Hashflow + Qume
Systems of asset custody in traditional finance are built on trust in centralized institutions. Such systems extend to crypto custody as well and suffer from the same principal flaws as any other mode of centralization. It is susceptible to hacks, data theft, mismanagement, lack of transparency and corruption.
For a crypto derivatives exchange, it is paramount to be transparent where allegations of insider trading and market manipulation are the mainstream thought. Crypto exchanges which use custodian services as of now rely mainly on centralized auditors or no auditor at all. This results in opaqueness in the trading operations of exchanges and their liquidity providers.
While fully decentralized exchange (DEX) protocols solve the problem of custody and transparency, they suffer from low speed, poor UI, price variability, and lack of liquidity. Such severe drawbacks make them unfit as a product solution for serious traders.
In DEXes the absence of a second layer technology such as lightning network or Raiden network produces latency in on-chain order books as they are updated by the latest block in the ledger. This latency could extend from seconds to minutes depending upon the underlying blockchain. For example, if it takes 3 minutes to process a transaction on the Ethereum blockchain then it will take a minimum of 3 minutes for the order book to be settled. This speed is certainly not suitable for high-frequency traders.
A decentralized custodian service, on the other hand, provides trustless solutions to the problems mentioned above. Proof of solvency and SPV solutions allow users to verify the latest updated balances on exchanges serving as proof of liability of an exchange (whose accuracy relies on network participation) against the reserve that an exchange has which can be simply queried by the users of the network. This entire process ensures complete transparency by the exchange or any OTC desk.
Hashflow is a leader in the market protocol for non-custodial centralized exchanges. The Hashflow approach decentralizes power by allowing anyone to start a hub within an open, trust-minimized, distributed crypto market structure with the associated built-in functions of the traditional financial market structure. It also incorporates the benefits of crypto automation and verification.
Hashflow crypto market structure offers the following functions: custody, credit, issuance, execution, clearance, settlement, collateral management, transparency, Proof of Solvency, audited data feeds or Price Oracles, and cross-chain asset swaps.
Qume has partnered with Hashflow for centralized non-custodial order books for our derivatives exchange platform. This will allow our users access to global liquidity, deep order books and ultra-low latency trading, marking yet another milestone for Qume as we deepen our commitment to building a transparent derivatives exchange.