Although cryptocurrencies have seen substantial success in their first decade, there is no guarantee that this success will continue. Many institutions have reservations about investing time and money into an intangible currency with a volatile future.
A decentralized exchange is a trading market place which does not require an intermediary third party for the execution of trades and the custody of its customers’ assets. Instead, the users of a decentralized exchange trade via smart contracts directly with each other in a peer-to-peer manner. Since all transactions are directly processed by the underlying blockchain, the buy and sell side are required to pay a network fee for the execution of each transaction – this fee is generally referred to as GAS and is paid to the miners of the Ethereum network. Further, all buy- and sell-side orders of a decentralized exchange are anonymously displayed in a public ledger for all market participants to see. Currently, the use of decentralized exchanges via smart contracts is limited to tokens which are based on the same blockchain such as Ethereum, which uses the smart contract standard “ERC20” – this is also the standard which SCX uses.
A centralized exchange is a trading market place which allows customers to buy and sell cryptocurrencies such as Bitcoin and Ether (Cash-to-Crypto and Crypto-to-Cash), as well as trading cryptocurrencies against tokens and each other (Crypto-to-Crypto, Token-to-Crypto, Crypto-to-Token). In a centralized exchange there is a third party – the provider of the exchange – which acts as an intermediary and counterparty for all customers’ buy and sell orders. Most of the transaction fees are therefore defined by the exchange provider which usually nets all transactions off-chain and does not execute all trades via the blockchain. This is also the reason why centralized exchanges enable the efficient trading of tokens and cryptos of different blockchains.
Cryptocurrencies or which are based on a native blockchain protocol (for example Bitcoin (BTC) - the native cryptocurrency of the Bitcoin blockchain) are referred to as «Cryptos». They are designed as a means of payment and their purpose is to constitute a monetary unit, store of value and medium of exchange. The fees which occur when transacting cryptos are paid directly to the miners of the decentralized network which use a public consensus mechanism to confirm the state of transactions within the network and towards all network participants.
Certain Cryptos contain additional features and their purpose lies beyond a mere medium of exchange. For example, the Ethereum Blockchain which has the native currency Ether (ETH) also enables the creation of smart contracts. These smart contracts can be used to create Tokens on top of the Ethereum Blockchain, which can act as a unit of value, exchange, payment or to access a service within a certain use case or area of application. The fees for token transaction are therefore paid in the native currency of the underlying blockchain, respectively, in form of GAS in the case of the Ethereum Blockchain. As an analogous example we can use Starbuck’s coupons (= «Tokens») which can only be used within the Starbuck’s network but are denominated in USD or CHF. In contrast to Starbuck’s coupons, tokens provide a broader area of application since they can give token holders a variety of rights. For example, there are tokens that give their owners the rights to participate in revenues, access certain services and receive price reductions, receive payouts for the provision of digital resources, exert voting rights or the entitlement to hard assets such as precious metals.
GAS LIMIT describes the maximum amount of GAS which a market participant is willing to pay to execute a specific transaction. A simple ETH transfer from one person to another has a GAS LIMIT of 21’000 GAS. However, if the transaction involves a smart contract with more complex code that requires miners to allocate more computational power to execute it, it will have a higher GAS LIMIT.
The deposited public key is also a prerequisite for the correct allocation of payments in the broker service. Using the token exchange does not require additional verification. You can use both platforms with a log-in.
With the current legislation, we are also required to know whether the customer is a Politically Exposed Person (PEP). A Politically Exposed Person is an individual who is or has been entrusted in the past twelve months with a prominent public function. Family members and close business associates of PEPs are also considered PEPs themselves. Examples of Politically exposed positions are:
- (a) Head of State, Head of Government, Minister, Deputy or Deputy Minister;
- (b) a Member of Parliament;
- (c) a member of the governing bodies of political parties;
- (d) a member of the Supreme Courts, the Constitutional Court or any other similar judicial body whose decisions may not, except in exceptional cases, be appealed;
- (e) a member of the Supreme Audit Institution of the Court of Auditors and the State Audit Office;
- (f) a member of the Governing Board of the Central Bank;
- (g) an ambassador or trustee;
- (h) a military officer in the Armed Forces;
- (i) a member of the administrative, management and supervisory body of a wholly-owned enterprise; or
- (j) a Director, deputy director and board member of international organizations.