Permissioned (centralized) vs. permissionless (decentralized) blockchains have been a talking point in the blockchain (cryptocurrency) community since Satoshi Nakamoto released the now infamous Bitcoin whitepaper in the midst of the financial crisis. The release of the Facebook-led syndicate’s Libra coin whitepaper has rekindled the debate. Decentralists often state that only permissionless blockchains can host true cryptocurrencies. Proponents of private and consortium blockchains argue businesses and consumers don’t care about decentralization, as long as their experience is simpler, faster, cheaper, and more secure.
The four core components of an exchange (capital deposits, order books, order matching, and asset exchange) have traditionally been centralized. Blockchain projects focused on consumer-finance activities like banking, insurance, and securities trading are often regulated and must conduct Know Your Customer (KYC) and Anti-Money Laundering (AML) checks before opening an account (permissioned) to legally scale their solution. Exchange order books are stored on centralized servers (compromisable) and data is only available for a fee or at certain levels of membership. Order-matching is opaque and ensuring best execution is difficult. Lastly, clearinghouses are needed in order to settle trades, which often takes two to three days.
AhrvoDEEX is a blockchain-based exchange (ecosystem) that allows individuals, brokerages and financial institutions to trade traditional equities peer-to-peer (P2P) with real-time settlement. The network uses artificial intelligence (neural networks) to create ratings and price targets for over 8000 stocks and ETFs. The platform is decentralized in every component of an exchange except capital deposits. Brokers and financial institutions that trade on the AhrvoDEEX blockchain must conduct Know Your Customer (KYC) and Anti-Money Laundering (AML) prior to opening accounts and accepting capital deposits (centralized/permissioned).
To facilitate transparent and secure trading, the order book is housed on the blockchain. Anyone within the network can see passive (limit, stop) and active (market) order flows for any stock or ETF. The ecosystem also has an onchain order matching engine. This way individuals and institutions can ensure they get best in class execution. More importantly, the network has onchain settlement, so trades can settle without clearinghouses or other intermediaries. Dramatically improving post-trade liquidity and settlement speed (days to seconds).
For blockchain (cryptocurrency) to reach mass adoption, it must be applied within real-world constraints (KYC/AML, etc). In addition, it is important to view decentralization relatively instead of absolutely. One could argue AhrvoDEEX isn’t decentralized. However, relatively to the current brokerage experience, it is. Bloomberg recently reported that 40% of Bitcoin (BTC) is owned by 1000 people and more than 50% of the Bitcoin networks hashing power is generated by three mining pools (BTC.com, AntPool, SlushPool). Furthermore, 33% of Ethereum (ETH) is owned by 376 people. Together, BTC and ETH comprise more than 70% of the crypto’s total market cap. Is that decentralized?