The woes of the legacy banking system have shown us all the consequences of fractional reserve systems, a lesson that has also been demonstrated by some exchanges in the cryptocurrency sphere that practiced said system, such as Mt.Gox and Mybitcoin, both of which ended badly.
However, Bitcoin itself has also shown us that it is possible to take some lessons from this same legacy system and apply it in a disruptive and meaningful way that can benefit the masses rather than just a few stockholders. Such is the case with the secret feature in the upcoming release of EasyDEX by the SuperNet team, the first fully decentralized exchange for cryptocurrencies.
This highly anticipated feature has already been developed and is currently being tested. It allows traders to take full advantage of the trading platform by creating a sort of “money multiplier” or, more specifically, a liquidity multiplier which allows the same funds to be used in multiple order books.
In this system, traders can place multiple orders using the same funds, allowing them to have multiple orders in various markets and to “catch” dips in the market without having to choose between any coins. Jl777 describes the feature as so:
“(The native DEX) is like quantum physics in the sense that the same funds can be in many places at once. Only when the wave function collapses (a trade happens) is its actual location fixed!”
This system favors average traders that don’t have large holdings and are, as so, confined to trading one or two assets based on recent market movements. With this liquidity multiplier, however, the exchange user can trade his favorite assets without having to wait behind users who have more funds and can spread their orders in multiple markets.
Once the trade takes place, however, and the user funds are depleted, all of the orders that were using the same funds in previous markets will be canceled, and the user will receive the funds from the order that was filled. Novice and experienced traders alike can take advantage of this feature to maximize their earnings, a feature that can, in some ways, be compared to margin trading.
“By being able to do many orders with the same funds, it really is like having N times the money to be trading with. So, if you are able to make X% per month with 1 BTC, now you an make N * X%!” JL777
This system is not only a curious and innovative feature for traders, it’s also a way to maintain the exchange healthy. The money multiplier creates a network effect that establishes liquidity in the order books and greatly reduces the need for market makers, who often times dictate the movements of the market itself, undermining technological progress and value.
As expected, the implementation of this additional feature in no way betrays the premise of the native DEX, which is to allow the trustless exchange of funds between users. As so, this disruptive kind of “fractional reserve system” will never result in insolvency or complicated withdrawal procedures. As so, users can be sure that they will not fall victim to the problems of the legacy banking system.
As blockchain technology moves forward, new and elaborate tools will become available and decentralized exchanges may soon become the new standard in cryptocurrency trading, bringing with them stability, transparency and security.