[giergirey]

Yes, I also think exchanging tokens is one of the (few?) situations where a smart contract really is a great solution to a real world problem (as opposed to blockchain hype).

Definitely an interesting area, I've been watching this space, here's some interesting ones:

On the tethered tokens side, https://decentralizedcapital.com seem to be offering tethered tokens backed by real currencies (and cryptocurrencies on other chains). Not heard much about them though.

Implementing full exchange matching rules is pushing at the limit of what's possible in an Ethereum smart contract - https://ubitok.io are working on it (disclaimer: I'm involved with them!).

As others have mentioned, https://etherdelta.github.io is one of the better known decentralised token exchanges - though they do use an off-chain matching engine so it's not totally on-chain.

https://oasisdex.com have gone the other way - they're 100% on-chain, but they don't try to do best execution / automated matching - you have to pick an order to trade with.

[zdkl]

If I want to transform (BTC|LTC|eth) tokens to cash, how does introducing an intermediate token help?

[giergirey]

OK, suppose you want to sell Litecoins for USD cash in a bank account.

Now, admittedly, it might be that today a one stop centralised exchange is the best choice for you.

But by introducing intermediate Ethereum based tokens, you've broken down the task into three parts, potentally allowing more competition for each part:

1. finding someone willing to exchange your Litecoins for an Ethereum tethered-LTC token

2. finding someone willing to exchange your Ethereum tethered-LTC token for an Ethereum tethered-USD token

3. finding someone willing to exchange Ethereum tethered-USD tokens for bank account USD.

Part 1 is purely crypto-currency-based (albeit on different chains), and so should have lower fees than anything involving fiat transactions. It's also free of exchange rate risk, so doesn't need a fully-fledged exchange - should be easy to automated and audit.

Part 2 is purely Ethereum-based, and this is where competition should drive fees down to near-zero. Because a smart-contract can run this, there's (potentially!) zero risk of the exchange being hacked / running off with your coins / taking weeks to verify you / being shut down by regulators.

Part 3 still involves the ugly movement from crypto to banking. But now it's just going from tethered-USD to USD - so for the processor there's no exchange rate risk, or need to deal with weird and wonderful cryptocurrency networks.

And perhaps one day you'll be able to live without Part 3 - you might start to find you can spend tethered-USD in more and more places without needing to go to a bank account ...

Disclaimer: I'm involved with the https://ubitok.io decentralised Ethereum exchange so I do have a bit of a vested interest in decentralised exchanges! Would love to hear some counter opinions though ...

[zdkl]

Thank you for taking the time to answer. Respectfully, I see no point in the mechanism you outline above. You're moving the icky cash-for-tokens risk source from the established coin markets to your private coin with no added benefit I can discern.

If you already assume I as user don't trust the established exchange, what makes you confident that this setup with the added complexity alters any downside/risk/cost of transferring value from coin tokens to cash?

[Edit] For instance given a user with a diversified portfolio of coins, in what way does adding another coin like asset facilitate any of the coin-coin or coin-cash transactions?

[giergirey]

I agree you probably won't see much benefit if most of your transactions involve cash-in-a-bank-account or coins on non-Ethereum chains.

However, if:

- Ethereum continues to grow; and

- we continue to see more and more successful/useful coins/tokens built on top of Ethereum (especially if asset-backed ones are accepted as payment);

Then we're going to see a lot more coin-coin transactions that /can/ be done on-chain - at which point a smart contract exchange is attractive (no counterparty risk, no fees, no waiting weeks for document verification, no limits).

Right now today it's possible for me and you to trade millions of dollars worth of tokens such as WINGS, BAT, USD.DC, GNO with each other on https://etherdelta.github.io or https://oasisdex.com/ (and soon https://ubitok.io/) - without needing to get verified or sign up, and only needing to trust that the exchange smart contract behaves as claimed (well, and that we're interacting with the right contract!).

If you don't see smart contracts / decentralised apps working well here, are there any problems where you do see them as being a good solution? A distributed exchange always seemed to me like a bit of a poster child for smart contracts ...

[zdkl]

What I don't follow is why Ethereum is a good target to implement this type of program on. If you have the know-how to implement a bulletproof/trustable multi-token transaction clearing platform, why would you want to tie yourself to this platform?

The only advantage I see for smart contracts is that it would allow you to implement security-like mechanisms without regulatory burden associated with the SEC and other financial entities. Apart from this "new world" thing, in what concrete ways is using an etherium based exchange more advantageous for me-user than traditional financial organisms who must submit to oversight and scrutiny with safeguards in place to prevent hostile behaviour from my peers?

[zdkl]

I should've bet on it.

https://news.ycombinator.com/item?id=14807779