Bytemaster's Blog

The Worlds First Decentralized Exchange

The Worlds First Decentralized Exchange

Posted by Daniel Larimer on .

The Worlds First Decentralized Exchange

Posted by Daniel Larimer on .

The centralized exchanges the world has known throughout history have proven unreliable and untrustworthy time and again. Whether it is MF Global, Mt. Gox, or BitStamp we have seen all of the perils of allowing a 3rd party to hold your money. It doesn’t matter how big they are or how many auditors, regulators, or insurers are involved every kind of fraud, abuse, and theft occurs on a daily basis on centralized banks and exchanges around the world. It is time for a change. Today I would like to introduce the benefits you get by using the worlds first fully decentralized exchange, BitShares.


Decentralization gives BitShares robustness against failure. When a centralized exchange is compromised millions of dollars and thousands of users are impacted all at once. In a decentralized system any attack or failure impacts only a single user and their funds. Users are in control of their own security which can potentially be much better than any centralized entity.

There is a fixed cost associated with attempting to hack an exchange or an individual user. The difference is the size of the reward. If you place a multi-million dollar bounty on attacking a specific exchange, then you can expect a lot more effort to be put into compromising that exchange than would be put into attacking your individual account.

Within a given company there are many people whom have access to the funds. You may have heard the expression that ‘Three Can Keep a Secret If Two Are Dead’, well all exchanges end up depending upon multiple people who share the responsibility of guarding the secret key that controls the funds. If any one of them is compromised then everyones funds are at risk. In this respect being individually responsible for maintaining your own secrets can be much more secure than any multi-signature system.

Fast, but not too fast

With BitShares your trades execute in seconds, just like any centralized website interface. Unlike centralized exchanges there can be no high frequency trading, front running, or hidden orders. This puts all traders on a level playing field.

On Wall Street traders go to great length to get as physically close to the exchange as possible because their trading bots are making decisions so fast that the speed of light becomes a real limitation. A decentralized exchange is location neutral and gives everyone equal opportunity.


Every Dollar, Euro, bitcoin and ounce of gold held on the BitShares exchange is backed by up to 3 times the reserves of traditional centralized exchanges. The traditional banking system has long practiced what I like to call fictional reserve banking, more commonly known as fractional reserve banking. In the Bitcoin ecosystem we demand at least 100% reserve. A single hack, mistake, or theft can quickly turn a 100% reserve system into a fractional reserve system or worse, a no reserve system. Without any reserves it is unlikely that an exchange can give you the funds it owes you.

By always maintaining at least 200% or more reserves you can rest assured that BitShares is solvent in almost any market. All of the reserves are kept as BTS held on the blockchain and they cannot be stolen because there are no private keys that can be compromised to steal the reserves.

No Limits

You can trade any amount, at any time, from anywhere without withdraw limits. All other legally compliant exchanges have daily withdraw limits on the order of a couple thousand dollars. If you wish to exceed those limits you must provide increasingly invasive levels of documentation. Some exchanges, such as Coinbase, even limit what you can do with your money after you have withdrawn it. Other exchanges demand documentation of how you earned your crypto currency.

With BitShares there is no one that must approve your account. You have complete financial freedom.

Low Fees

At just a few cents per trade, BitShares is the cheapest exchange around. Other exchanges charge a percentage of your transaction volume. For a $1000 trade on BitStamp you will pay $5 vs less than $0.01 (Jan 2015) to make the same trade on the BitShares exchange. The more traditional exchanges like etrade or Scottrade charge over $5 per trade. It doesn’t get any cheaper than BitShares.

Trade Almost Anything

Trade in Gold, Sliver, Gas, and Oil in addition to all of your favorite national and crypto currencies. There are few limits on what can be traded on the BitShares exchange given enough interest. The BitShares exchange can support assets that can track stocks, bonds, indexes, or inflation. Companies can issue their own stock on the BitShares network and allow easy, low cost, trading with complete protection against naked shorting. What other crypto-currency exchange allows you to trade in gold and silver? Learn more about how BitShares creates trust-free digital assets pegged to almost anything.

Earn Interest on your Gold & Silver

What other bank or exchange will pay you interest on your gold or silver? With BitShares every Dollar, Euro, Bitcoin and other asset will pay you a positive yield that could be quite significant if the market is very bullish on BitShares.

Open Source and Fully Transparent

The entire exchange is open source and backed by an extremely open community. No where else will you have the level of transparency that can be found with BitShares.


With BitShares you can have as much privacy as you can maintain . Like Bitcoin, all transactions are public but no transaction needs to be tied to your real world identity. There is no need to file a FBAR report with the IRS and no one will be asking for copies of your passport, drivers licence, utility bills, and credit reports.


Not only can you do traditional trading, but you can also buy and sell option contracts to help hedge your positions. All option contracts are fully collateralized with no risk of default.

Margin & Short Selling

If you would like some leverage to increase your rewards, BitShares gives you the ability to borrow and sell just about anything, including dollars, gold, silver, bitcoin, and more. All margin positions require 300% initial margin and 200% maintenance margin. No credit check necessary.

The Future of Banking

The BitShares exchange is still under rapid development, but with these features and benefits it is clearly the future of banking. We finally have a decentralized, trust-free exchange that can be just as usable as any centralized exchange without all of the down falls. If you are interested in learning more about how BitShares works, see my article “The Future of Crypto Currency Exchanges”.

Recommended by Bytemaster

      (see more...)



My name is Daniel Larimer and I am the founder of BitShares. My mission in life is to find free market solutions to secure life, liberty, and property for all.

The purpose of this blog is to help create a free society by encouraging people to join our community which is centered around Bitshares, a next generation fully decentralized crypto-currency exchange. I use Austrian Economics to engineer the economic incentives which make freedom and non-violence profitable.

Help spread the word.

Featured posts

Recent Articles