Digitex Futures | Safety and Reliability of the Independent Smart Contracts

One of the most important features of Digitex Futures is the use of independent smart contracts on the Ethereum blockchain to set up accounts for traders. Through this, Digitex is able to set up a trustless model where traders don’t have to trust or rely on the integrity of Digitex Futures to keep their funds safe. I have said this in my initial posts about Digitex Futures and if you would like to know more about it kindly refer to my recent works on Digitex Futures or better still, read up that segment of their whitepaper through the link provided below this post. Now, let us take a closer look at the trustless feature of Digitex Futures.

Like I stated earlier, through the aid of independent and decentralized smart contracts on the Ethereum blockchain, traders can trade freely on Digitex Futures Exchange without having to trust or fear the exchange managing their money in whatsoever way. Actually, Digitex carries this out by striking a balance between the decentralized model and the centralized model to establish a zero fee futures exchange platform; the very first in the history of trading futures since the emergence cryptocurrencies. This seeks to and of course, will solve a lot of problems associated with centralized exchanges that cryptocurrency holders used to depend on for trading digital financial assets. It is also important to understand that, even decentralized models have their own flaws.

The blockchain is ubiquitous and has a way of going against norms in every institution you find it within a sector or an economy in general and at any given time. Being highly disruptive it still doesn’t solve to the fullest, some of the challenges that arise while trading futures on blockchain infrastructures. Such challenges include; order-matching and efficient settlement of trade.
While on the other hand, the centralized model has a way of solving this seamlessly; increasing transaction speed, enhancing real-time trading and so much more. This is why Digitex Futures is making use of this two models to give futures traders a world-class trading experience.

The benefits of centralized servers are numerous compared to running a decentralized one in terms of how they both handle distributed ledger applications. The matching engines on the centralized model are super-fast and this enhances the possibility of having a real-time trading experience. It also enables a trader to apply the necessary tools for making technical analysis. Also, on the centralized servers traders tend to benefit from a measure of privacy that is important for their safety to a great extent based on the fact that the rate of frontrunning will be reduced to the barest minimum (no one would know about his/her moves and trading decisions). One other benefit is that running a centralized server is relatively cheap compared to a decentralized one. The centralized server system also allows for margin trading and as a result of this, traders can maximize their profits using leverage (trade in larger volumes). With leverage each unit of their account balance would command a certain multiple of the leverage chosen by such traders; say a 1:100 leverage for example. This means that for every single unit of the trader’s account balance he would control trading positions worth one hundred times higher. Margins and Leverages are not possible with a decentralized model.

Digitex has intelligently integrated a Centralized and Decentralized model on one exchange to deliver a service that’s characterized with speed, reliability and security (with the aid of independent smart contracts; that functions beyond the reach of Digitex Futures). The role of Digitex Futures is to get users' account balances by interacting with the Ethereum blockchain; this will also reveal the trader’s margin liabilities together with his net-profit. Above all these, it is necessary to have it in mind that at no point in time will Digitex have access to (freeze, control or deactivate) users’ wallets. In other words, this is simply beyond the reach of Digitex Futures because it is held by a smart contract on the Ethereum blockchain.

• Digitex will have no ability to seize user’s funds at any point in time. Reasons for freezing accounts like we seen in the past may include the following; pressure from the government or centralized authorities, Know Your Customer (KYC)/Anti-Money Laundering regulators and so on. Digitex will have every right to resist such pressure by giving the simple reason that they do not have access to user’s funds.
• It is impossible for Digitex to mismanage user’s funds. This is also because the funds held by the user’s account is beyond their reach.
• No keys (private keys) are held by the Digitex Central Servers, so they are not a target for hackers and intruders. There’re no rooms for funds to be stolen or lost with this model.

Centralized exchanges are artificial third-parties that are unnecessary in real terms. Due to the fact that what they tend to do for traders is what traders could do for themselves. Here’s how it works;

They act as a middle-man between the traders and the independent smart contract that holds the trader’s account balances. So each time a trader initiates a withdrawal, the independent smart contract will first ask the exchange for an update of his current market position and worth. In this way, the smart contract will update his balance that’s available for withdrawal and give him the corresponding response based on such information. This only takes place every time a trader processes withdrawals because the process has a high cost attached to it; since it is an on-chain process. As a result of this, exchanges only update trader’s account balances whenever the trader initiates a withdrawal. However, there’s a dark side to this, intruders do take advantage of this process and through it send false information to the smart contract and this could lead to loss of funds.

The solution then is to calculate the trader’s net-profit from all his trades (matched trades) whenever the smart contract requests for an update of the trader’s balances. This will make it impossible for hackers to send incorrect information to the smart contract; such intruder will be unable to create all matching orders from the scratch with the necessary timestamps.

One other thing to do to enhance security is to insist that all users of Digitex Futures Exchange will have a Metamask plugin added to their browsers. This will guarantee the fact that only authorized persons (one who made deposits) will be able to withdraw from trader’s account. The Metamask secure identity vault uses signed blockchain transactions to authenticate the same person who made deposit.

I have embedded a video showing the general walkthrough of Digitex Futures;