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Golden Recommended Reading | An article to understand the centralized exchange solution StarkEx



Golden Finance recently launched the Hardcore column to provide readers with introductions or in-depth interpretations of popular projects. Press: On June 4, 2020, StarkWare, a zero-knowledge proof development organization, launched the scalability engine StarkEx on the Ethereum mainnet, and it has been deployed on DeversiFi. StarkEx uses zero-knowledge proofs to enable centralized exchanges to provide self-custodial services and bring liquidity into self-custodial transactions. The current transaction speed can be as high as 9000TPS, compared with the TPS of Ethereum is only about 3. This issue of Hardcore introduces StarkWare's interpretation of StarkEx. Traders and investors will experience massive changes in crypto trading. Traders will be able to trade in the most intuitive way: trade directly in their own wallets, maintain escrow status at all times, and take advantage of the liquidity pool provided by Centralized Exchanges (CX). In addition, traders' funds are always available for payment. Exchanges will also change. Exchanges will provide custody transactions and self-custody transactions (Self-Custody, SC) for customers to choose, and all transactions come from the same liquidity pool. They will reduce the operational risk associated with custody of crypto assets. They will be able to provide transaction protection to their customers and protect them from harm. A crypto exchange that provides tailored premium services for any tokenized asset will be comparable to Wall Street exchanges. From time to time we see information about the risk of CX custody of encrypted assets, most recently Binance, before Bithumb and Quadriga and many other hacks of CX, even dating back to the infamous Mt.Gox hack. Unlike real-life robberies, each of the aforementioned hacks resulted in the theft of encrypted assets worth tens to hundreds of millions of dollars. Golden Afternoon News| List of important news at noon on November 1: 7:00-12:00 Keywords: Sanya, Facebook, Wall Street Journal, 1. Sanya International Assets Trading Center was officially inaugurated; 2. Facebook re-examined and Bitcoin-related content; 3. Ning Jizhe published an article in "Qiu Shi": the first three quarters of blockchain and other industries grew rapidly; 4. The Wall Street Journal published the title-ethexc "'Cash is rubbish', 425 million US dollars bet on BTC "The article reported MicroStrategy's bitcoin investment; 5. disclosed a new flash loan security vulnerability, which has been fixed; 6. The S2F model shows that bitcoin has entered an upward price trajectory; 7. The country's first district The block chain timber electronic trading platform was launched in Ganzhou. [2020/11/1 11:21:34] We rarely hear of exchanges outside the blockchain industry being hacked. Why? The reason is simple, those exchanges do not hold assets for traders, so there are no financial assets that can be stolen. Centralized exchanges in the blockchain industry are different. They host users' encrypted assets, so users face huge counterparty risks. This is a historical "bug", an artifact of cryptographic design and limited blockchain bandwidth, and somehow turned into a so-called "feature". It’s worth emphasizing that in the blockchain space, custody is actually far more dangerous than elsewhere, because no trusted party can reverse an illicit transaction: stolen assets cannot be recovered. Through hosting, the centralized exchange has formed a huge asset honeypot, and hackers are always thinking about intrusion and theft. StarkWare recently demonstrated the ability to conduct large-scale self-custodial transactions, achieving 500 transactions per second on Ethereum, which is 200 times higher than Ethereum's current TPS. We expect this metric to grow significantly in the coming months. We believe that self-custody transactions are now ready and therefore inevitable. Golden Evening News | Important news on the evening of June 24: 12:00-21:00 Keywords: Filecoin, US Department of Homeland Security, Riksbank 1. Preparations for the Filecoin testnet reward plan are expected to be completed on July 6. 2. Circle announced support for USDC on the Algorand blockchain. 3. The US Department of Homeland Security SVIP will continue to fund the blockchain anti-counterfeiting project. 4. The Monetary Authority of Singapore: has been exploring the use of wholesale central bank digital currency. 5. South Korea's Ministry of Science and Technology Information and Communications issued a blockchain strategy that will introduce blockchain in seven areas. 6. The Swedish central bank released a research report on the central bank's CBDC to discuss different models of the electronic version of the Swedish krona. 7. Topic of the FATF plenary meeting: Submitting a stablecoin report to the G20. 8. Hangzhou solicits the first batch of financial technology innovation supervision pilot application projects including blockchain. 9. The U.S. Supreme Court limiting SEC penalties for financial crimes will have an impact on crypto scams. 10. Bitcoin fell, with a daily high of $9694.33 and a low of $9283. [2020/6/24] This article will focus on StarkWare's centralized exchange solution StarkEx, which will bring the benefits of self-custodial transactions to the huge liquidity pool of centralized exchanges. We believe that once centralized exchanges introduce StarkEx into their main systems, crypto asset trading will become more efficient, secure and larger. Together with 0x, we recently launched the Alpha version of StarkDEX, a scalability solution for decentralized exchanges (DEXs). The figure below is a comparison of centralized exchanges (CX) and decentralized exchanges (DEX) in several important aspects, and how StarkDEX and StarkEx address their main shortcomings. Jinse Finance Market Report 丨 BTC rose slightly, supported by MA5: According to the Huobi market, BTC rose slightly in the early morning of this morning, reaching a maximum of 9045 USDT. The daily average MA5 constituted support, and the overall pressure above 9000 was relatively high. The 4-hour chart has a dense moving average. According to the historical market, BTC’s 1-hour market has a “hole” and there is a performance of rising again, and now the market has been cashed out. As of 10:00, the specific performance of the mainstream coins on the Huobi platform is as follows: [2020/5/6] The comparison between centralized trading and decentralized exchanges shows that liquidity requires scale. Exchanges must be able to match and settle large volumes of trades to provide liquidity. The blockchain (i.e., layer 1), as a public distributed ledger, is a very natural place to record the ownership of encrypted assets (especially transaction settlement). However, the operation and storage capacity of the blockchain is greatly limited. For example, Ethereum can currently support up to about 40–50 transactions per block, which is equivalent to about 3 transactions per second. This is in terms of scalability and liquidity. Both are very low. Centralized exchanges are actually trust-based 2-layer solutions, and are currently the only means with high liquidity. In order to do this, traders must surrender custody of their crypto assets. If a trader insists on retaining custody, he must trade on illiquid decentralized exchanges (DEXes). The market voted unequivocally on the matter, CX is much bigger than DEX. When forced to choose between high liquidity and SC trading, traders chose liquidity. But traders still want the best of both worlds: high liquidity and SC trading. With StarkExchange, they can have their cake and eat it too. Central exchange (CX) custody faces many issues that affect its profitability, operations, and regulatory risks. Hindered profitability: Revenues are down, costs are up. 1. Revenue: When it comes to retail, crypto trading is widely considered to be the "Wild West". This may not deter early adopters, but it will likely prevent the next round of large-scale landing. Customers are asked to trust the exchange's custody despite overwhelming evidence to the contrary. Institutional investor demand is also negatively impacted: if custody is handed over to CX, it becomes more challenging to take advantage of liquidity opportunities that exist elsewhere in a timely manner. Golden Relativity | Chen Jun: What we need to do now is to adapt to the environment and do a good job in the application research and practice of the currency-free blockchain: In this issue of Golden Relativity, the essence of the currency-free blockchain and the blockchain runs counter to the problem, Hangzhou Quantum University Chen Jun, the co-executive director of the Blockchain Research Institute, said that it is a bit too much to say that it runs counter to it, and that it is more appropriate to say that it is not possible to make the best use of it. The premise is that the blockchain we understand is complete or incomplete. The key difference is whether we want it or not. Decentralized” attribute. If you think that only decentralization is the blockchain, then you have to rename the application of blockchain technology without decentralization. If you don’t need to use other attributes to count as a blockchain, then you can accept a coinless blockchain, that is, an alliance chain and a private chain. Such applications will be easier to implement, but you must also accept blockchains without decentralized attributes. There is a huge gap between the block chain and the block chain with decentralized attributes in terms of subversion, innovation, and promotion of social progress. My point of view is that there is no need to worry about what it is. Time will give us the answer, and we should follow the trend. At this stage, we must strive to do a good job in the application research and practice of the currency-free blockchain. I think that the current B-side (enterprise) and G-side (government) are the main markets for blockchain applications, so don’t consider C-side products first. Coinless blockchains are here to make a difference, maybe even truly mainstream. [2018/9/29] 2. Cost: The protection of large assets leads to increased costs; the cost of high-quality security operations is high. The larger the asset, the more attacks are triggered. With fewer assets, there is less incentive to attack, and the cost of securing the system is lower. Insurance is also expensive, not only because the industry does not understand the cryptocurrency industry well enough, but also because of the unique ownership model of crypto assets, where no trusted party can recover from malicious actions. Disadvantages of custody operations: There is a huge operating overhead to maintain custody of billions of dollars worth of encrypted assets. Interestingly, centralized exchanges will deploy teams that have undergone strict scrutiny. These teams are trustworthy and can control the private keys of encrypted assets. Security requirements required these teams to be as small as possible, but workflow requirements pushed them in the other direction as more and more assets were handled. The burden of custody means that centralized exchanges are not as flexible as they should be. Jinse Finance reported live on Huobi Mining Pool Wu Di: Huobi Mining Pool is committed to becoming one of the best producers of EOS blocks: Jinse Finance reported live on June 6, at the "Financial Chain Change - Huobi Group Global Brand Upgrade Conference On ", Huobi Mining Pool Wu Di said: EOS community, EOS accelerator, etc. are expected to help Huobi Mining Pool become one of the best producers of EOS blocks. Specifically, for token holders, there is a system of continuous benefits, a greater opportunity to obtain tokens on EOS, and a convenient system for one-click voting; for DAPP developers, it is easier for them to obtain investment and can obtain excellent Technical support, and it is closer to the online position; for block producers, hundreds of millions of users vote, provide Chinese translation services, and organize regular meetings are also great advantages. [2018/6/6] Regulatory risk: Regulatory systems usually require custody to be separated from investment or trading. In the case where CX does not host encrypted assets, it is easier for regulators to achieve this type of investor security protection. STARK can provide a layer 2 solution on Ethereum (i.e. a solution that runs on top of the Ethereum blockchain), a scalability engine that will allow CXes to offer SC transactions to leverage their large liquidity pool pool. Like other scaling solutions based on zero-knowledge proofs (zkp), we do not change the fundamental functionality of the blockchain, but rather its goal, from computing small payloads on-chain to verifying exponentially smaller payloads computed off-chain. large payload. The basis of the ZKP scalability engine is the recognition that the blockchain should be used for verifying computational proofs, not for general computation. Instead of doing transaction settlement (computation) directly on the blockchain, the blockchain is used to verify STARK proofs, which verify the validity (validation) of a large number of pending transactions. The STARK proof system is highly asymmetric in computing work distribution, where the prover does a lot of work and the verifier does little work (exponential reduction). Now, if the prover runs in the cloud (off-chain) and the verifier runs on-chain, we can exploit this asymmetry to verify on-chain a lot of computation done off-chain. Note that not only can the prover run off-chain, but it doesn't actually need to run open-source, because in the proof system, there is no trust assumption about the prover. The blockchain is rarely used, the commitment to the off-chain state is stored off-chain, and the verifier performs little computational work on-chain to verify off-chain state transitions. Since StarkExchange only accepts valid transactions, the prover itself cannot generate proofs for transactions not properly signed by users. This means user funds cannot be stolen. If users have access to off-chain state, they can always walk away with their funds. Neither the exchange nor the prover can withhold these funds, as users can activate "escape pods," essentially an emergency mode activated at the user's discretion when they refuse service, and they can withdraw directly from the on-chain smart contract funds. Activating the "escape pod" is a key component of securing SC deals. In order to activate the "escape pod", a trader must have the ability to prove ownership of the asset. Ideally, one would like to have both SC transactions and privacy. There is currently a trade-off between the two, DEXs offer SC transactions without privacy, CXs protect the privacy of other traders (not CX itself!), but no SC transactions. StarkExchange may eventually achieve this tradeoff by introducing shielded trades. In the absence of confidential transactions, different data availability solutions can be selected based on the degree of trust in the exchange. We envision some possible options (there will certainly be others): 1. Trust-free: transaction data is sent on-chain. In order to reduce the data size, the digital signature is not stored on the chain, and the digital signature needs to be verified by the prover as part of the proof. This represents an effective transaction volume cap, which is determined by Ethereum's capacity. It is worth noting that for the native deployment of StarkExchange, the data on the chain will easily generate 3,000 transactions per block, which is 100 times the current capacity of Ethereum. 2. Minimize trust: put the cryptographic commitment to the state of the exchange account on the chain.


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