So about month ago we launched Hodl Hodl — a peer 2 peer cryptocurrency exchange, which many people mistakenly called decentralized. It was partially due to us not being careful enough using this word in a couple of places on the website which we duly removed as soon as we saw people being pissed about it. But it was an important lesson — people really don’t get it: what decentralized means, what p2p means and how the heck does it all work. So let us Dansplain it to you and share some of our wisdom launching an exchange.
Seriously though, we just wanted to shed some light on what we’re doing and how it differs from the rest of the projects. These days people are jumping on all the new cryptocurrency exchanges that spring up expecting a number of predetermined features. Let me start with the question we get most often the answer to which actually explains what peer 2 peer means.
People ask
What payment methods do you support?
ALL OF THEM. We don’t care if you’re trying to exchange Chilean pesos for Bitcoin or if you want to send EUR via Skrill. You’re trading with another person, not us. Thus, when creating an offer, you can choose any payment method that’s been added for your particular country or add a new one. The only restriction is that we moderate new payment methods added by our users to avoid duplicates (such as “PayPal” and “paypal”) or obvious bullshit. If you’re not creating an offer yourself, but picking from a list of offers created by other traders, then you’re at their mercy: you can only trade with another person using payment methods that trader says he supports. In fact, you can filter offers by payment methods. This functionality is nothing new to regular Localbitcoins traders.
I actually think a lot of misunderstanding comes from people being used to centralized non-p2p exchanges and expecting us to be like them
So let’s get down to what Decentralized and p2p means
- Centralized means there’s a server or a number servers controlled by the exchange on which the software runs. In that sense, Hodl Hodl, as well as Localbitcoins and all other non-p2p exchanges ARE centralized. The only exception to this is Bisq, which doesn’t have a centralized server and is truly decentralized.
- Peer 2 Peer means trades happen between users. The exchange isn’t involved and doesn’t hold funds. Bitstamp, Kraken, etc. are NOT peer 2 peer, while Localbitcoins, Hodl Hodl and Bisq are.
But there’s a catch. While we highly respect Localbitcoins, they’re still much closer to Bitstamp and Kraken in that they do have their own wallet — they have 100% access to all the bitcoins stored with them. Hodl Hodl is different in that we don’t have a wallet. Instead, we generate a Bitcoin or a Litecoin multisig address and 2 keys are required to unlock the funds. One key is stored with us while another one belongs to user and isn’t stored on our server ever. This means, that even if our servers are hacked, the hacker cannot get access to the funds locked in escrow as he would lack another key. This greatly reduces the incentive to hack the exchange and cease to be a honeypot which most exchanges are.
On the other hand, we wanted to stay as user-friendly as possible and avoid the hassle of asking users to install our software on their computers. That meant a decentralization trade off — unlike Bisq we are centralized, but we also offer a much smoother user experience.
Ok, that’s all very cool, people say, but
No way I’m trading on your exchange when you charge a 0.6% commission
while most exchanges commission is around 0.2% or lower. Well, yeah, this commission is high for day traders, who aren’t our target audience. But for other people it’s very low (lower than Localbitcoins, which charges 1%). But why is it still so high? Because complexity! It’s much more complicated to process a trade on a p2p exchange (easy explanation: more lines of code to bash your head against and debug) and there’s also almost no competition (for pretty much the same reason). When there are more p2p exchanges offering better fees, it’ll be cheaper. But for now that’s what the market is. In fact, we’re offering a 0% commission on all trades until July 2018, so let’s not complain about the fees just yet!
Another question we get asked fairly often is
What’s up with your stupid name? Hodl Hodl?
It’s a meme economy. We like memes. We also think it reflects well that we have 2 keys for a multisig address. And we also wanted to be called hodl.com, but someone had this name before us and asked us to pay him a hundred billion bitcoins for it, so we thought screw that.
But your marketing sucks, how do you plan to ever make it?
By building a much better product. We’re limited in funding as we’re investing our own money. We prefer to spend them on development. We do marketing on twitter and it’s free: if people like our product, they follow @hodlhodl, they retweet and post links. Let’s keep it that way. If you like us, please follow us and retweet our posts. Tell your followers you like us. This is something that would be extremely helpful to us and will allow us to focus on development.
I still don’t get it
It’s ok. Peer 2 peer exchanges are hard to develop and hard to use. That’s the price everyone pays for freedom. Because you don’t go through KYC/AML, you don’t wait in line and you can start trading immediately. If you’re not sure, just sign up on testnet.hodlhodl.com and try using the exchange with testnet bitcoins and litecoins to learn how to do that. It costs you nothing as testnet bitcoins are free to obtain. We actually have a fairly decent set of videos about how to get testnet bitcoins and go through the contract on testnet.hodlhodl.com — all on our YouTube channel. Watching the video and then going through it yourself, repeating every step, will hopefully remove all your questions. If not, you can ask us on our Telegram channel @hodlhodlTESTNET.
A special thanks goes to
To the people who helped us test, launch and promote Hodl Hodl: Pierre Roberge for his security expertise, Florian for his advice and help in pentesting, Ambroid for his trading expertise and advice in implementing a referral program and Tuur Demeester for invaluable advice and help.
That’s it for today. And remember — there’s no better place to buy the dip than Hodl Hodl.
