Qurrex
INTEGRATING INDUSTRIAL INFRASTRUCTURE OF
TRADITIONAL STOCK EXCHANGES WITH
DECENTRALIZED NETWORK
ABSTRACT
Our team is developing the first multifunctional
hybrid cryptocurrency exchange ecosystem by
combining a centralized industry platform with a
decentralized blockchain protocol in which the
centralized exchange will serve as one of the nodes.
We are creating the next-generation Etalon platform,
which will win the trust of professional stock
exchange players by substantially increasing the
market’s liquidity and supplying a new standard set
of exchange products. By 2020, these should be at
the disposal of all our market colleagues.
The product’s key functional capabilities are as follows:
• A highly secure, high-performance hybrid architecture supported by an independent technical audit
• A broad functionality that satisfies the demands of users of any level
• Maximum transparency for users: an independent audit, publication of financial accounts, maximum
formalization of all processes
• Payment gateways for depositing and withdrawing fiat money
• An advanced interface that is highly customizable and comes with an advanced API
• A platform for social trading and investing with its own marketplace
• Fast and responsive multilingual user support operating 24/7.
Thanks to its unique set of features, our project will
become one of the leading gateways for the mass
entry of professional institutional stock exchange
players into he crypto-economy. At the same time,
we will providing a high-quality exchange and
trading service to current members of the cryptocommunity
who are currently experiencing
difficulties with existing solutions.
TERMS AND DEFINITIONS
Latency, Roundtrip Latency: waiting time, the time taken by the system to process a request,
usually calculated as the time elapsed from the moment the request is
registered at the gateway until the moment information about the said
request being processed is issued.
Capacity: the number of transactions that can be processed by the trading
system module/node or the whole trading system in units of time,
usually per second (tps - transactions per second).
Node: a node of the decentralized network (of the blockchain platform).
Digital asset: a cryptocurrency, token, or coin of the blockchain network.
HFT (High-Frequency Trading): a form of algorithmic trading on the financial markets characterized by
minimal time for position holding (over fractions of a second) taken by
up-to-date equipment and special algorithms. This abbreviation also
refers to a trader using such trading strategies(High-Frequency
Trader).DVP (Delivery Versus Payment): an order of settlements that implies the presence of a sold/alienable
asset (whether cryptocurrency or fiat) with the client when requesting
a purchase or sale. After successful verification of the asset’s
availability, the application may be submitted (if the required asset is
absent, the application will be rejected). After this transaction occurs,
simultaneous settlements between the parties take place.
CEX: the centralized exchange
DEX: the decentralized exchange
Fiat, Fiat Currency: traditional cash or non-cash money of centralized issue and
recognized by the global community
INTRODUCTION
Today, in the expanding crypto-economy, a
paradoxical situation has developed. On the one
hand, a total hegemony of the centralized
exchanges has been established, with minimal basic
client functionality and service – a position only
strengthened by the growth in the volume of
cryptocurrency trade and capitalization. On the
other hand, the “teething troubles” of the centralized
platforms, and the successful running of ICO
projects linked to cryptocurrency trading, have led
to consistent demands by the community for both
an improvement in the quality of service of the
centralized model of trading platforms and for the
creation of effective decentralized cryptocurrency
systems.
The Qurrex multifunctional trading platform is a hybrid system that consists of:
• a centralized node, which is comparable in its effectiveness to modern, cutting edge traditional exchanges;
• client functionality that meets the demands of users of leading exchange and FX brokers;
• a blockchain network which, on the one hand resolves problems of secure storage and eliminates
middlemen, and, on the other, provides the user with aggregated liquidity from all network nodes, including
the centralized platform.
In reality, Qurrex is setting the industry standard in
the crypto-economy for a universal cryptocurrency
exchange – one which existing platforms will
eventually achieve only after years of independent
effort.
The platform will become the first cryptocurrency
exchange based on high-performance architecture
from the leading international trading platforms.
Rather than respond to the market demand of
“yesterday”, it is designed for the future – for the
coming growth explosion in cryptocurrency trading.
1. Creating a Next Generation Exchange with a Hybrid Architecture
1.1. BACKGROUND AND SOLUTION OVERVIEW
Originally, the Qurrex platform was designed
exclusively as a centralized cryptocurrency
exchange system. The reason for this was related to
the team’s background: having worked for over 10
years on the creation of various exchange and
broker systems and products for the traditional
markets, we inadvertently became adherents of this
approach.
However, research into distributed networks as part
of delivering the current project led us to new
approaches and tools for solving many of the
problems that we had encountered over the course
of recent years. Here we refer, first and foremost, to
the need to increase liquidity of separate
instruments, as well as to increase clients’
confidence in unregulated infrastructure providers.
The outcome of our investigations was the
understanding that, in order to create an effective
exchange system and meet the demands of a wide
circle of users, what is necessary is the harmonious
merging of centralized and decentralized elements.
In order to provide clients with user-friendly tools for executing operations and maximizing
liquidity, we formulated our approach in the following way:
• The centralized exchange (CEX) will, in the long-term, remain the most effective solution in creating
maximum possible liquidity across the majority of types of trading instruments;
• At the current time, it is only within a centralized infrastructure that effective creation of partial pre-deposit of
funds is possible (the function of guaranteeing the fulfillment of obligations of the transaction party is always
undertaken by the central link of the infrastructure) and this technology, in our view, will ultimately be
introduced onto the cryptocurrency market;
• Decentralized exchanges (DEX) with high capacity remain, unfortunately, an unattainable goal in the medium
term, whereas clients need a high-quality service now.
Given this, we believe that:
• Eventually, obstacles to the creation of a high-capacity DEX will be overcome;
• DEX is an indispensable tool for creating liquidity in low-liquidity instruments such as tokens issued as part
of an ICO or the numerous altcoins;
• DEX is a natural protection from those technical problems which inevitably arise from time to time in the
central node of any centralized system;
• DEX is the best understood and most transparent mechanism for lowering the risks around the function of
the infrastructure’s central link, albeit it at the cost of other product qualities (operation processing time, for
example).
This approach lies at the heart of our system and inspires us to simultaneously create a successful, advanced,
and effective centralized project, and to move forward, heeding the call to build and utilize decentralized
systems.
1.2. CEX: THE ISSUES
It is possible to identify several existing problems that gave the impetus to the creation of
Qurrex.
• Multiple complaints about the quality of service of today's cryptocurrency exchanges;
• Strong concerns regarding the security, reliability, and transparency of current solutions;
• The existence at the current time of only niche products on the cryptoexchange market;
• The absence of a universal exchange with a set of characteristics able to meet the demands of future
clients;
• A clear vision of the market’s future development in relation to that of the classic exchange market.
1.3. CEX: PROBLEMS WITH THE CURRENT STAGE
The main failings of existing cryptocurrency exchanges communicated by the community, and which we plan
to resolve by creating Qurrex, can be set out as follows:
• lack of protection and an insufficient level of
security (fraud, theft of cryptocurrency from
wallets, theft of personal data);
• insufficient liquidity, especially across low-liquidity
instruments;
• lack of rapid, connection-friendly APIs;
• low capacity and substantial delays in completing
operations in the bidding system;
• lack of formal transparency, in particular, public
and liaison protocols for interacting with clients in
the event of any issues arising;
• malfunctioning due to limited productivity;
insufficient performance for peak trading activity
periods;
• non-adherence to the obvious rules of business
practice;
• malfunctions as a result of excessive traffic;
• interfaces (both graphical and application
programming) provide only restricted analysis and
trading functionality, for example:
• lack of mobile applications,
• incomplete set of tools for graphical and
technical analysis,
• non-user-friendly interface,
• poorly customizable user interface;
• slow processing of deposits/withdrawals, limited
means of such deposits/withdrawals;
• unsatisfactory level of customer servicing, for
example long response time from technical
support services, lack of telephone support;
• narrow choice of trading instruments, lack of
“hot”/new cryptocurrencies and tokens.
1.4. CEX: NICHE PRODUCTS AND THE UNIVERSAL
EXCHANGE
In the modern realities of the developed client services on the financial markets, and also due to the digitization
of all processes and the establishment of universal companies which provide their clients’ ecosystems with the
widest possible range of services, the client wants to have a single entry point for an exchange’s entire
functionality.
We identify the following types of cryptocurrency exchanges:
• Platforms that don’t accept fiat currency, with a
wide selection of cryptocurrency pairs (for
example Poloniex and Bittrex);
• Platforms that don’t accept fiat currency and that
specialize in low-liquidity coins/tokens (from
recent ICOs) and the trading of one or two
popular cryptocurrencies (for example
CoinExchange, C-CEX);
• Exchanges that do accept fiat currency and that
specialize in one or two cryptocurrencies, with
platforms for clients to enter the cryptocurrency
world (for example Bitstamp, Lykke);
• Exchanges that accept fiat currency and
specialize in a wider range of traded
cryptocurrencies/coins most popular with
platform speculators (for example Bitfinex,
Bithumb);
• Futures exchanges (for example BitMEX, Deribit);
• Platforms that aim to mix the approaches listed
above (virtually absent, possibly refers to hitBTC,
YObit.net).
1.5. CEX: SECURITY
The exponential expansion of the cryptocurrency
sphere and the rise in demand for services in
converting fiat currencies into cryptoassets has
aided the development of centralized exchanges.
As a result, members of the blockchain community
have started to transfer control over ownership of
decentralized currency to centralized exchanges.
For ease of access to the conversion functionality
1.6. DEX: THE ISSUES
ATT! See new Clarification and detailization of the DEX concept on the page 56
Today, there are a number of projects for organizing the decentralized exchange of cryptocurrencies, some of
which have already launched and some of which are still in development.
All of these projects seek to address the following challenges:
• secure storage of funds/cryptoassets;
• the vulnerability of the central link/intermediary;
• the search for a counteragent interested in a deal;
• the transparency of completed operations;
• cross-blockchain exchange (e.g. Bitcoin for
Monero);
• supply/demand volumes on equal terms for all
market participants.
1.7. DEX: CURRENT SOLUTIONS
Attempts by developers to solve the problems of speed, liquidity, collateral and the algorithm for matching
trading operations have led to the rise of decentralized trading platforms dependent on centralized services,
which resolved the issues of keeping order books, keeping reserves for collateral, matching incoming orders
and selecting the technology for mutual settlements. Such centralization raised the question of solving the
global problem of the presence of a vulnerable middleman.
From our point of view, the majority of technical solutions within these projects are essentially marketing
innovations aimed at securing better product sales.
2. The Next-Generation Hybrid
Exchange Paradigm
2.1. INHERITANCE FROM THE TECHNOLOGICAL,
ORGANIZATIONAL, AND OPERATIONAL
EXPERIENCE OF EXCHANGES
In searching for the optimal solution to the many problems with the existing cryptocurrency exchange
platforms, we turned to the experience of classic exchange and broker companies, an area in which we have
great expertise. Set out in the table below are the characteristics of the Qurrex exchange that were previously
absent from cryptocurrency platforms.
2.2. QURREX’S SOLUTION FOR DELIVERING DEX
By studying the proposed solutions and protocols of decentralized exchanges, we have adopted two
approaches that will be applied in decentralized networks of the next generation, one of which we will focus on
for practical implementation.
Cross-chain Atomic Transactions
At the present time, we’ve already seen the first results of the work on conducting atomic transactions
between two different blockchain networks. The first transactions were made in the DECRED and Litecoin test
environments, and code samples for such operations were shared. The technology will continue in its
development, and in the near future we will have the opportunity to conclude transactions between different
blockchain networks that support this functionality.
Technology for exchanging quotes (market data) and requests between all nodes of the
network:
• Security for the multi-currency wallet;
• Technology for blocking funds;
• Technology for submitting requests in the confirmation node and the creation of an atomic transaction;
• Technology for the optimal execution of a request.
Estimated solution parameters:
• Consensus algorithm: DPOS
• In chain data: orderbook (depth), orders, statuses
• Out chain data: trades
• Performance: more than 15,000 tps
In the case of the Asset being released to a real asset, this will allow:
• Minimal risks from third-party involvement;
• A 1-to-1 ratio between the collateral asset and the released virtual Asset;
• Highly reliable storage.
To create such an opportunity, we plan on developing the following solutions:
• A consensus algorithm used to conduct transactions within the contract;
• Technology to maintain the exchange’s condition, which will free us from worrying about losing the wallet
key that was created as part of this contract;
• Technology to defend against forks and double spending.
2.3. INTEGRATING CEX AND DEX: THE PATH TO A
HYBRID EXCHANGE
After the modification/integration of the blockchain network selected for delivering the decentralized exchange
and after the completion of work on the functionality of the DEX, the centralized exchange will become one of
the nodes in the aforementioned network. The CEX node (or the central node), along with other nodes that
make up the network, will send orders to nodes with the best price for an instrument and exchange
information with the rest of the nodes about current active requests by participating in the creation of
aggregated market information for each electronic asset.
The featured functions of the hybrid exchange will be:
• The formation of an aggregated order queue based on data received from all the system’s nodes (both the
centralized and decentralized nodes);
• Routing of the aggregated queue’s orders to the blockchain network;
• Identification of the system nodes where the best instrument prices are located and to which it is necessary
to send the order/transaction submitted by the client (when it is possible to make a deal at the price
specified in the order);
• Including the order in the blockchain;
• Receiving information on matching results.
Note: an order which cannot be fulfilled at the time it is displayed, due to the absence of a suitable price on the
whole hybrid exchange system, is listed on the node on which it was originated.
Essentially, each node of the hybrid exchange will provide the user with the Best Execution service, obligatory
for broker companies in most countries with a developed financial market.
Furthermore, on the US assets market, such an approach underlies the national market system in which each
exchange is obliged to send orders submitted by clients to another exchange where there may be a latest best
price. The Smart Order Router module, which will operate on each network node (including the CEX), will be
responsible for the functioning of the Best Execution in the system.
2.4. THE KEY FEATURES OF OUR SOLUTION
2.4.1. Transparency: Financial Openness
Presently, the majority of existing crypto-exchanges are characterized by a low level of openness towards their
users who do not have access to information, including:
• who is controlling and managing the exchange’s
activity and, consequently, the funds which the
users are depositing in their exchange accounts;
• the way the funds deposited by users in their
exchange accounts are being used;
• whether there is a balance between fiat money
and cryptocurrency assets circulating on the
exchange platform;
• whether the exchange platform’s balance is being
audited;
• where the exchange’s accounts can be
inspected;
• how much in fees and commission the user is
paying to execute trading operations.
A key virtue of Qurrex will be its openness towards the community, which will be achieved by way of:
• quarterly reporting of the exchange’s activity;
• conducting of an independent audit of the exchange’s activity by one of the Big 4 auditing companies;
• publishing of audit results;
• creating of an exchange management board of independent industry experts and community
representatives;
• supplying users with the most detailed information possible regarding the state of their account and
completed trading and non-trading operations.
Layer of client functionality:
• Calculation service and storage of performance indicators for managing trading accounts;
• News and analytical server – an aggregator of macroeconomic statistics, news publications, and news
articles of the top exchanges;
• Auto-tracking service for trading signals – copying of transactions made by managing traders with the use
of individual adjustments for risk management;
• Back-end provides the middleweare API to end users. It implements information exchange over the
Websocket protocol, with the NGINX server balancing the load between NodeJS nodes;
• GUI level is realized over the NodeJS Backend. A web client (Single Page Application) is provided with iOS
and Android mobile terminals.
3.4. TYPES OF AVAILABLE TOOLS AND
SETTLEMENTS FOR TRANSACTIONS
The trading system is planned to support to the following types of tools:
• spot tools (currency pairs, cryptocurrency pairs);
• repos/swaps (in the future, support of different multileg tools is possible, ncluding e.g. spreads across
different assets, basket trading);
• futures and options contracts.
3.5. PROCESS STACK
As we strive to provide optimal performance, the nodes of the proposed system will be developed using the
following process stack:
• C++ – for all nodes where performance and
stable latency are important in 99% of cases;
• JavaScript/Node.js/Go/C# – for all nodes where
the convenience and speed of business logic
programming are important;
• PostgreSQL – as the primary DBMS;
• mBinary – proprietary protocol for internal
exchange between nodes of the system in binary
form;
• Redis – for in-memory data caching and Redis
Messaging as a message broker in order to build
a reliable and flexibly configurable Enterprise
Service Bus on client functionality layer;
• In terms of operating systems, our servers and
nodes will use Linux with modifications to the
network drivers.
Predicted characteristics of the trading system
The following connection protocols will be available to our clients:
• mBinary – our own protocol that allows the exchange of messages of a given format in binary form;
• FIX/FAST – standardized protocols for transferring exchange data; used in the majority of trading systems;
• WebSocket – convenient protocol for application developers; flexible and scalable. It is used both for
connecting client terminals as well as for implementing trading APIs, market data, analytics, and chat
messaging;
• REST – exchange standard in terms of responding to a request that has parameters. It is technically the
simplest solution for the majority of third-party developers.
4. Market analysis
4.1. FORECAST OF QURREX’S MARKET POSITIONS
The average daily volume of trading in cryptocurrencies didn’t exceed $300 million until early 2017. Significant
growth in turnover began after overcoming a BTC exchange rate of $1,000 and the rally of altcoins in the first
quarter of 2017. As early as May 2017, the daily trading volume was $2.5 billion, and by the end of August it
exceeded $6 billion. After the adjustment of the trading volume up to $3.5 billion per day in September there
was new rally both of bitcoin and altcoins. As a result, daily trading volume grew to 35 billion per day.
Despite significant growth, the cryptocurrency market is still in the early stages of development. For
comparison, the daily trading volume on the stock markets is $200 billion, on futures it is more than $400
billion, and on FOREX this number is around $5-6 trillion. When extrapolating the retrospective dynamics of
changes in the volume of trades on cryptocurrencies for the future in various scenarios, we see a multiple
increase by 5 to 30 times or more.
EXAMPLE:
Overall number of tokens – 65 million
The total commission fees for the reporting period amount to 162.5 million USD
The amount of the discount for 1 token = (162.50/65)*20% = 0.5 USD
Mr. Smith has 200 tokens, which gives him a discount of 100 USD
The amount of commissions for Mr. Smith is 75 USD
To receive a discount value of 75 USD, Mr. Smith deposits 150 tokens into his own
special account where the tokens are not moved before the next reporting period
(protection against double expenditure).
Mr. Smith will be able to transfer the extra 50 Qurrex tokens for temporary use to
other exchange clients for market compensation in a liquid cryptocurrency, direct
them for lending for marginal trade, sell them, or simply leave them where they are.
A medium for paying for services and fees.
The cost of the platform’s services and fees will be denominated in the established coin of account (USD,
euros, or another national currency). The owner of the token can pay for any of the exchange’s services or fees
at the highest of the two values of the Qurrex token: the current exchange or determinate nominal value.
This function of the Qurrex token will be in demand by all of the exchange’s clients, primarily for paying for onetime,
relatively expensive transactions:
• first and second public listing services of third-party tokens (ICO);
• provision of technical access/placing of client equipment in a co-location zone/other network services.
In this regard, the market value of the Qurrex token is supported by a determinate nominal value and is
determined by the volume of services that the exchange can provide in the short term.
5.2. USING THE TOKEN ON THE DECENTRALIZED
EXCHANGE
By creating the DEX, we are striving to enhance security, increase the competitiveness, liquidity pool and trade
volume of the Qurrex ecosystem.
At the same time, we decided not to use our token as utility, in order to avoid some systemic problems that
appear in the case of limited issue of tokens:
• inflationary growth of the token’s value and commission fees within DEX;
• in case of deposit model - limiting the number of users (demand);
• deterioration of consumer properties of DEX: decrease the availability and usability of services when
consumer should to use the token in daily operations;
• a conflict of interest of DEX subjects: Confirmation Nodes tend to increase the size of the commission, while
User Nodes reduce it.
The ownership share of Qurrex CEX's Confirmation Nodes of the decentralized network (nodes DEX, owned
by CEX) will not exceed 30%. The commission income received by Qurrex from DEX services will be taken into
account when calculating the general permanent CEX discount.
All owners of Confirmation Nodes will have to join a uniform rules of DEX functioning which will harmonize DEX
and CEX including following documents: legal declaration, trading rules and regulations, tariff policy and other.
6. Project Road Map
The development road map of our project includes several phases.
PHASE 0. DEVELOPMENT OF A PRODUCT
PROTOTYPE AND HOSTING OF A CROWDSALE
Reference point: November 2016 – February 2018
In November 2016, at our own expense, we began
work on the project. By now we have developed a
minimally viable version of our trading terminal,
which will be the main interface of our exchange
system. In the current version, the interface allows
for the user to display current quotes of key
currency pairs, conclude deals, view news feeds
from various sources, and apply technical analysis
tools. In the future, we will develop a trading terminal
as a platform for social trading and investing; we
estimate it to be 60% complete.
PHASE 1. TESTING AND LAUNCH OF ORGANIZED
TRADES ON THE CEX.
Reference pont: 1st half of 2019.
In the second half of the year, the operating office in
the EU will be fully operational and we will receive
licensing for the payment system to carry out
activities in the EU.
As part of the work on the technology of the DEX,
we are planning to obtain the first results of the new
protocols (EOS, Tezos, 0x) and on their basis or on
the basis of our own developments, to create a
description of the decentralized protocol of the
exchange and to develop a module for integration of
the DEX with the CEX; we will also start the
development of prototype nodes and the trading
platform of the decentralized network.
PHASE 2. EXPANSION OF THE FUNCTIONALITY OF
THE EXCHANGE CORE AND THE DEVELOPMENT
OF THE PLATFORM FOR SOCIAL TRADING AND
LAUNCH OF A DECENTRALIZED NETWORK.
By the beginning of the second half of the year, we
will carry out stress testing of the decentralized
trading platform as well as integration tests of this
network with a centralized trading system. The
results obtained from this testing will form the basis
for launching the commercial operation of the hybrid
exchange system.
After the launch of commercial operation, each
customer (regardless of their type of connection
through the central node or through a decentralized
network) connected to the hybrid exchange platform
will be able to access aggregated liquidity from all
nodes of the network including liquidity provided by
the centralized exchange.
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