Fueling a global Exchange and bringing Liquidity to the Crypto Space

Fundamentals check:

Website: Liquid.plus

White paper: https://s3-ap-southeast-1.amazonaws.com/liquid-site/quoine-liquid_v1.9.pdf

Working Product: No, but some of the building blocks are already in place.

Roadmap: On the website we can see an extensive road map starting back in Q1/2 2014 with the launch of the QUOINEX exchange and targeting major development milestones in 2018 with a final product expected in Q3 2019.

Technicals:

Market Cap: ~$284.411.400

Circulating Supply: 350.000.000 QASH

Total Supply: 1.000.000.000 QASH

Funds raised through ICO: $106.400.000

ICO ended: 8/11/2017

ICO Price: 1 QASH = $0.24 (0.0008 ETH) This includes a 20% period, the ICO sold out during that time so all tokens were sold at that price.

Today’s price: $0.81

ERC20?: Yes

Exchanges: Quoinex, Bitfinex, Huobi, Qryptos, Gate.io

What is it?

“Our LIQUID platform which aggregates all major exchanges in the world to one single trading platform, combined with the prime brokerage service, will allow everyone in the crypto space to benefit and contribute to LIQUIDITY.”¹ — Mike Kayamori, founder and CEO of Quoine

As a shorthand, Quoine describe QASH as “the next Bitcoin or Ethereum for financial services”. With their LIQUID platform they aim to provide liquidity to the crypto market. This sounds pretty broad and initially I thought that we are dealing with a pure utility token here, but QASH is actually supposed to be a currency and a blockchain with a pretty impressive set of features. Especially the latter feature would set it apart from other exchange tokens like BNB and KCS. We will have to go into more detail to grasp all they want to do with it over the coming 24 months (with 70+ pages their white paper ranges on the more extensive and complex side).

Value Proposition:

QASH will be the native token on the LIQUID platform built on top of Quoine’s Japanese exchange QUOINEX that already offers some of the tools and systems on which LIQUID is built upon. The LIQUID platform aims to be a worldwide, universal crypto exchange that offers a holistic solution for exits and entries to and from fiat, as well as trading between all crypto assets. To achieve this goal, three key components will be put in place over the course of the next 24 months:

The World Book is designed as a globally sourced trading platform that aims to incorporate all other major crypto exchanges while offering fiat pairings from not only the leading currencies but also emerging economies in the global south and Asia. If done right, this will become one huge order book where users will be able to trade in between a plethora of crypto currencies and get in and out to their local currencies through what Quoine calls Direct Market Access, no more sending BTC or ETH from exchange to exchange like it is the case now. (Beta launch soon with the LIQUID platform launch scheduled for Q2 2018 and the final Direct Market accessin Q3)

A Prime Brokerage service is desperately needed to provide the above mentioned benefits of a world order book. So far, nothing comparable exists in the crypto space. Traders need to manage a huge amount of different accounts and fiat entry points and therefore need to deal with a lot of counter party risks. LIQUID-users will only ever need to create and manage one account, while the system executes their trades over several exchanges and even banks. To realize this vision, Quoine actually have to make a giant effort, as explained in the white paper: “Moving large sums of fiat is slow, expensive and time consuming — which is one of the reasons Crypto Tokens are the future of finance. Over the past three years, QUOINE has built an extensive network of relationships with banks. Part of our banking strategy has been to co-locate our bank accounts with those of other major exchanges, by creating accounts in the same bank — and in many cases the same branch — as other exchanges.”1

The Prime Brokerage services will also include banking level order management and matching systems that — at least this is what Quoine claims — will be able to process millions of orders per second, as well as sophisticated reporting. Additionally they will offer crypto and fiat credits to leverage existing balances (possibly comparable to margin on Bitmex) for which the company is applying for a formal banking license.

On top of this, the LIQUID platform will provide a wide range of trading tools (some of them are already in place on QUOINEX), automated trading strategies that can be further developed by external devs and premium co-location on their private servers near key liquidity entry points.

Token Utility:

QASH will be used to pay for the extended services described above, including Direct Market Access, Fiat Management, Fiat/Crypto Credit Services, System Co-Location, Automated Trading Strategies and Trading Tools.

Trading in QASH pairings will provide a 5% discount everywhere on the LIQUID trading platform, as well as Quoine’s other exchange QUOINEX and QRYPTOS that they will optimize for holding ICOs. According to Mike Kayamori, the ICO platform will be ready shortly after the launch of the platform. 5% might not sound like much but many of the features on the LIQUID platform are tailored to the needs of institutional investors that move huge amounts of money around.

Quoine claim that QASH will prove itself as a currency like BTC or RIPPLE as development enters it’s final stages, promising high end transaction speeds.

The most interesting and widely overlooked feature of QASH has to be that Quoine is building a proper blockchain around it. This is a big deal for an exchange token that goes beyond its narrower utility related to trading on the LIQUID platform:

One of the major discoveries in the white paper and according to additional clarifications Quoine made over the last weeks is that they are actually planning to integrate decentralized elements in their eco-system: “The QASH blockchain will be built to natively support Decentralized Distributed Execution and to a great extent will be tailored to financial services, but not limited to them.”³

This includes Intelligent Agents aka smart contracts that will introduce trustless mechanisms to the LIQUID platform. Additional DAPPs can be developed using Erlang, Python, C++ and other programming languages. This is important because while LIQUID will reduce counterparty risks related to dealing with several accounts on exchanges it would focus all your risks on one party as long as decentralized elements are not in place.

This way they promise to provide decentralized trading of assets with QASH being the native currency on the blockchain. If they manage to reach their envisioned speed of 100.000 transactions per second this could be a game changer.

Finally, and this gives the QASH tokens a whole new level of value, the blockchain will use a proof of stake (POS) consensus algorithm so holders will be able to stake their QASH realizing a rate of interest on what they call “Semi-Permissioned Distributed Nodes”, based on KYC and other controls: “Anybody can generate/forge blocks as long as compliance with KYC/AML and other regulatory policies are fulfilled. This will be controlled natively on the platform. Forgers participating in the validation network will be rewarded in QASH ONLY. QASH will serve as the fuel that will power the distributed execution services (Virtual Machines) and to pay for other native services such as asset transfers.”

There are additional features mentioned in the same article. Be aware that this is very far away and even goes beyond the scope of their road map as far as I can tell: Seamless currency conversion (Fully exchange linked), Opt-in KYC (Traditional finance/compliance-officer friendly), Blockchain based Continuous Linked Settlement (Settlement of positions across liquidity providers), Multi-asset ledger for special-purpose value-stable assets (e.g. tokenized fiat used for settlement), An opt-in socialized loss mechanism (distributed insurance), Decentralized, trustless and non-custodial exchange-linked wallet — the user retains control and custody of their assets but a portion is locked up for settlement, Decentralized trustless lending. Lenders retains control and custody of their assets but the portion loaned is locked up for the term of contract, Credit Scoring (already available in the existing platform), Trading Algos (already available in the existing platform).

Background, Team and Partnerships:

QUOINE is a global fintech company operating from Singapore with additional offices in Japan and Vietnam. In 2014, they built the Japanese exchange QUOINEX that already offers an extraordinarily high variety of fiat trading pairs (Japanese yen, US dollar, Euro, HK dollar, Indonesian rupiah, Singapore dollar, Philippine peso, Indian rupee, Australian dollar, Chinese Renminbi). QUOINEX has been licensed by the Japan Financial Services Agency back in September 2017, indicating strong government support. According to their own estimates, QUOINEX realized a volume of more than $12 billion over the course of the last two years. This would place it among the leading exchanges globally.

All of the above sounds incredible but I would be more skeptical if it wasn’t for the team behind LIQUID. CEO Mike Kayamori is a fintech veteran with more than 20 years of experience, his associates have worked for the world’s leading finance businesses: CFO Katsuya Konno (Softbank), CSO Ray Hennessey (Merrill Lynch, 30 years of experience), Co-founder Mario Lozada (Credit Suisse and Merrill Lynch Japan), the list goes on with former Goldman Sachs employees and more. Backers include names of the caliber of Paul Kuo, former CEO of Credit Suisse Japan and former chairman of the International Bankers Association and the Japan Stock Exchange or Masaaki Tanaka who currently is the Senior Global Advisor for Private Waterhouse Coopers (remember what they have been doing for Vechain so far?).⁴

Quoine CEO Mike Kayamori

They have already assembled an impressive list of partners. Especially partnering with exchanges will be paramount to the success of this ambitious endeavour: Bitfinex and Binance are big hitters in that regard. Then we have names like Dash, Blockwave, ZB.com, BW.com, EXX.com and CEX.IO.

Possible Downsides:

As their ICO was very successful, QASH already is sitting in the top 100 on Coinmarketcap (currently rank 68) so it will take a greater influx of money to make it move than a low market cap token. This can be seen as a plus as it provides visibility in the market.

Anybody who uses QUOINEX for the first time will be impressed with the modular design and the wide array of trading tools already in place. However, the interface can be very confusing and some of the stuff just does not work properly (at least on my system), like scaling with buttons vanishing outside of the screen. This can be fixed but it is not something I would leave unmentioned here as Quoine are building a large scale universal exchange that should offer an accessible UI if it aims at mass adoption.

We still don’t know how the following years will play out and how predominant truly decentralized exchanges will become. As mentioned above, LIQUID includes elements of decentralization too but the market will be crowded at some point with large scale projects like ICON having first mover advantage. No project I know of is trying to do what Quoine does at the moment.

Partnering with the largest exchanges will be one of the most important things to look out for going forward. Quoine will have to get everybody into the boat for this to work out. So far they seem to have done a great job in that regard, although we will have to be cautious about how the whole Bitfinex situation develops. If some of the huge exchanges fail, this would make the DEX-approach much stronger in the future.

Since my first in depth look into LIQUID, a lot of possible competitors entered the field. These are mostly ICOs that did not even have a public sale yet(like i.e. Xtrade or the lesser known Cryptalgo). However, if Quoine push out the items on their road map in time, they will be first to market. On top of that, I still think that their team and advisors are as impressive as it can get these companies will have their work cut out for them.

Overall Outlook on QASH:

Honestly, when I started this research I was a bit turned off at the prospect of another centralized exchange in times where many of us are craving for a proper decentralized solution following in the footsteps of Etherdelta. But our investing strategies should not be clouded by ideology, just look at what Ripple has been doing over the last month. At the very least, QASH could be a decent hedge in that direction as institutions enter and transform this market. Do we really see big institutional money flow around on decentralized peer-to-peer exchanges? These players need licensed partners and aim to minimize counterparty risk while having access to as much liquidity as possible. So I took a closer look after Korean Jew introduced the project to the Crypto Dojo. What I found is way more appealing than I would have initially thought. The road map is ambitious and spans a relatively large time frame but if Quoine can pull this off, QASH could be a top 10 or even top 5 coin in the foreseeable future.

If we want to have some eggs in the basket of fintech, banking and institutional money, LIQUID could prove itself to be a serious Ripple competitor that offers way more and even incorporates elements of decentralization. There remains of course the not purely philosophical question if anything that only shows aspects of decentralization can be called truly centralized, but that’s the ideology talking again. If somebody asked you if you would like to invest into the framework for the future forex markets in its infancy, would you decline?

Another aspect that should not be overlooked is the fact that QUOINEX is registered in Japan and we can see some of the head figures of the team being Japanese too. Historically, Japan has been one of the most crypto-friendly nations regarding user adoption as well as government regulation.

Overall, the value of the QASH tokens is much more nuanced and plentiful than I initially imagined. Especially the blockchain aspect with a POS consensus algorithm could turn QASH into a phenomenal long term hold after mainnet launch. At a price of around $0.80, these tokens are highly undervalued if you believe that Quoine can build the LIQUID platform as described.

***DISCLAIMER***

This is not financial advice, please do not invest more than you can afford to lose.

This Crypto Dojo research was first made public accompanying Korean Jew Trading’s video on QASH (https://www.youtube.com/watch?v=XBM4g4-oiAk).

If you have further questions or want to discuss anything presented in this article, you can find me on twitter @Shillman_Crypto

Endnotes:

¹ https://steemit.com/cryptocurrency/@quoineliquid/7vk1p6-announcing-quoine-s-ico-the-qash-token-sale

² Liquid White Paper, p. 24.

³ https://medium.com/@QUOINE/qash-and-the-qash-blockchain-b8fb922994a4

⁴ Find a full list of leading team members and backers on https://liquid.plus/#home