By Edward W. Mandel

At BQT (Token:BQTX), we’re big fans of decentralization. Whether we’re talking about security, privacy, cost per transaction or simple philosophical elegance, any move toward self-sovereignty appeals to us.

But we’re also keenly aware that, if all you make are right turns, then all you do is go around in circles.

There needs to be nuance to any strategy, if it is to be successful, and room to recalibrate. And nuance starts with clear definitions. So let’s make absolutely sure what we mean when we say “decentralization”.

What a lot of people think it means

When most people talk about decentralization in a cryptocurrency context, they’re referring to decentralization of asset exchange.

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That is to say, the things being traded themselves — cryptocurrencies, tokens, digital assets, whatever you or your regulators want to call them — are decentralized. Their value, their quantity and even their very existence are matters of consensus of multiple nodes, which tend to be unknown to each other.

So you can be on a centralized exchange such as Binance or on a dex such as BQT and you will still be dealing with decentralized asset exchange.

So, by this argument, any crypto trading platform could be considered decentralized. Still, we know that decentralization of asset exchange is necessary but not sufficient to make a transaction truly decentralized.

Blockgeeks, by the way, has an excellent article on this topic.

What it really means

As Blockgeeks’ unsigned guide article goes on to say, there are at least three other trading functions that are amenable to decentralization: capital deposits, order books and order matching.

One way to approach decentralization along all these lines at the architectural level is to build a currency-neutral platform. This is distinct from currency-specific platforms that center around one particular coin, such as VCTrade for ripple or IDEX for ether.

Not that there’s anything wrong with that, as long as you hold those coins. Although they’re widely accepted cryptocurrencies in their own rights (“widely accepted” being a relative term), they function as utility tokens on those exchanges. As a result, you have to maintain a pool of coins for which you might not otherwise have a purpose. It’s kind of a back-door intermediation — and dexes ought to, in my opinion at least, be doing all they can to reduce middlemen whether they use the front door, back door, side door or chimney.

Capital deposits are the critical point at which true dexes distinguish themselves from the Binances and Coinbases of the world.

“Due to KYC (know your customer) and AML (Anti-Money Laundering) regulations, exchanges are often required to seek users’ identities for capital deposits, creating centralized record-collection and data-storage of personal information,” Blockgeeks writes. “Effectively, centralized exchanges give users permission to transact currencies, rather than creating a permissionless ecosystem.”

Fortunately, most exchanges that call themselves decentralized do offer truly permissionless, secure, private transactions. BQT will certainly be among them, although we on the team never set out to “among” anyone. We intend to lead and, as long as one key competitive advantage is full decentralization we are evolving towards, we demand from ourselves that we stay at least one technological pace ahead of the pack to bring that feature to you.

Handling and matching orders books are more problematic, though, than capital deposits. In a previous post, we discussed atomic and submarine swaps, which serve this function but are not necessarily decentralized. They are ephemeral structures specific to two peers, one transaction, one time. They do have the benefit of making the trade in one step rather than two, but they are, at least at present, predicated on a currency-specific model. (That said, we’re studying with great interest what’s happening on the Cosmos and Vite networks lately. Yoav Vilner has more to say about these at Forbes.)

Also, the counterparties to such swaps need to be known to each other on at least a pseudonymous basis. A truly decentralized exchange would have a repeatable process with dedicated infrastructure that allows for random sellers to broadcast their offers and for random buyers to match them.

BQT is committed to extending the full value stream of decentralization for every trader, on every trade.

Where we stand

So it’s safe to say that the exchange on which the BQT team has been laboring so diligently is on board with this whole decentralization thing.

But I want to stress that we will offer these functions because they make sense to us and, more importantly, to the sophisticated traders whom we welcome as participants. We agree with the tenets of decentralization on a metaphysical level, but you can’t eat metaphysics.

We’ve got nothing against any other exchange based on their degree of decentralization — as long as it’s based on sound strategy and rooted in the real world of a wide array of market participants and an equally wide array of government attitudes toward cryptocurrency exchanges. We believe there will be use cases for digital bourses with a broad spectrum of approaches to decentralization — and we’re particularly impressed with Bisq’s novel approach of hosting their exchange on participants’ own devices rather than on a dedicated server, while remaining a currency-centric platform on the Bitcoin chain.

As long as the markets demand it and until and unless there’s no way around it from a compliance perspective, BQT with time will offer full decentralization.

Edward is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and ICO projects and recently launched his own BQT.IO P2P exchange helping traders connect with each other to leverage their crypto assets.

BQT.IO has been in development since March 2017 and its ICO launched September 18. The information can be found online at BQT.io, on Telegram @BQTCommunity and on Twitter as @bqt_ico.