“If you can’t explain it simply, you don’t understand it well enough” — Albert Einstein.
We’re testing the WandX prototype Dapp on a private Ethereum network across 4 user types:
Eric, who is familiar with cryptocurrencies and ICOs, and has invested in them earlier as well.
Lisa, who owns Bitcoins and Ether, but doesn’t know too much about ICOs or other altcoins.
Kate, who doesn’t own any cryptocurrencies but has heard of Bitcoin and Blockchain.
Joshua, who has spent a lot of time in financial services and heard of Bitcoin, but hasn’t invested in it yet.
We showed the 4 groups our website, whitepaper, articles, and prototype. The aim was to keep the prototype as user friendly as possible; all four groups understood how the prototype worked and could play around with it, however the articles weren’t understood by everyone, and this is what we want to fix.
I will skip over the concept of a blockchain and how it works (two great references are given here and here). Ethereum is a blockchain on which decentralized applications can be built. Most applications are written using the Solidity language which is then deployed to the Ethereum blockchain. The solidity code constitutes a smart contract; these smart contracts run on every node in the Ethereum blockchain, and hence derives the benefits of decentralization — no single point of control or failure. Ethereum allows users to create their own custom tokens which can then be used in the users’ applications.
The WandX platform aims to be the wall street for Ethereum. If you assume that all the tokens on Ethereum are stocks, then exchanges such as Coinbase (analogous to the NYSE) allow you to buy stocks as well as trade between stocks. However these exchanges are centralized services enabling you to trade in cryptocurrencies that are designed to be decentralized, both in creation and distribution of the cryptocurrencies. Hence there are decentralized exchanges such as the 0x protocol and EtherDelta. Now if you want to trade a basket of cryptocurrencies, or if you want to create/trade a cryptocurrency future or option, you could go to https://www.deribit.com/ which offers these services. However, if you want to trade these derivatives (futures and options) in a decentralized manner, you can do that on WandX. In the real world, derivatives are traded on commodities exchanges and the NYSE.
Through the various WandX APIs, you can potentially create and trade in an ETF (exchange traded fund), Derivatives, portfolios, or any financial instrument on cryptocurrencies. I sometimes interchange cryptocurrencies and crypto-assets — a cryptocurrency is not backed by an asset, eg: Bitcoin, while a crypto-asset could be a cryptocurrency or a cryptocurrency backed by an asset such as loyalty points. WandX provides users with the tools to create and trade in financial instruments on cryptocurrencies (and later when regulation becomes , similar to how a brokerage account allows you to trade in stocks and derivatives, .
The stock exchanges in the real world are secondary markets which were created to enable easy trade of stocks/assets as well as to enable accurate discovery of prices for these stocks. Futures and options on stocks were created to hedge risk against price movements. Other instruments such as shorting stocks were created to bet on falling stock price.
WandX enables accurate price discovery of ERC20 tokens, as well as increased liquidity for trading these tokens and derivatives on the tokens. Hedging against price movements of tokens can be made through futures contracts, and investment in a variety of tokens can be done through investing in the WandX index. Thus, the WandX platform acts as the decentralized equivalent of a stock exchange for the cryptocurrency world.
Appendix:
Ethereum — a blockchain based on the Ether cryptocurrency (symbol of ETH). New cryptocurrencies or tokens can be created on the Ethereum platform by writing smart contracts (pieces of code that run on a blockchain).
Token/cryptocurrency/crypto-asset — In this article I mainly refer to tokens created on the Ethereum platform.
Derivatives — Financial instruments whose value is derived from the value of a more basic underlying variable. eg: futures and options.
Decentralized — As the name indicates, not governed by a central party.
ERC20 token — a token created on the Ethereum platform.
ETF — An ETF is a type of fund that owns the underlying assets (shares of stock, bonds, oil futures, currencies) and divides ownership of those assets into shares.
Financial instrument — They are assets that can be traded. These assets can be stock/bonds or derivatives.
Check out the Wandx marketplace here https://www.wandx.co/