In the yard of 2018 and now many people understand the need for decentralization of financial transactions. With the advent of cryptocurrencies, the whole world took a huge step towards freeing itself from attachment to a third party, be it an ordinary Bank or an exchange. But, despite the fact that cryptocurrencies are created on decentralized models, most transactions on cryptocurrency are carried out with the help of centralized systems — exchanges or, at worst, an exchanger. Yes, there are decentralized exchanges that seem to solve the security problems of centralized systems, but in practice, we get quite slow on the speed of processing exchange orders.
Now imagine a stock exchange platform that combines the speed of centralized systems and the security of decentralized ones. The developers of Neon Exchange, in fact, offer a solution to this problem and, perhaps, at the end of the year will be a completely new standard exchanges.
What is Neon Exchange (NEX)?
Neon Exchange (NEX) is a new decentralized exchange running on NEO blockchain. The optimal combination of speed and security is proposed to provide a system of request details and transaction processing in transactions of the type off-chain.
Order processing is the most expensive part when making an exchange. The developers propose to carry out this processing in transactions of the type off-chain, thereby obtaining huge improvements in speed and the ability to carry out a variety of orders, such as limit and margin. At the same time, while processing orders as they are aligned – with the provable deterministic behavior – the security advantages of traditional decentralized exchanges remain.
Another feature of NEX will be a new, user-friendly smart wallet Chrome for storing currency exchange, which has functionality for instant trading. Co-founder Fabio Cantin described the extension of the wallet, as the app “MetaMask + NEON Wallet” that allows users to access the exchange while maintaining secure storage of tokens.
How Does NEX Work?
NEX consists of three main components:
- System information, applications and processing of transactions to off-chain.
- A smart contract in which trades are executed.
- A payment system in which global assets such as NEO and GAS can be converted to tokens and transferred via smart contracts, making them compatible with exchange.
System Information, Applications, and Process Еransactions (matching engine)
The off-chain transaction processing system allows NEX to have high performance while maintaining a decentralized user account model based on blockchain. The orders are signed and sent with addresses of users in the system information of applications and processing transactions, where they are quickly processed with the use of highly efficient equipment. The processed orders are then signed to off-chain and sent back to the user accounts in the blockchain.
Let’s look at the diagram:
The user authorizes the token exchange transaction A to token B (1) and sends the order to the processing system (2).
The second user then authorizes and submits a token exchange transaction B to token a (3-4) for consideration.
The system processes orders (5) and sends them to the smart contract (6).
Please note that the steps (1-2) and (3-4) can be initiated either through an API call or on the exchange’s web site NEX.
Since a single NEO transaction can contain many executed smart contracts, the system can pick up a number of processed orders in a single transaction in order to minimize computational costs. NEX is potentially capable of processing and executing more than 100,000 trades per second!!!
Smart Contract for Exchange Operations
System information, applications and processing of transactions NEX, is associated with the smart contract, which has transactions between users. This smart contract contains a logic based on the standard token-NEP-5, which captures all the user tokens involved in an active auction.
As soon as the NEX processing system calculates the match, it sends this smart contract to all participating addresses that have information about the type and number of tokens. Once the information has reached the users, the contract completes the transaction.
All requests received for this smart contact can be collected in one transaction, which will significantly improve performance and reduce network volume.
NEX Payment System
The NEX payment system allows neo smart contracts to interact with assets that are outside THE neo virtual machine. For example, a user can use the payment system to make a chain of transactions by sending ETH to a neo smart contract, from which transfers to other NEO addresses can be easily made.
In the future, the payment service will support the assets of other blockchains and possibly even non-digital assets such as us dollars, acting as a gateway to OTC trading on NEX. However, in the short term, the payment service will have to present a similar function for global assets in NEO blockchain, such as NEO and GAS. More broadly, the payment service is the starting point for ideas on how decentralized exchanges can interact with assets on other networks.
NEX payment system is necessary for complex interactions, such as decentralized exchange between smart contracts and global assets.
Let’s take a closer look at the principle of this interaction.
The payment system converts global assets such as NEO and GAS into token-based assets that are easier to send and receive through smart contracts. When you Deposit funds into NEO’s payment system, an equivalent amount of XNEO is created for you, which can be sent and received through smart contracts using the NEP-5 standard. Conversely, when you withdraw NEO from the payment system, your XNEO balance will be adjusted accordingly.
For clarity, we will analyze another scheme:
The user enters NEO into the smart contract of the NEX payment system, creating an XNEO balance, which can be transferred through smart contracts (1).
The user grants permission to a third-party smart contract (SC1) to access their XNEO (2A). The user then activates this contract (2b), which sends a portion of XNEO to another user. The user allows the second smart contract to track the remainder (2c). The first smart contract is then linked to the second smart contract (2d).
In the final part, users and the second smart contract (SC2) output their NEO, zeroing the balance of XNEO (3).
NEX Differs from Other Decentralized Exchanges
The very first decentralized exchanges placed order registers directly in the blockchain. In these systems, market makers must execute on-chain transactions whenever they need to place, modify, or cancel an order. In addition, in the process of placing new orders with the smart contract should perform a comparative logic that is running slowly on all virtual machines in the network. In General, such exchanges require more network bandwidth and are very slow, so today a very small number of decentralized exchanges operate under this scheme.
In contrast to on-chain order registers, the second class of systems uses smart contracts of an automated market maker (AMM). These systems apply a price adjustment model where all parties trade with AMM and the spot price of the asset is determined by the total market prices. While the AMM provide greater usefulness and performance register of orders on-chain, they are still much slower than centralized exchanges, and are forced to set artificial limits on the performance, to prevent the misappropriation of their working capital from potential arbitrations.
Unlike previous concepts, NEX is a new kind of decentralized exchange based on a reliable system of orders data and transaction processing in off–chain. Such a processing system works in the same way as on centralized exchanges, but controls only active orders and makes on-chain transactions without access to the balance of the user’s account. Like the exchanges, based on off-chain relay, NEX orders are processed off-chain, and run in on-chain, but an automatic system of information, applications and processing of transactions NEX reduces the possibility of arbitration and allows to fulfill more difficult orders.
In essence, this makes NEX the first decentralized exchange with performance comparable to today’s centralized exchanges.
While the off-chain NEX requisition and transaction processing system brings enormous productivity benefits, it is also open to potential trust issues between users and the exchange. A logical question arises: “how do users know that the system processes an order objectively rather than cheating with the order register for its own benefit?”.
To solve this problem, developers offer an idea that proves the objectivity of off-chain processing. According to this idea, the NEX order details and transaction processing system in off-chain will follow a publicly available deterministic algorithm. This information, together with the public order report available for viewing, in which transactions were sent to the exchange and executed on the blockchain, will allow any user to check the integrity of the exchange. In order to increase confidence in NEX, it is planned to create a smart contract in the future, in which users will be able to provide evidence of unfair behavior of the exchange, while receiving compensation in a large amount.
Processing on NEX will be determined based on price and time-FIFO. Less expensive orders will be processed earlier, with preference given to orders placed earlier in time at the level of specific prices. Any order changes reset (reset) the placement time.
The security problems of centralized exchanges are not just a technical challenge that needs to be overcome, but also the social consequences, the desire of the average user to store assets in exchange accounts. NEX aims to bring the background of the centralized experience to a decentralized model, thus obtaining the ideal product. This is planned by storing the encrypted private key of the client in the user’s browser. This preserves the security guarantees of the decentralized account storage model, allowing users to log in to NEX through a traditional web form requesting a username and password.
To ensure that no one from outside will conduct fraudulent trades between users, the smart exchange contract trading method will only accept orders signed with a private key stored in the NEX order details and transaction processing system.
The Principle of the Commissions
NEX follows the maker/taker fee structure, which is common and is used on many exchanges.
Market makers who place new limit orders in order registers do not pay fees. While buyers (takers) who place an order on the market or limit orders below the market price will pay a small fee.
The Commission will be withheld from buyers during the transaction in tokens exchanged.
NEX calculates the 30-day moving average turnover of the user using the history of transactions associated with his public key, as a percentage of the total exchange volume. Below is a table with the commissions.
In total will be released NEX 50 million tokens, which will entitle the holders to a share of the profits received from the exchange on the exchange transactions and payment services. The NEX holders can claim their profits through the bid process, where the demand for shares from the NEX work in a similar way as in the NEO network. In fact, NEO token is a share in the company, and as a profit you can demand your GAS at any time. GAS, in turn, is a separate token and settlement unit in the NEO network. As a result, the more exchange transactions occur in the system, the more commissions will be paid and, accordingly, the more your profit will be.
NEX will sell tokens in the first quarter of 2018. It is planned to sell 25 million tokens to an unlimited number of people, from a total pool of 50 million. More information on sales can be found in the official channels. NEX declare that they strive to comply as much as possible with the legislative norms and will try to attract as many countries as possible to sales.
Neon Exchange Command
Just wanted to note that the co-founders of this project are part-and developers of NEX. Most of them are co-founders of CoZ (City of Zion, an independent community of developers, designers and Neo translators) and the main creators of neo cryptocurrency.
Fabio K. Cantin (Fabio Canesin C.) is the co – founder and developer of the project NEX. He holds a master’s degree in computational mechanics and variational multiscale modeling. He has developed software in several major projects, whose assets have increased by billions of dollars. He is also the initiator of the original ideas of the City of Zion community, which brought together the founders of NEX. Prior to that, Fabio co-founded and acted as technical Director of Lemonaid Learning Analytics startup in Brazil.
Fabian Wahle is a co – founder and developer of NEX project. Has extensive knowledge in the field of machine learning and AI in the field, receiving the degree of doctor of science in the Federal higher technical school of Zurich. Previously, he was co-founder of the medical technology company Altoida, awarded as the most promising startup in the field of biomedical Sciences (TOP100 Swiss Startups), where he currently serves as technical Director.
Fabian engaged in cryptography in 2014, and after working in “Antshares” (the original name of Neo before renaming) at the beginning of 2016 helped to grow and nurture the community CoZ, acting as its co-founder.
Ethan Fast (Ethan Fast) is a co-founder and developer of NEX project. He is an entrepreneur and researcher with experience in HCI and AI. He led more than 10 projects, published in many prestigious publications. He first became interested in blockchain technology in 2014, and later redirected his interest in Antshares as co-founder of CoZ. Before returning to Stanford for his doctorate, he founded the “Proxino”startup.
Luciano Engel (Luciano Engel) – co-founder and developer of the NEX project. Is a mechanical engineer and entrepreneur with seven years of experience of structural modeling: during this time, he was a partner for project implementation in several technology and educational start-UPS in Brazil. For the first time he faced “Antshares” in the development of its previous cryptocurrency startup, after which he became a co-founder of CoZ and the Creator of the project NEOScan.
Thomas Saunders (Thomas Saunders) – co-founder and developer of the NEX project. A graduate of the faculty of philosophy, a software developer with 10 years of experience. Thomas spent the last 2 years, leading the development of start-UPS at the University Minnesota”s College of Education. Thomas is co-founder of CoZ, developer of neo-python and compiler of Python for NEO Smart Contracts, contributed to NEO Core project and understands neo virtual machine very well.
Social Activity NEX
At the moment, the project has three official pages in the media space of the Internet.
- Twitter. The account has 24 thousands of readers. And quite a good activity.
- Medium. Here we see a little more than two thousand subscribers. And not very active account. The last entry is dated December 13, 2017.
- The network has a lot of hype about the upcoming ICO, which is mainly felt in the English-speaking community.
Consider the rest of the site:
- YouTube. On one of the English channels about cryptocurrency, there was a fresh interview of one of the co – founders of NEX and CoZ-Ethan fast. In an interview, he talks about the prospects of NEX.
- A small topic on bitcointalk. The topic is not super popular, but all unsubscribe unanimously agree that this is a very cool project with excellent prospects. Below is the translation of the brightest comments:
“The team behind this project is amazing. I will definitely take part in this ico”.
“Has anyone found the official telegram channel of the project? My opinion is that Nex will be the hottest ICO in 2018! Go Go go go guys!”.
As we will see later, in the project roadmap, the developers plan to conduct the initial sale of tokens in the first quarter of 2018. When exactly the sale will begin, nobody knows, and the official media channels are just silent. Nevertheless, I managed to find a curious page, which contains the date of the start of sales-March 25, 2018. I doubt that NEX individually informs anyone about their plans, so the date can be considered inaccurate, at the level of rumors.
- Q4 2017: samples of smart contract for payment services and decentralized exchange, demonstration of the mechanism of distribution of profits on TestNet.
- Q1 2018: selling NEX tokens and presenting the platform, open source, for selling tokens on NEO.
- Q2 2018: launch of the payment system on MainNet for NEO and GAS. In addition, the launch of the NEX order management and transaction processing system on TestNet, supported by the included CLI interface.
- Q2 2018: smart wallet and API for integration with tokens bound to MainNet.
- Q3 2018: trading interface and start-up of the system of orders and transaction processing on MainNet: start of trading NO, GAS and NEX. And starting demo crosscan platform for ETH and NEO TestNets.
- Q4 2018: launch of a cross-platform to support trading with ETH tokens (here, apparently, a typo – Aired twice). In addition, support for margin trading in the MainNet network.
- 2019+: decentralized banking services: smart contract asset management through chains.