The Stellar Development Foundation (SDF) are in the final stages of preparing their own decentralised exchange (SDEX), rumoured to be this July, and have announced plans to make an alteration to the core protocol.
This protocol alteration would change how buy and sell orders are executed on all Stellar based exchanges, such as their own SDEX, or a third-party exchange like Stellarterm. At the moment it’s possible to create multiple ‘shadow’ offers, which add up to more than the total holdings of the wallet. These offers can then disappear, leading to potential manipulation of the order books. Whilst users of exchanges such as Binance are used to ‘fake’ buy and sell walls, these exchanges at least require the buyer or seller to hold the correct amount of the underlying asset, with users unable to bid/sell with greater amounts than their wallets contain.
The proposed update would change how the Stellar protocol functions, and also therefore the related decentralised exchanges, bringing it in line with how centralised exchanges operate. Users would only be able to sell or buy with what they hold in their wallet. By introducing a ‘liabilities’ function, both outbound and inbound liabilities would be vetted, keeping track of what an account is selling and buying, preventing this particular style of order book manipulation.
“So what are those changes in plain English?
Short version: you can only sell what you have (shout out to captain obvious).
Longer version: we are making this happen by introducing the notion of “liabilities” that are enforced across the board.
Outbound liabilities keep track of what an account is selling via offers.
Keeping track of those liabilities stops people from:
creating offers that would sell an asset more than once
paying people with assets that they are also selling (if they really want to do that, they need to remove the offer from the order book first to free up those liabilities)” –Nicolas (SDF)
Although the above may seem like a relatively small change, it is a clear signal from the SDF on how seriously they are taking the potential liquidity boost that their protocol and revamped exchange will experience in the coming months. With final touches to their ‘professional’ updated trading user interface only weeks away from public eyes, and native currency Lumens (XLM) being approved by financial regulators in New York for trading on the itBit exchange, it seems that this particular protocl and cryptocurrency is readying itself for some serious industry attention.
ItBit is the first qualified custodian & licensed exchange to receive approval from the New York State Department of Financial Services to offer Stellar Lumens.https://t.co/PSyD2ddNUd https://t.co/BIgNZuCKiy
— Stellar (@StellarOrg) June 14, 2018
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