockchains, while keeping the assets in your wallet, protected by your private keys, utilizing cryptographic protection. No one else does this.
- Noone else allows you to conduct peer to peer trading, with assets still in your wallet, protected by your keys. Boom!
- In the future Thorchain will also let you create decentralized trading pairs, essentially liquidity pools, for any asset, and then allow you to profit by providing liquidity for peer to peer trading, and once again, protecting your assets with cryptographic securtity. Thus decentralized finance, which is potentially, thee most important financial advancement in over a hundred years. But requires a surrender of cryptographic security, will be changed , perhaps for ever.
Thorchain, is it the future of defi or an evolutionary step?
source
- Thorchain is not perfect, not as an exchange, nor as an example of decentralization.
- Some will criticize Thorchain for halting the chain after the last hack, and some will apprecite this ability to protect investors against hacks.
- This is definately a significant disagreement of big significnace and led to the initial civil war and fork for the great project called Ethereum, into Ethereum and Ethereum Classic.
Chain halts and rolebacks to rectify hacks and thfts are a solution, but they destroy the other core concepts of the blockchain immutability defined simply as " all transactions are final and permanently recorded on the blockchain.
- It is possible that we will one day accept hacks and thefts, and leave the blockchain alone, as the permanent record of this hack or theft.
- It is possible that we may one day come up with a fix which doesn't involve rolling back the blockchain and destroying it's immutability, simply remove stolen funds from the wallet of the thieves, but this then destroys the very basic core principle of cryptocurrency, which is cryptographic protection of your wallet.
- These are dilemas, and Thorchain is one solution which preserves cryptographic protection, immutability and decentralization.
- Thorchain is a pretty deep rabbit hole, and believe me, I have just dropped your head in to look around at the top.
- I suggest you look elsewhere for more knowlege, @mistakili just wrote a post.
- I hope you found this helpful, and I am curious: what you think?
The controversy today was not a hack, but hackers trading stolen funds using THORChain. The chain itself was not halted... only one front end (THORSwap), which was used for the bulk of the trades the "hacker" made.
Thanks, I will clarify that point.
To a great extent, I am really enjoying the concept thorchain is trying to introduce in the world of blockchain
I also, even as I learn more and try to understand it completely, I recognize some of its potential and principles.