Ethfinex is shutting down and reopening as DeversiFi, a fast, high liquidity DEX

Fast and functional decentralised exchanges are a necessary part of a DeFi future.

One of the most interesting features of decentralised exchanges (DEXs) is that they tend to handle like rubbish compared to centralised exchanges. Two of the most common problems are a lack of liquidity, a lack of responsiveness and comparatively high trading fees in some cases.

It's something of a chicken-egg problem. Decentralised exchanges can't get the liquidity and user base if they're not competitive with centralised exchanges, but they can't become competitive without the liquidity and user base.

The inherent advantage of DEXs is that they let users trade directly from their own wallets, for additional privacy and zero risk of losing your funds to an exchange hack, no transfer limits and theoretically no maintenance downtime.

Finding the best of both worlds is an ongoing effort, but DeversiFi reckons it may have cracked the code.

"Ethfinex Trustless has successfully scaled to the point where users can expect the same performance as that of a centralised exchange but with additional benefits in terms of security, privacy and control. We see DeversiFi as a necessary next step forward towards our goal of empowering traders through fast, convenient and self-managed decentralised financial technology," said DeversiFi CEO Will Harborne.

"We believe in working towards a fair and accountable economic system that is open to everyone, and see DeversiFi enabling a new era of digital asset trading which empowers users by putting power back into their hands with trustless trading solutions."

"It is incredible what the Ethfinex team has been able to achieve in such a short time. There is no decentralised exchange in the market that offers the same liquidity as existing large exchanges," agreed Bitfinex CTO Paolo Ardoino. "We think that DeversiFi is on the right path to facilitating the transition to a decentralised financial world and look forward to seeing their offering develop over the coming months."

What's happening and how it's happening

Ethfinex was the centralised caterpillar, Ethfinex Trustless was something of a cocoon stage for collecting user feedback and evolving, which would make DeversiFi the butterfly. One of its first acts as a butterfly will be to put the appropriately-named-for-this-analogy Nectar (NEC) token at the centre of what it does going forwards.

So far it's known that the NEC token will get people trading discounts on DeversiFi. Beyond that, more details on what the token does will be revealed on 21 August at the Berlin Governance Games.

Right now DeversiFi is up, while Ethfinex will be closing its doors in September. Anyone who hasn't withdrawn their funds by then will have their holdings automatically moved over to Bitfinex.

That said, as part of this migration, Ethfinex/DeversiFi is moving away from Bitfinex and properly becoming an independent entity.

To achieve its speed, DeversiFi uses a hybrid system "built on the backend architecture of one of the most advanced centralised exchanges", which presumably refers to Bitfinex and/or Ethfinex. This architecture sees users trade directly from their wallet by "wrapping" the tokens they want to trade, which essentially earmarks them for trading. From there they can manage orders by simply signing messages.

The wallets currently supported by DeversiFi include Metamask, Ledger, Trezor and Portis, with more coming down the line. Keystore is also supported.

DeversiFi also includes features you won't typically find on existing DEXs, some of which came from successive Ethfinex Trustless iterations, such as DEX OTC trading, and DEX margin trading via the bZx Fulcrum protocol.

Incidentally, bZx is also a great entry point for anyone who wants a better understanding of all the different ingredients that go into holistic DeFi solutions. As a margin trading system, it spans decentralised loans, interest earnings and other activities which have traditionally been the purview of banks and other tightly centralised, steeply-regulated financial institutions.

Butterflies such as DeversiFi are another lovely feature in the increasingly verdant DeFi garden.

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Disclosure: The author holds BNB, BTC at the time of writing.

Picture: Shutterstock