From 2020, with the expansion of DeFi protocols, people around the world will invest more than 100 billion dollars in these projects, and the decentralization of the world is going with high speed.
In recent years, decentralized banks, decentralized insurance companies, decentralized exchanges and etc appeared and are growing, and other areas such as property, car and stock transactions were added to this list to some extent. This event means that the world is decentralizing at the speed of the light!
In this article, we want to talk about stock, forex and commodity trading in the decentralized world. An idea that has many challenges, but it will happen sooner or later. Let’s get started…
What do decentralized protocols cure?
The world’s financial system has been working traditionally for almost 200 years, and in the last 20 years, they tried to move this system towards decentralization, but the power and control is still for a few people and governments. In the traditional world, trust is a fake and false concept, because money and capital are in the hands of laws, and if the government or an organization wants to destroy or block your capital, practically nothing can be done!
If you look at history, there are clear examples of this in history, funds lost by fraudsters and no one supporting the victims.
This financial system can restrict and block some people and take work permission from them or destroy their bank accounts in general and sometimes charge them to pay taxes!
In the traditional financial system, all data and wealth are in the hands of a special few, and this means that those special people can do whatever they want. But with the expansion of blockchain and decentralized financial system, the world is going in a new direction. Trust is no longer a fake concept, and on the other hand, security has a real meaning! No one needs to support us anymore, because we support ourselves. Technology supports us.
Decentralized protocols cured the pain of trust, security, account blocking and speed for the world and gives them something that did not exist before, peace of mind from their wealth and capital!
Stock trading in a decentralized world
In recent years, exchanges such as DYDX, Uniswap, Serum and … brought cryptocurrency trading into the decentralized space and added something that this market lacked, security and trust.
Due to the illegality and lack of specific regulations, the cryptocurrency market witnessed many scams, and with the advent of DeFi, this issue disappeared forever.
But the stock, forex and commodity markets have been under government supervision for years and no company can provide these services without an official license in developed countries, but these licenses and laws sometimes create annoying restrictions for traders and the concept It does not provide security and trust in the full and comprehensive sense that we mean.
Maybe it’s time to think of a bigger idea, trading all assets in a decentralized world!
Centralized systems have many bugs and inefficiencies at best version, and decentralized technology eliminates these inefficiencies to a large extent. Inefficiencies such as security, data and information preservation, transaction speed, and privacy. What is happening right now is the movement of various financial markets and their entry into the decentralized world! An event that will happen quite seriously in the coming years!
How to trade stocks in the decentralized world?
Now there are several projects that are working on this ambitious idea and with strong white papers and providing suitable protocols, they were able to create a good name for themselves. But these projects have a long way to go and we need to give them more time! In the following, we would like to introduce you some projects that are the top of this section!
Synthetix and Mirror project used a new idea to bring shares to the decentralized world! An idea that did not require permission or approval and great challenges. Let’s explore further.
This project, whose market value reached more than 1 billion dollars, does not offer shares directly. Rather, a person as a multiplier puts a certain amount of capital (for example, $100) in the system and locks it, and based on it, multiplies a token from a specific stock and presents it to the market.
Another person comes and buys this token and so on.
In this project, traders don’t actually buy the stock, but buy a Synth of the stock that has its price and trade with each other.
This method found many fans among traders, but it also had challenges, the most serious challange was the issue of liquidity.
If there was no multiplier to multiply shares or buyers and sellers, transactions would practically stop and the system would face the challenge of lack of liquidity.
This protocol, as well as Mirror, are working and have their own audience, but the issue of liquidity and the limited number of shares offered reduce the attractiveness of this platform!
From the point of view of many audiences, this protocol was one of the phenomena of 2021 in the field of DeFi, which could not maintain its power and collapsed after a while. But what technology does this protocol have and how does it work?
Sologenic, in cooperation with Saxo Bank, which is one of the largest brokers in Switzerland and provides various services in the stock, forex and commodity markets. it’s developing a decentralized trading system for stock trading, but how?
They used Tokenized Share system. In this way, when the customer used to buy Apple shares on their platform, they would buy Apple shares in real form from Saxo Bank and based on that, they would create a token and give it to the customer! The value of this token was related to Apple shares, and if Apple went down, this token would also lose its value.
But what were the main challenges of this system?
- 1. Legal issue
As we said, this system was directly connected to a centralized broker! This means that it is not as decentralized as we think and is ultimately connected to a centralized source, and this issue created legal challenges for it.
As all the customers of this platform had to go through the KYC process, their identity was confirmed and then they were allowed to work.
All these things mean that this platform is not actually decentralized and only carries its name!
- 2. Liquidity challenge
In the traditional financial structure, there are many liquidity providers and market makers that brokers connect to and transfer transactions in case of a lack of liquidity on the platform. But this was not the case in this system, and if a person wanted to buy or sell a token, sometimes it was not possible due to the lack of liquidity! This is the most serious issue of the decentralized financial system.
3. Intelligent Protocol
One of Solana’s attractive projects, which was unveiled at the end of 2021, presented itself with a revolutionary idea. The entry of all markets into the decentralized world!
How does intelligent protocol work?
This protocol is revolutionary and innovative in two ways:
- Appropriate use of artificial intelligence to help customers
- Creating decentralized platforms to provide different markets in the decentralized world.
- Use of artificial intelligence
It is perhaps the first project in the field of DeFi that has given so much importance to the issue of artificial intelligence and this global trend and tried to use it optimally.
Using artificial intelligence, this protocol analyzes the needs of customers and based on that, introduces the best and most appropriate asset that is suitable for them.
This introduction was done using artificial intelligence algorithms and basic data analysis and based on the risk level of the audience, the best option is presented to them.
On the other hand, the artificial intelligence of this platform constantly checks the customer’s portfolio and offers corrections to the customer, and if the customer makes a mistake in transactions, it helps him to fix his mistake in a completely real-time and scientific way.
These issues show that this platform is doing its best to keep its customers in the decentralized space and help them grow their capital.
Creation of decentralized platforms
Intelligent has tried to provide various financial markets in the decentralized world by creating several centralized and decentralized platforms.
Decentralized Perpetual Trading platform
In fact, this platform provides trading of stocks and various assets in the form of Future and Perpetual. In this platform, you do not become the owner of shares and like future transactions in different brokers, you profit from the rise and fall of the price.
But what is the positive point of this platform?
- All transfers are done in a decentralized world without dependence on traditional financial markets.
- The structure of liquidity providers and market makers is seriously there and the liquidity problem has been solved.
Decentralized Tokenized share platform
In the first step, this protocol tried to create a completely legal and centralized platform that can communicate with different stock exchange organizations and offer different stocks within its platform.
Then, with the support of the centralized platform, he wants to offer shares in the form of tokens and completely legal in the decentralized world, how?
With clear communication between the centralized and decentralized platform and by the clients themselves, not this protocol! For this reason, this is a revolutionary idea!
The main challenges
Stock trading in the decentralized world has 3 main challenges:
- Network speed and capacity
- Legal issues
According to the structure intelligence presented, he solves the problem of liquidity in general, and in relation to the discussion of network speed, he uses Solana, which has the capacity and ability to stretch an On Chain Order Book. The only problem with this protocol is the legal issue for which they provided an interesting solution.
Regarding the Decentralized Perpetual Protocol, there is no need for legal approval, because it does not have a centralized dependency, and in the case of Tokenized, they want to do this with deep communication and obtaining the necessary permissions.
The ultimate goal of this platform is to offer stocks and various assets without the need for centralized dependencies, a goal that may take many years but is possible.
In this article, we tried to talk about the latest blockchain technology and its impact on the stock market. An event that will make a lot of noise in the coming years and will be used worldwide.
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