What Is Market Protocol?
Market Protocol provides the inoperability necessary for order routing and other trading activities on the blockchain. It’s an open source protocol that powers decentralized derivative trading and decentralized derivative exchanges.
Developers can create decentralized applications – dApps – on top of MARKET Protocol. That means non-technical traders can easily interact with the underlying blockchain technology through the use of these dApps.
Using these applications, MARKET Protocol aims to provide traders with exposure to cross-chain crypto assets without having to manage multiple exchanges or take custody of a separate asset. The protocol gives traders a secure, flexible, open source solution for decentralized derivatives trading.
What Problems Does Market Protocol Seek To Solve?
Market Protocol seeks to solve a number of serious problems with today’s cryptocurrency industry, including:
Custody of Funds:
Centralized exchanges have complete control over customer funds. Transactions are essentially “internal IOUs”. These transactions are not recorded on the blockchain until funds are withdrawn. Exchanges have complete power to delay or cancel deposits or withdrawals. Customers overall have limited access or control over their funds.
Customers depend on exchanges to ensure solvency – but customers have few ways to confirm the exchange is solvent. Traders are exposed to credit risk while funds are on-exchange.
Limited Product Offerings:
Exchanges only offer products that are commercially viable. They have no incentive to list lesser-known crypto assets. The most popular crypto assets rise to the top, while lesser crypto assets – even those with promise – cannot compete.
Exchange owners and customers have different incentives introducing friction. A limited number of centralized exchanges can exhibit monopolistic pricing power. Restrictions can prevent certain customers from accessing exchanges. Exchanges have the freedom to reject, suspend, or freeze accounts on a whim. This centralization of power rarely favors users.
“Margin calls and irresponsible leverage can lead to systematically dangerous outcomes,” explains the official MARKET Protocol website. when a forced liquidation occurs, it tends to cascade into additional liquidations. Irresponsible trading activity can lead to serious safety issues for customers.
Exchanges regularly have security issues. Every week, it seems a new exchange suffers some type of serious issue or hacking attack. Traders are forced to accept this risk.
How Does Market Protocol Blockchain Trading Exchange Work?
MARKET Protocol aims to solve the problems listed above by providing the protocol required to build a decentralized exchange. Specifically, MARKET Protocol will provide the requisite clearing and collateral pool infrastructure. Because it’s a protocol, MARKET will enable third parties to build applications for trading, order routing, and related activities.
MARKET Protocol is available open source under the Apache 2.0 license.
The ultimate goal of MARKET Protocol is to create a safe and secure framework where companies can manage cryptocurrency assets, positions, and leverage in a systematically responsible way. All smart contracts and collateral pool balances will be publicly available on the blockchain.
MARKET Protocol will solve centralization problems by ensuring no person or entity controls the flow of assets among participants, nor can they control order matching, contract creation, or dispute resolution.
To be clear, MARKET Protocol is not a decentralized exchange: it’s a protocol that enables the trading of decentralized derivative-like contracts. Each “derivative” represents a contract between a buyer and a seller. The value is derived from an underlying asset or assets. Typically, derivatives use stocks or commodities as the underlying asset.
How Do Market Protocol MKT Tokens Work?
MKT tokens are the base cryptocurrency of MARKET Protocol ecosystem. However, they won’t be used to pay any fees. That’s because peer-to-peer trading is free on MARKET. There are no native fees in exchange for using the protocol.
However, nodes that provide order book hosting and management will have the ability to set and collect transaction fees in exchange for offering this service. All contracts traded through MARKET Protocol will require the use of MKT tokens. Specifically, the participants in the trade need to temporarily lock MKT tokens in the smart contract during the trade.
Creating a smart contract will also require a minimum MKT balance. Plus, MKT tokens will transfer voting rights: MKT token holders will have a vote in protocol improvements and development.
The end result is that both users and providers of the protocol have a voice in the protocol’s future. One final use for MKT tokens is that they will be used for dispute resolution.
Who’s Behind MARKET Protocol?
MARKET Protocol is being created by Seth Rubin (CEO and Co-Founder) along with Phil Elsasser (CTO and Co-Founder) and Collins Brown (Co-Founder). Seth has been a derivatives trader since 2005. He’s been involved in the crypto space since 2015 as a trader, although he later began learning about cryptocurrency exchange platform technology.
Phil, meanwhile, has spent the last 7 years as the lead developer on an algorithmic trading desk, leading teams of developers focused on creating trading infrastructure, user interfaces, execution platforms, and quantitative trading analytics.
Market Protocol Conclusion
MARKET Protocol aims to give crypto holders the opportunity to gain exposure to both real-world and digital assets through derivatives using crypto-based assets as collateral on the Ethereum blockchain. It’s an open source protocol governed by participants.
It takes power out of the hands of centralized organizations, putting power back into the hands of users. Key features include a shared collateral pool that encourages systematically responsible trading instead of irresponsible leverage trading.
To learn more about MARKET Protocol and how it works, visit online today at MARKETProtocol.io.