DeversiFi is a protocol that facilitates cryptocurrency trading without transferring the assets to an exchange while offering high-speed trading.
The infamous Mt Gox hack and Binance’s 2019 security breach unearthed major flaws in centralized cryptocurrency exchanges. Although some exchanges like Coinbase insure deposited funds and guarantee their user security, malicious actors never sleep trying to find a crack on these protocols. Therefore, centralized exchanges (CEXs), although convenient and extensively used, present a risk on deposited funds.
Decentralized exchanges were born to address, among other things, the security of centralized systems. Unfortunately, DEXs suffer from low liquidity and fewer trading pairs compared to centralized platforms. This has necessitated the creation of platforms with the security of DEX and the liquidity of CEXs.
An example of such a platform is DeversiFi. Below we look at how the platform is able to provide a decentralized order book and high liquidity while allowing users to maintain custody of their funds.
DeversiFi is developed by Liquidity Labs Holdings Limited (LLH). The firm also owns and maintains the project’s website.
The DeversiFi team has partnered with key players in the cryptocurrency market. They include Ledger, StarkWare, Consensys, Infura, Bitfinex, and WBTC.
What is DeversiFi?
DeversiFi is a protocol that facilitates cryptocurrency trading without transferring the assets to an exchange while offering high-speed trading. It overcomes the security shortcoming of centralized platforms by allowing users to interact with the platform directly from their private wallets. The network uses the Ethereum blockchain as the main chain.
Luckily, the smart contract code is open-source, enabling heightened scrutiny from the community to improve its security. A vital component of the DeversiFi smart contract is that it only allows withdrawal from the rightful asset owner (more on this later).
Apart from a self-custodial approach, the protocol also offers an open order book where sell and buy orders are placed. Consequently, this enables transparent market depth and price discovery. Interestingly, the platform welcomes liquidity from external providers increasing the liquidity available to users.
On speed, the DeversiFi network achieves a high speed that ensures instant trade settlement by storing all funds in a single smart contract. Notably, a trade is executed but recorded on the blockchain later. StarkWare powers the settlement component.
Also, the platform enhances its speed by using WebSockets to fetch market data. The WebSocket-fetched data is used to update the order books. DeversiFi uses WebSockets provided by reputable cryptocurrency exchanges such as Bitfinex. The network also uses the exchange to place orders.
Activities on the network are powered by Nectar (NEC), a native token. NEC facilitates activities such as governance and utility. Among the token’s major benefits include transaction fee discounts and participation in governance matters through voting.
Advantages of using DeversiFi
- Instant speed – With a transaction speed of 9000+ transactions per second, DeversiFi facilitates instant trade settlement, whether using the platform via a user interface or an API. Although the system uses the Ethereum blockchain as the main chain, transactions are first settled on the network before being committed to the ETH-power platform in batches.
- High security – The protocol champions for self-custody of funds putting the security of users’ funds in the hands of traders. More than promoting self-custody of funds, DeversiFi uses PeckShield-audited smart contracts, and the contracts’ source-code is publicly available. The protocol further enhances the security of users’ funds by setting up trusted entities to store funds offline to ensure that users have access to their funds even when the platform is offline.
- Enhanced liquidity: DeversiFi attracts liquidity from centralized and decentralized platforms. For example, it receives liquidity from self-custody sources. By offering high liquidity, traders can enjoy low slippage and better prices.
- Assured funds during withdrawal: By employing trusted offline fund storage and funds securely and reliably connected to a trader, withdrawals are guaranteed at all times.
- Advanced privacy: With regulatory authorities and malicious actors prying cryptocurrency traders and investors, privacy makes an important aspect in activities involving virtual currencies. DeversiFi provides privacy by handling transaction-specific data off-chain. This approach is ideal for preventing other users on the platform from copying a trader’s trading plans.
- Affordable fees: On the DeversiFi network, transaction fees range from 0.0 to 0.2 percent.
DeversiFi and StarkWare
StarkWare is the developer of STARKS (zkSTARKS), a Zero-Knowledge (ZK) technology that provides the ability to combine multiple Ethereum transactions into a single batch using cryptographic proofs. The technology acts as a layer-two scaling solution built on top of the Ethereum blockchain.
DeversiFi uses ZK to overcome Ethereum’s scalability. The technology helps the protocol achieve a transaction speed of more than 9000 transactions per second. Additionally, zkSTARKS’ technology allows the DeversiFi network’s security to be shifted on the Ethereum blockchain.
Apart from speed and security, the technology mitigates the dangers of trade rollbacks by enabling instant trade execution. In addition, ZK implementation provides a privacy layer.
StarkWare Data Availability Committee
A critical aspect of StarkWare technology is the Data Availability Committee (DAC). The committee is made up of vetted entities that provide off-chain storage of DeversiFi user funds. As such, the funds are available even if, for whatever reason, the two platforms are offline.
Furthermore, the committee interacts with proposals meant to improve the blockchain’s state. In addition, by operating in a zero-knowledge environment, the committee is vital in improving privacy by ensuring that trading history is not transferred to the main chain.
However, whether accessing the platform through the API or the user interface, only three operations are enabled.
- Registration: This is the process of adding a new trader to the network. The process includes linking the smart contract with a trader’s Ethereum address using the STARK public-key. Note that the public key is used by STARK’s proof system to differentiate between asset owners on the platform.
Therefore, it enables the right withdrawal from the right asset holder. Consequently, it minimizes the chances of theft of users’ funds. Also, it prevents any unsolicited attempt to transfer funds.
- Deposit: Apart from facilitating registration, the API and user interface allow DeversiFi users to deposit funds into the same smart contract. By utilizing zero-knowledge technology, the platform first records the information on-chain while keeping the balances hash intact.
The deposit is then transferred off-chain, and an update happens on the balances hash. To provide privacy easily, the STARK technology moves the deposits to a non-permanent address before DeversiFi transfers it to its user’s account.
To provide transparency throughout the process, the trader whose funds are being moved must provide authorizations through signing. Therefore, there’s a STARK-designated signature and an Ethereum-designated signature.
- Withdrawing: The DeversiFi platform also provides withdrawal functionalities through both an API and user interface. Providing privacy functionalities during a withdrawal process follows the same step as when depositing funds on the protocol. As such, it requires signing from the trader.
Despite running on Ethereum, DeversiFi can achieve a high transaction speed and enhance the anonymity of traders’ activities. Also, allowing offline storage of funds assures traders access to them even when the network is offline.
Additionally, the protocol supports a wide range of users by providing API access. DeversiFi’s partnership with StarkWare, Bitfinex, and other key players in the cryptocurrency space adds trust to the platform’s activities.