KuCoin launched a feature that allows traders to self-custody cryptocurrency while trading on the crypto exchange’s centralized platform. The new security technology is provided by Boston-based startup Arwen, which will go live in beta on KuCoin Tuesday.
This eliminates the counterparty risk associated with storing cryptocurrency on a centralized exchange, and protects the coins from hacks.
Arwen said that trades are executed via a layer-two blockchain protocol that allows traders to benefit from the full liquidity and speed of the centralized exchange’s orderbook.
Trading between unknown and unreliable parties is made secure by relying on the traded coin’s native blockchain. For example, security for trading BTC is provided by the Bitcoin blockchain, while security for trading BCH is provided by the Bitcoin Cash blockchain.
“This is in contrast to other approaches … which require the introduction of a completely new blockchain that traders must trust,” according to Arwen.
The self-custody service will be limited in the initial stage, and will not be available to US residents. Escrow sizes are limited to about $100 and trade sizes to about $25 as a standard security measure.
KuCoin President Eric Don believes decentralized solutions will gain increasing popularity.
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