Decentralized Cryptocurrency Exchange A Proof-of-Concept based on Hashed Timelock Contracts
2018
In recent years, cryptocurrencies have grown rapidly to a market capitalization of
400 billion US dollars. As the value of cryptocurrencies has increased, several exchanges
have emerged. Some of these exchanges have been targets of attacks leading
to losses of cryptocurrency worth hundreds of millions of dollars. The attacks have
been made possible as a result of exchanges keeping track of the cryptocurrency in
circulation on the exchange by storing their users’ funds. A successful attack puts
not only the exchange, but all its users at risk.
This bachelor’s thesis explores an alternative to a centralized cryptocurrency exchange
by trading directly on the blockchain using peer-to-peer technology. This
decentralized approach eliminates the risk for attacks with far-reaching consequences
as users’ funds are not stored in a central location. A protocol for exchange between
cryptocurrencies is proposed and a prototype based on this protocol is implemented.
An evaluation is done to ensure the quality of the prototype and protocol based on
three parameters - delay, cost and trading pairs.
The protocol is proven to be a possible alternative to the solutions offered today.
The prototype displays a proof-of-concept of a decentralized platform that implements
this protocol.
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