New Decentralized Crypto Exchange Plays Up Transparency After FTX Collapse

by Arthur · March 8, 2023

(Bloomberg) — A new decentralized crypto exchange is promising faster speeds and greater transparency, positioning itself as an alternative to centralized entities like Binance and Coinbase that have faced increasing regulatory scrutiny.

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Blockchain firm Vertex will launch its low-latency decentralized exchange on Wednesday, giving institutions immediate access to spot and derivatives trading, before the platform opens to others in the second quarter.

Generally, decentralized exchanges have high latency, or long delays, since they process orders directly on a blockchain, while centralized exchanges operate in the same way as any exchange. But Vertex Co-founder Darius Tabatabai said the new platform – which will use “off-chain” programming to speed up transactions – “can achieve comparable performance to centralized exchanges.”

“It provides a high-speed, low-latency, high-throughput way for primarily high-frequency traders — but also users via our front end — to trade,” Tabatabai, a former head of metals trading at both Credit Suisse and Merrill Lynch, said in an interview. Vertex counts Hack VC and Dexterity Capital’s venture arm among its investors, in addition to Jane Street, Hudson River Trading, GSR, Huobi and others.

The launch comes as crypto companies have responded to increased scrutiny following the collapse of FTX in an attempt to reassure both investors and regulators.

Last week, US senators called Binance a “hotbed” of illegal activity, saying FTX – another centralized exchange – had demonstrated the need for “true transparency.”

The U.S. arm of Binance said it is confident in the strength of its operations and broader compliance programs. But Vertex is betting that traders may prefer the transparency that decentralized exchanges, or DEXs, can offer.

Transaction data can be easily found on the blockchains that power DEXs, while the same information on centralized exchanges is more opaque.

Read More: Binance Explores US Retreat Amid Crypto Crash

Tabatabai said that DEX latency is typically anywhere between one and 30 seconds, but Vertex should only be 10 to 13 milliseconds, which is in the same range as centralized exchanges.

The Vertex protocol will be able to save time and cut costs by processing orders “off-chain” with a matching system based on Rust – a common programming language for high-frequency trading. However, like other DEXs, Vertex is prone to scalability issues on the blockchain and may not be able to process as much volume as centralized exchanges. Eventually, the firm plans to decentralize the order matching process as well.