Alex Wearn on AuroraDAO and the shift to decentralized exchanges

0:00all right everybody we're live on the Crypto Coin Show and blockchain interviews where we find the latest and greatest innovations in cryptocurrency and the blockchain industry on today's show we have Alex Wien from Aurora thanks for your coming on the show Alex thanks for having me I should know where he's been so tell me a little bit about yourself how you got

0:20into cryptocurrency and how the Aurora project got started thanks I've been involved in the blockchain space for about five years now originally found that coin like most people economists myself so it was curious about the idea of a decentralized currency that didn't require a third party for clearing and settlement was really captured by the etherium white paper when it was

0:45released in the idea of extending that technology to applications you know bringing it beyond just the idea of a ledger and balances allowing it to actually run code on the ahta blockchain and that's kind of where we got our start with the idea of decentralized exchanges so my co-founder was working on ether x one of the early implementations of an ethereal exchange

1:06that project ended up disbanding and we started Aurora our first product here is ID X it's a kind of a new form of decentralized exchange where we've identified some of the challenges and usability issues that exist with other products out there and we think we've got a unique solution that helps tackle those problems awesome yeah I looked through the exchange a little bit and

1:28I'm really interested in decentralized exchanges and I think looking forward into 2018-19 it's gonna be the future of trading absolutely I think it's gonna take the technology needs to catch up with the demand centralized exchanges still provide some benefits to users most notably the speed and throughput that being on a blockchain can't compete with but I think just the

1:56security issues and the trust challenges that you have when you have to hand over your cryptocurrency to another person and other entities private keys that's going to drive eventually towards decentralized exchanges and it's really what the whole movement is about the ability to manage your finances and kind of be in control of your own assets for sure I think everyone wants

2:19to know they have control and not have to worry about in exchange getting hacked like a mount GOx or a bit Phenix kind of attack where somebody else was actually holding your money and accepting you lost it so that's awesome I'm glad that you're getting part of the decentralized exchange movement and I know there have been a lot of decentralized exchanges popping up

2:39recently some big ones like Khyber network and stuff have you noticed I like a lot of them popping up and what do you think is different about idec's as opposed to these other ones there's definitely a lot of activity in the space I think people are excited by the promise that it brings to it always felt a little bit backwards that these decentralized currencies you had to send

3:03it to a centralized entity in order to buy and sell it so adits is a little different in the way we've designed it so there's two kind of fundamental flaws we've seen with other decentralized exchanges on aetherium one is the fact that if you're relying on the blockchain for balances and it's gonna be slow to update so if you're waiting for a transaction to mine before you know

3:24whether or not the trade went through it's gonna be a slow poor user experience the second is that if you're relying on individual users to broadcast transactions to the blockchain there's no you can't have confidence that a transaction is going to go through and both of those kind of manifest itself on what I would say probably the most popular decentralized exchange is either

3:43Delta so you have situations where there's an order that appears to be on the books but it may actually already have been bought so to speak and that someone has already placed an order or so then in a transaction to buy that particular order you can also have what are called race conditions where two individuals can see the same order and try to race to fill it and whoever pays

4:02the higher gas price in some cases just whoever's transaction gets mined first gets lucky and gets the transaction and the other user they're their transaction runs out of gas and it fails because the assets aren't there anymore once it goes and tries to make the trade so with idec's our innovation is the way we kind of structured our smart contract so

4:21individuals have to deposit into the smart contract in order to trade so you deposit into our smart contracting you're credited with you know both in the contract and on the exchange and then from that point on all the transactions are submitted to the network through the exchange itself it still needs to be authorized by the end-users private key so it has that

4:40security element of a decentralized exchange no funds can move until the user authorizes it to happen but the key difference is that the trades are submitted to the network by the exchange itself so what does this mean exactly we're able to now provide two separate databases it's kind of a way to think about it so one is kind of our server where the individuals create a

5:02trade and submit a trade and immediately their balances update so if you buy an asset you immediately see that asset has been purchased and you actually turn it around in a media it's immediately sell it so this is important for you know when markets are moving quickly do you want to take advantage of quick price movements you don't want to be limited

5:19by the speed of the blockchain what happens though is those transactions are authorized by the end-user and then then behind the scenes they're submitted to the network for processing and our exchange makes sure that all transactions mined in the correct order so that the smart contract balance always catches up and eventually matches what the user is already seen on the

5:39exchange itself so in that example I just gave if you know make a purchase and then sell it a few seconds later we would have to authorize transactions submitted to the blockchain and they're submitted in the correct order to make sure that the balance is in the contract match what's shown on the exchange and then another benefit of this is that we're able to offer free

5:57cancels for users so if you're having to pay two in order to cancel transactions it's gonna get costly if you're trying to market make so BOTS are always buying and/or adding and removing orders you know as the price moves around a certain point so if you're able to cancel for free that's gonna actually make that a cost effective strategy where you're at

6:16if you're having to mine and cancel into the blockchain every time it's going to be cost prohibitive to do that definitely yeah I've had a lot of experience using ether Delta to try and get coins that aren't listed elsewhere and that's one good thing about decentralized exchanges is you really don't have that central authority that decides which coins are going to be

6:38listed on either Delta once the coin comes out anybody can in that sense but at the same time a lot of experience that people have had with each other Delta being one of the most popular decentralized exchanges is it's very slow it's very hard to learn to use and the people the people who developed it just didn't do a very good job even technical people have a tough time

7:02selling on decentralized exchanges and I think that's one of the barriers to entry right now absolutely and we're all focused entirely on usability because I think that's kind of a first hurdle necessary to take on the other centralized exchanges if people find it confusing or you know as you mentioned sometimes people you know miss mix up the price options on either Delta and

7:24and do a really you know poorly price order that's in against it not in their favor and then they're racing to mind the cancel while others who've noticed the miss pricing are racing to fill the transaction so it can create some odd behavior some odd incentives so we're really trying to solve that with our design pool yeah so you guys are doing a sort of like a stable coin built into

7:45the exchange to allow for more usability or how does that work so when we were designing the decentralized exchange one of the key insights and I guess it's it's obviously if you think about it but it essentially i's exchange can only trade blockchain based assets right it you have to be able to deposit the asset into the smart contract in order to have

8:06it as part of a trading pair and right now all the assets on the exchange trade against ether as a base market so you have augur eath alright those that's the trading pair which can be challenging if you have both of those currencies fluctuating pretty dramatically my deal a you're trading against the stable base currency but without you know having a

8:28connection to bank accounts we can't offer something like dollars or euros so the question becomes you know how do you create that decentralized stable coin and there's some people working on projects out there and we you know we thought that we had a unique opportunity that by combining the exchange with a stable point itself to create kind of a new model a new approach so there's a

8:47couple things that are kind of you can think of it as backing the stable coin you know kind of giving a collateral one is revenue from the exchange itself so as we earn transaction fees from users that goes into a reserves of sorts that will be used to back and collateralize be stable coins that we'll be issuing the other is actual endorsements so to

9:08speak or backing from the exchange itself in the fact that you can always redeem them in lieu of trade fees at their target value so instead of paying your trade fees in whatever cryptocurrency is your trading you can pay them in this stable coin and actually do so at a slice slight discount the idea is to provide a place for customers where they can always spin

9:32these stable coins and know that they will always have value regardless of what they're trading at on the open market so you can imagine a situation if people start to sell them and the price starts to dip traders are now incentivized to purchase them and prepay their transaction fees because they'll actually be able to save on their trading costs and improve their

9:50profitability it's kind of how if you think about how fiat currencies work so you know the US dollar is arguably the most no stable currency in the world and that's because there's a big entity you can think of the US government as a retailer they are you know collecting three trillion dollars of annual revenue in the form of taxes and when they have

10:09any bills they only pay it in the form of US dollars so that gives it a huge amount of demand or you can be certain that you'll always have a place to spend that cash so we're trying to think of what's the analogous you know kind of counter counterpart in the crop in the cryptocurrency space and we think that's daft our decentralized application endorsement so we're starting with IDE X

10:31and then we want to recruit others to eventually join in and have that same promise on their products and then once we've kind of built up the stable coin and people have you know kind of confidence in it you know we know this is kind of a new idea and we think it's gonna take people some time to get familiar with it but when people have been paying with trading fees and it's

10:50being used as a stable base currency on idec's will actually begin lending it out to customers so there's a lot of companies that are working on he centralized credit score's to centralize identity trying to create some of the financial products that exists in the existing world but using a blockchain using your private keys as is kind of the piece of you know who

11:11these individuals are and we want to kind of expand that into that space as well using this dis currency as a as a vehicle for lending on the blockchain okay so in terms of it actually being called a stable coin is it is backed by some amount of fiat currency or is it pegged to like an American dollar price so yeah we're pegging it to the dollar to begin with we do want to explore

11:36eventually expanding that you know there's the question is stable relative to what right most people are familiar with and comfortable with US dollars euros you may release versions that are mirroring different fiat currencies but we do also want to kind of push the boundaries of you know is there another basket of assets you know a basket of commodities a basket of world currencies

12:01there's the SDR which is a weighted basket of you know all the largest national currencies so we do want to kind of push the boundaries and explore you know how can we make it even more stable so that we're not tied to the monetary policy of these different governments right and then eventually start exploring what our own monetary policy would look like there's a there's

12:22a rich period of history known as free banking where private enterprises were issuing their own currencies and we're responsible for maintaining kind of the stability and the faith in the currency and if they got too loose with their lending standards you know and others would find out about it then the value of the currency would fall you know if they had too many bad loans on their

12:39books so to speak so we think that there's an opportunity to revisit this and that blockchain technology provides kind of a unique technological leap or change that wasn't there before in terms of the transparency aspect so you could imagine that you'll be able to see how many of these are in circulation you know what's kind of the revenue of the

12:59exchange and how quickly are they being pulled out of circulation so to speak by paying with trade fees how are the loan repayments looking right what's kind of the default rates you know all this stuff that individuals be able to assess and see you know whether or not that they think that this entity is stable and kind of sound or if there's any issues so that's where we're

13:19really excited to kind of use the technology to do something that's never been done that's awesome I really agree with the fact of having open transparency and being able to see circulation and the movement of the currency in the economy so in terms of idec's as a business how far along like is it is it already generating revenue and are a lot of currencies being added and is there a

13:42lot of trading going on and how is that going yeah aiex is live it's been live for a little over a couple months now we're seeing anywhere from 100 to thousand to a hundred and two hundred thousand dollars of daily trading volume we add pretty much any currency that people ask us to add we're wearing at the moment of you know trying to add any any assets that might be you know

14:06blatantly trying to scam individuals and we're actually changing our architecture so that people can add coins and trade them if they want and then we'll kind of once we've had a chance to review the project we'll open it up to other customers but like you said you know we you know part of the movement is that there's a group of people out there you

14:24know are we who are we necessarily to say that you can't trade this but you know we do want to kind of be wary of kind of the space and protect others from that but yes so I'd exes live right now and then we're working on eventually we're going to release a few months from now we're going to release the boreal and incorporate that into the exchange

14:43itself and we do have a initiative as well to kind of expand idec's and help address some of the issues that we've seen with the blockchain itself in terms of scalability on aetherium so there's been some other projects that have been announced that we're kind of watching closely with the ability to create a side chain and bring transactions off of the main aetherium

15:03blockchain and only settle kind of you know in this case withdrawals to and from the exchange you know only settle to the main chain when necessary so as part of our project we've got our own network token aura that will be used to power the side chain so it'll be a proof of stake type model where individuals with this token will will stake it and be responsible

15:24for securing the transactions that are occurring on this side chain and that'll allow us to you know kind of grow and scale the exchange itself you know while the core aetherium blockchain is working on scaling solutions and I think that's been away a lot of people in the space see this going is if you have you know closed ecosystem so to speak in this case you know we have an

15:45exchange that new people will just be trading with you know within the exchange you know we can offload a lot of those transactions to the side chain and then expanding on that where we where we really want to take this is opening that up to make it a network of other exchanges similar to idec's so that's where we really like this idea of a shared liquidity pool you know how can

16:06you each you each exchange gonna have its unique value proposition to users maybe it's a good on-ramp for people in a certain geography or it has a trading interface that's you know familiar or friendly to you know certain types of traders users with certain needs so that's where we really want to take this is how can we create a unified order book but at the same time allow people

16:29to you know create their own kind of unique unique space or their unique applications man that's pretty cool so it's like a multiple token effort and a multiple exchange effort in the long run absolutely yeah and we know that this is quite an ambitious project right but you know I think we're really focused on building it out in stages so you know it starts with IDE X which

16:53we've got live today and we've shown that you know it's really it's the most advanced decentralized exchange out there in terms of the user experience and then from there we're gonna slowly build it out so you know release the boreal get people comfortable that's the name of our stable coin if I hadn't touched on it earlier release the boreal get people comfortable with this idea of

17:11a decentralized stable coin that's backed by this cooking a group of kind of collateral and then eventually build out this sidechain piece to help the exchange the exchange itself expanded okay so if I was going to be looking into idec's and looking at the aurora and the token sale like what information can you give me about the token sale metrics and

17:35how the ico is working so we have two coins that are available during the token sale so the primary token that we're selling it's called DV IP and it's a membership token to the exchange and the or network the primary benefit of VVIP is that it gives you three years of free trades on idec's so depending on how much you trade you know we would kind of look dead

17:58other popular exchanges liquid Polonia 'kx kind of an average daily trading volume of a user depending on how much you trade you know it can be a lot better deal than paying all apart so defeats so to speak in terms of on a per transaction basis and then with that DV IP also comes a free state a free portion of our network token ora the idea being that you know members who

18:23purchase and help fund the exchange effort now are able to then participate in the staking effort which is in the future where you know how will be permitting our transaction fees from the exchange to those who are providing security to the network so somewhere how the etherium network the miners are paid gas fees for mining transactions of users in this case the or token holders

18:46who are staking and securing the network will be getting transaction fees from the exchange from supporting and hosting that economic activity look there's all the information is available on our website aurora dot-com if you go to the token sale section you'll be able to see a full breakdown of D VIP or in the benefits that each provide awesome so you say that this one coin is a proof of

19:10stake coin so does that mean that it's staking on its own blockchain that's exactly right so it'll be its own sidechain Network so the aura token will be running its own side chain that connects to the main etherium blockchain and then that's how we're going to be able to offload all the transactions associated with the exchange get that scalability and throughput before the

19:32etherium network is scaled and then also allow us to open it up to other exchanges as well so we think that you know there's also other block chains working to be EVM compatible so that's where we think it could be really cool where if there's other you know Yoast affinity others that want to interact with smart contracts you know it's possible to create a side chain that can

19:52have interaction with all of those so that's really where we see this future going where you know it's really this truly open permissionless system where you're trading all these assets on all these different those different bar chains yeah that's really awesome to be able to transfer to other blockchains cuz I know there's a lot of competition coming up

20:13with a theory blocking similar to a theory I'm like yo sent our chain and these other ones that are working on scaling and they might be scaling end up scaling faster than aetherium so it's to be able to be moved to those other block chains and still have these transaction protocols that's like super awesome absolutely and I would say we're blockchain agnostic

20:35we're on aetherium right now because that's where everything's happening right that's where all the I SEOs have been launched it's really where you see all the network tokens being generated at the moment but I agree with you that you know you see Neos for example is you know willing to make some trade-offs in terms of full decentralization with their delegated proof of state model but

20:56it's certainly going to have if their claims are successful it's going to have the transaction throughput that etherion won't have for many years so it remains to be seen what matters to users do they do they prefer the full decentralization are they willing to give up a little bit on theoretical security in order to have that higher transaction volume and user

21:15experience so we're definitely you know kind of watching all of these eagerly and you know we're gonna make sure that we're out there kind of supporting and innovating and building on you know whatever is kind of those stuff most promising blockchain a ton awesome so where do you see Aurora halfway through 2018 about six months from now and at the end of that year as well where do

21:39you see it where do you see it at at that point the big focus at the moment is growing the exchange and building that liquidity so one of the things to mention is we have a market making program to help incentivize users to bring liquidity to the exchange so anytime your trades are purchased if you if you're creating limit orders on the exchange actually earning Ora tokens

22:01earning that Network token so it's our market making reward program to incentivize liquidity so that's really how we're trying to jumpstart it and you know get that trading volume because it's gonna be so critical both to our growth as a company as well as to the growth of our future development plans so the more web were earning the more we have to put in

22:21that reserves to back the stable coin and then the more that individuals will be able to pay transactions with the stable coin kind of the more velocity it has and it'll help build up kind of the validity and trust around it so I'd say you know mid 2018 we want to be doing you know millions of daily volume certainly in terms of the exchange we'd like to have the boreal live or close

22:44to live so that people can start to get their head around this idea of a decentralized stable coin that's backed by this basket of collateral and then 2018 you know into 2018 I think will be we'll be doing this the same thing just just more growth on the exchange further growth on the boreal and they're really starting to work on that side chain protocol that I

23:04mentioned interesting one last comment I know a lot of the major exchanges are doing hundreds of millions of dollars in volume right now but there was the China story where the Chinese had 90 percent of the Bitcoin volume but it turned out that they because they had no trading fees bots for trading back and forth and other exchanges as well have

23:28been trying to inflate their volume to make it look like it's a more popular exchange than it is can you comment on the differences between centralized exchanges inflating volume and decentralized exchanges and whether BOTS can make trades the same way on decentralized exchanges so I guess it depends on the trading engine do you know if there's an exchange that allows

23:50you know matching of an individual if they allows that cow to trade with themselves I say the big difference is that because you're actually having to pay gas for the network to process your transaction you can do that but it's going to get costly right because every trade you know in addition to actually paying the transaction fee you're paying for the network to mine it and you'd be

24:11able to see that you know if you're watching kind of a blockchain in the smart contract I'm not too familiar the story of my understanding of the Chinese exchanges was that they were free to trade on and so you had people watch trading back and forth like you said in order to inflate the value of the assets but if you have some sort of charge even if that's just you know the gas feed for

24:29the network it's going to make it more cost to do that definitely well I'm looking forward to seeing decentralized exchanges having more volume and centralized exchanges having less volume so absolutely you and me both yeah so thanks for being on the show Alex if my viewers and everybody wants to know a little bit more about Aurora where would be the best place to go

24:51check us out at Aurora Dale comm a uro RA Dao Dao comm awesome thanks for being on the show and I'll see you next time Thank You Astrid