Trade in a cryptocurrency exchange necessitates a high degree of speed and efficiency — especially when you are engaged in high-frequency trading. Every millisecond counts, as executing an order at even a fraction of a second ahead of the market can make all the difference between profit and loss incurred in the process.

Although the exchanges in the market today claim a high degree of throughput and speed, most of them struggle to keep up when encountered with an increase in the trade volume. BankDex is the first decentralized cryptocurrency exchange to overcome high latency, ensuring a throughput of over 1,000,000 orders per second.

A Primer to BankDex

BankDex is a decentralized exchange built in response to the demands of the cryptocurrency users, for a simplified and enhanced trading platform. The platform is built on a robust ecosystem that promotes an enriched user experience, low latency, greater liquidity and security for user transactions.

BankDex employs a loose mesh topology powered by kernel nodes which are responsible for faster transaction persistence and validation. In addition to ensuring faster transactions that can be completed in less than a second, they are also highly resistant to security attacks by being Asynchronous Byzantine Fault Tolerant (aBFT).

The exchange features an impressive collection of crypto — crypto pairing across its network. The array of its supported tokens and cryptocurrencies currently includes BTC, XRP, XLM, ADA, ETH, TRX, EOS, QNT, VIBE, MKR, ZIL and REM, with many more to be added along the timeline.

BankDex allows its users to withdraw funds for free from their wallet. Third party wallet integration is also one of those features to be integrated in the near future. The BankDex transaction management system is both unique and secure, ensuring a flawless trading platform for cryptocurrency users.

Latency and Cryptocurrency Exchanges

Traders handling large quantities of cryptocurrency trade often find themselves in need of an exchange with one particular feature — low latency. In the simplest of terms, latency can be defined as the delay to receive a response after a request is made. As it connects with trading, latency affects the amount of time required for traders to mingle with the market.

Latency, in trading terms, implies to the speed with which a trading platform can react to the present status of the market. Trading platforms integrate programs specially designed to buy and sell assets in less than a second. Low latency means that these platforms are able to react faster to the actions of the market. The rapid nature of today’s market enables traders to make a significant amount of money.

Traders who take part in such kind of trade look for very low latency, somewhere in the range 10 milliseconds to 0.1 milliseconds. This kind of speed limit can be reliably accomplished by machines only. For low latency trades to be worthwhile and lucrative, users require an exchange that can handle such high speeds. The ideal latency will figure around a speed of 0.5ms, but this is quite difficult to accomplish.

Most cryptocurrency exchanges today are not exactly designed for low latency trades. This leads people to develop software and programs to facilitate faster transactions. These programs are rarely reliable being either a hit or miss. Thus the cryptocurrency market is in serious need of an exchange which has low built-in latency capabilities.

Although low latency is a necessity for carrying out smooth trade, it does not present a problem in existing FOREX and stock markets. This is because most regular exchange markets are equipped with the feature. However, the same cannot be said about the cryptocurrency exchange scenario. For low latency trade to be made beneficial, the exchanges need to ensure considerable trade volume and high-frequency trade.

The demands of trade volume to ensure faster transactions make low latency a nearly unachievable task for many exchanges. Once we are able to overcome this limitation and offer trade at a faster pace, the cryptocurrency market will be a step closer to gaining the same respect and popularity as other asset trading classes.

Managing Latency in BankDex

BankDex decentralized cryptocurrency exchange addresses the latency issue with the lightning network concept, which ensures faster and safer trade of crypto & fiat currency. It overcomes the scalability issues, inherent to blockchain and enhances the throughput and latencies associated with a transaction.

The trading exchange consists of seven blockchains, which communicate with the core through a set of communication protocols. The communication between the different blockchains is established with the help of an interoperable blockchain router.

BankDex employs sidechains, an emerging mechanism that allows digital assets and tokens from one blockchain to be used in a separate blockchain and transferred back to the parent chain (if required) swiftly and securely. This feature of evenly distributing tasks helps in increasing the processing efficiency and lowering latency.

BankDex and the Lightning Network

A lightning network can be described as a protocol layer that enables low-latency, high volume digital micropayments without the help of an intermediary. The fundamental technology of lightning network involves a payment channel, a local two-party consensus.

Both the parties involved in the transaction sends an initial amount of Bitcoin, or any cryptocurrency token into a multisignature transaction. The multisignature transaction involves a local consensus on the existing balance that is allocated between the two parties in the transaction.

Any update regarding the allocation of the existing balance can be only be made with the cooperation of both entities involved in the transaction. This is done with the help of a new transaction that spends the funds allocated for the multisignature transactions allocated to each party.

Fig: A normal transaction in a cryptocurrency exchange

In the transaction, Alice sends 2 BTC to Bob. For this transaction to be accomplished, Bob first gives his Bitcoin address to Alice. Alice then broadcasts the transaction to the Bitcoin network. The payment is confirmed in the block after the entire network verifies the payment. Once this process is completed, 2 BTC is transferred to Bob.

Fig: BankDex Transaction with Lightning Network

Fig: BankDex Transaction with Lightning Network

In the transaction on lightning network concept, Alice and Bob enter into a contract, where the funds are first added to a 2 of 2 multisig. The transaction to exchange the funds are signed and the payment is conducted off-chain with point to point updates and very low latency.

In better words, the lightning network allows two parties exchanging funds to agree with each other regarding each other’s balance off chain and maintain control over the signed transactions while doing so. This helps balances to be more effective on-chain.

The Lightning Network employs the idea of payment channels to envision a network with zero counterparty risk, low fees, near-instantaneous speed and to facilitate bi-directional payment transfers. In doing so, the network intends to ease the concerns of scalability, around the Bitcoin protocol.

The lightning network allows the system to route around the blockages of universal consensus by off-chain settling of transactions, evading latency and other computational redundancies that usually plague blockchains. The network claims processing capabilities in the range of millions of transactions per second.

The lightning network helps BankDex overcome two limitations that are usually associated with traditional blockchain platforms.

· Instant transactions with final confirmation time under 1 second

· Lower fees as they are collected by the lightning nodes

Conclusion

As the technology around trading grows, the compulsion of a trader to gain a competitive advantage over latency issues have intensified. The timely reception of relevant market information and the capacity to act upon its receipt are greatly impacted by latency issues. As far as an active trader is concerned, latency needs to be managed and quantified, to maximise the odds of success. BankDex intends to ensure a profitable, safe and fast trading experience with its competent technology.