Bisq Co-Founder Chris Beams: There's Finally and a Fundamental Fatal Flaw In the Centralized Cryptocurrency Exchange Model


In the light of the recent Coincheck hack which resulted in theft of over $500 million in NEM (XEM) cryptocurrency, the ongoing debate on the value of decentralized solutions is taking another turn highlighting issues such as the vulnerability of 'conventional' centralized platforms and consumers having to sacrifice the control of their private keys in return for ease and convenience.

Furthermore, centralized platforms are not only subjected to increasing governmental regulations, but also heavily rely on the decisions made by people who run them.

One does not have to go too far in search of proof: things like these can be seen playing out in countries like China, South Korea, or India with all that pressure from the state officials, or at popular programs like Coinbase or Bittrex collecting a lot of personal info and imposing strict verification rules.

Despite their own flaws, something the EtherDelta incident last December demonstrated, and the lack of liquidity in contrast to the more popular platforms, decentralized trades (DEXes) thanks to their nature seem to have an upper hand when it comes down to issues like security and privacy.

Certainly, there are points for debate, such as the domain server which people access to use some online P2P platforms may indeed be centralized and thus be exposed to other and censorship attack vectors.

However, a typical DEX can be retrieved after downloading a special client supported by multiple nodes. This way a single entity never controls it -- there's no single individual controlling the marketplace, nor is the platform supported by a server. It runs on a network.

Bisq, the stage formerly called Bitsquare, is one of the leaders in this growing segment, and when there's somebody who knows everything about what a decentralized exchange is all about, which surely would be Chris Beams, a co-founder and one of the main brains behind the project.

ForkLog: Hello Chris, what's your take on the recent Coincheck story?

Chris Beams: Unfortunately, these thefts are quite predictable. Coincheck may be the most current and largest among them, but it will not be the last. Their lesson is the same: you do not own the coins, if the keys aren't owned by you. Let this be your telephone as you read this if your coins are sitting in an exchange account. Go withdraw your funds to it today and download a wallet that is proper. Buy a Trezor about how to use it, and educate yourself.

Thefts such as the one at Coincheck are avoidable.

ForkLog: Why are decentralized exchanges really important from this point of view and what role in your view they can play in the future of the crypto industry?

Chris Beams: Today, decentralized exchanges occupy a small but important niche in the larger crypto ecosystem. They satisfy the needs of consumers who understand the crucial importance of privacy and security in bitcoin (along with other cryptoasset) exchange trades. Because the set of users that are educated is small by comparison to the huge number who have been getting involved 25,, the niche is small.

As the number of individuals who understand the importance of privacy and security grow will increase the niche for exchanges. Thefts and hacks of exchanges are part of the learning process. When they do, they begin to use them, and find out about peer-to-peer exchange networks such as Bisq.

In the aftermath of the Coincheck hack, we hear the calls for regulations on exchange companies that are centralized to ensure that user funds aren't at risk. Ultimately, however, the solution to the problems posed by exchanges isn't to make them more regulated, it's to make them obsolete. It takes time, although exchange networks are we do that. It's growing, and building correctly systems is hard -- much harder than building centralized ones -- but Bisq is one such system that currently exists and getting better every day.

ForkLog: Do you have any advice to the standard players regarding security and other aspects of running a crypto exchange business?

My understanding is that the NEM stolen was at a wallet, and it is a mistake, and they don't need me at this point to scold them. There are loads and Coincheck now has 500 million reasons. I'm sure they will.

But while security risk can be mitigated to some level, what can't be mitigated in most cases is privacy risk. All exchanges have to collect personally identifying information so as to comply in the United States. There is no mitigation strategy here, because the companies are forced to collect the data, and are forced to hand over it when they request it.

This is a basic and fatal flaw in the exchange model that is centralized. Users have awareness about the privacy problem than they do about the safety issue, as governments get more aggressive in their attempts but that will change also.

There is not any way to operate a custodial market that is centralized and protect customers' privacy while complying with the law. So if I were going to give guidance to "conventional players", I would say get busy innovating and finding ways to conserve your business model without having to take custody of user funds. I wouldn't envy that job, and I think they would still be playing a losing game, but they might get to play with it.

Recently, you've had the client release, what new does it bring? Hopes and what other plans do you have for beyond and 2018?

Chris Beams: Things are going well! It's a terrific time to provide a try to Bisq.

Each release includes many different fixes and features, but the overall user experience and usability has been around improving. We now have dedicated contributors working on this area, which is exciting.

Our effort that is most important is growing the community of contributors . Where contributions of all kinds -- not just code Bisq operates as decentralized autonomous organization, or a DAO! --are eligible for payment. Contributors can take on dedicated roles, and start out working on bounties. If you're interested in becoming involved, or only want to learn more, check out the record. It provides an introduction to lays out our challenges, Bisq, and details how we are bootstrapping the Bisq DAO.

Ultimately, the mission of Bisq is to provide a way for national currencies to exchange bitcoin. We think this this mission is essential to the long-term success of Bitcoin, and there is still a long way to go while we're proud of how far Bisq has come in that mission up to now. So whether you need to use Bisq or want to contribute to it, welcome! We hope to see you around the network.