Presenter: Sergey Ivliev Presented at Trusted Open Data Ecosystems TODE 2016, Poznan, Poland http://10years.br-ag.eu/

1. Blockchain-enabled Exchange: Architecture,
First Experiences and Outlook
Sergey Ivliev
Lykke Corp, Switzerland; Laboratory of Cryptoeconomics and Blockchain
Systems, Perm University, Russia
Trusted Open Data Ecosystems. TODE 2016, Poznan, Poland
http://10years.br-ag.eu/

2. Agenda
• Why Blockchain?
• What is Lykke?
• Lykke Exchange Architecture
• First Experiences & Trading Stat
• Roadmap

3. Why Blockchain?

4. Today’s financial market is a pile of spaghetti

5. Peer-to-peer set up

6. DLT Ecosystem
Public DLT (permissionless) Enterprise DLT (permissioned)
Bitcoin, Ethereum, Lisk, Stellar, etc. Hyperledger, R3 Corda, Chain OS 1, etc.
Inherent cryptocurrency Tokens of value might be added
Typically PoW (mining) Typically PoS
Transparent Controlled privacy
Permissionless, Pseudo-anonymous Permissioned
Open, scale-free Closed, club-based enter
Ecosystem-driven governance Stakeholders-driven governance
Universal/retail-oriented Enterprise-oriented

7. Top-10 Blockchains
www.coinmarketcap.com

8. What is Lykke?
Lykke builds a global marketplace for all asset classes
and financial instruments, that is a level playing field
and where everyone has access
Uses open DLT to offer immediate settlement and direct
ownership
Swiss registered FinTech company that is crowd based at
all levels
Founded by Richard Olsen and received initial seed
funding in 2015

9. Vision
Global notary service will rewire financial system
The DLT/blockchain is essentially an Internet based
notary service that maintains a log of all financial
transactions and keeps track of the ownership of digital
assets
There will be one internet based, decentralized
exchange for all financial instruments with immediate
global consensus about completed transactions and
asset ownership

10. Three fundamental components
1. Global notary service = Blockchain
All transactions and ownerships can be logged in this universally
accessible distributed ledger
2. Standardized securitization = Colored Coins
Every financial instrument can be a listed security in the form of
a digital token for recording in the blockchain
3. Digital Signatures/Encryption = Wallet
Every owner of a colored coin has direct ownership protected
through a private key in his digital deposit box

11. High-level architecture

12. Issuance
Example
Digital asset is issued on the blockchain as Colored Coin (API/Web)

13. Real-time ownership structure
Ownership is automatically updated after confirmation of each transaction
e.g. Lykke ownership https://www.coinprism.info/asset/AXkedGbAH1XGDpAypVzA5eyjegX4FaCnvM/owners

14. Guaranteed delivery-vs-payment transactions
Transactions are settled as atomic swaps on bitcoin blockchain. Settlement risk is zero. Cost is small.
See LykkeX transaction log https://www.coinprism.info/address/anJBX5sKFK4vnbywKWE2NQa9xrvLJEqRAB2

15. DVP atomic transactions are used to swap assets between peers
Alice’s wallet Bob’s wallet
USD EUR
USDEUR
There are two signatures are required to broadcast the atomic swap
transaction on the bitcoin blockchain
Atomic swap
transaction
Colored Coins Settlement

16. Multisignature wallets are used to deposit client’s coins. The exchange does not take
possession of the traded coins.
2-of-2 Multisig address requires two signature to spend coins from it:
• Client’s signature
• Exchange signature
Exchange2-of -2 Multisig wallet
Client + Exchange
Client
MultiSig wallets

17. Lykke Wallet
ONBOARD EASILY
Simple as making a selfie
DEPOSIT SECURELY
Deposit bitcoins and digital assets to multisig wallets with an
encrypted private key and refund insurance
TRADE FREELY
Buy and sell bitcoins and digital assets with 0% commission
SETTLE IMMEDIATELY
Receive the proof of your trade in 10 minutes
OWN DIRECTLY
Verify your asset ownership on the “trust machine” of blockchain
WITHDRAW TIMELY
Receive immediate withdrawal to your bitcoin wallet without any
fee

18. Trading stat
Structure of trading activity on Lykke Exchange, %

19. Trading stat
Distribution of trading activity on Lykke Exchange (in log-log scale)

20. Trading stat
Distribution of confirmation time on Lykke Exchange (hours, log scale)

21. Initial Coin Offering Campaign
28 Days
30M Lykke coins (300K shares) offered
0.05 CHF per Lykke coin (5 CHF per Share)
56M CHF market value
ico.lykke.com

22. ICO stat: Accounts
1800 total #
+1300 new accounts
~40 accounts/day
*As of 13 October 2016

23. ICO stat: Accounts by GeoIP
90 countries
50% from 4 countries:
• Switzerland
• United States
• Russia
• Germany
*As of 1 October 2016

24. ICO stat: LKK Coinholders
*As of 1 October 2016
1.16m CHF raised
+580 new holders
717 total #

25. ICO stat: Holdings distribution*
$250 median
30% less than $100
$20k 95%-th quantile
$0.25 smallest investor
* w/o private wallets
*As of 1 October 2016
LKK holdings (dollar equivalent)
$250

26. Architecture Roadmap
• Offchain settlement
• Ethereum
• Crosschain
• Bridges:
- SWIFT
- SEPA
- CLS
• Smart market makers
• Trading agents
• Algo store
• Extended FIX/FAST
• Web-based terminal
• Margin trading
• Xamarin wallet
• Lykke Payments
• Price-spread-time
• Dutch auction
• Intraday yield curves
• ICO Kit
• Issuance portal
• Disclosure feeds
• New asset classes
- PE / VC / SME
- CFDs
- Funds
- Community coins
- Industry coins
- NatCap
- Bonds
- Futures / Swaps
- Music Shares
• Competition platform
• Publication platform
• Disputes resolution

27. Outlook
Research directions
• Empirical market microstructure of digital assets marketplace
• Scaling laws and optimal market design
• Intraday yield curves estimation and impact to liquidity
• Market participants ecology and behavioral studies
• Market abuse detection
• Settlement finality research
• Consequences for systemic risk
• Macroeconomic impact of digitizing financial assets

28. Conclusion
The value transmission protocols will evolve and in future there
will be many blockchain-based digital assets.
The important component that is missing is a global marketplace
that enables efficient pricing and secure exchange of digital
assets.