Opensourcing the Exchange

As you may have heard, last week we made two major announcements at the 2019 Baltic Honeybadger conference in Riga: generic escrow contracts with an API, and open sourcing our Exchange project. Explaining everything precisely and in a way that’s well understood within the timeframe of a 20 minute talk was challenging, so we wanted to write two detailed blog posts to explain each of those announcements and share more details.

The second announcement we made is that we’re going to opensource the Hodl Hodl Exchange project.

We’ll go over the reasoning below, but the implication of this decision is that now practically anyone will be able to run their own P2P Bitcoin exchange under their own name from their own server. We’re also probably going to shut down our own instance of the Exchange, however existing users don’t need to worry: unless they opt out, their accounts, along with their reputation and other info, will be transferred to an instance of one our trusted partners who committed to purchasing the licence to run the exchange, and the instance will be deployed as soon as we opensource the code.

This brings us to the next point: because we want to be able to continue working on the code, build new features, fix bugs and provide support to Exchange operators, in order to run an instance, you’d need to purchase a licence. The licence is going to be in the form of a yearly subscription, and at this point the price model is yet to be determined.

We also wanted to briefly touch on why we’re opensourcing the Exchange. It became obvious over the past year, even peer-to-peer exchanges, such as Localbitcoins & Paxful (whom we highly respect) were forced to introduce KYC/AML policies, which require their users to provide a lot of personal information to continue trading.

This, in our opinion, goes against what Bitcoin stands for. Hodl Hodl, as an non-custodial exchange, is not holding fiat currencies or bitcoins, and was able to avoid regulatory pressure for now. However, we expect regulators become more desperate in an attempt to contain the spread of Bitcoin. As a company and as Bitcoiners, we refuse to be victims of arbitrary changes in laws which could force us to introduce KYC/AML. For this reason, we decided to choose a business model in which we earn money by writing software, not by providing financial services. Much like free speech on the internet, software cannot be banned, blocked, censored, controlled, reasoned with or threatened. It just is.

We foresee many different entities around the world running Hodl Hodl Exchange from their own service, in their respective jurisdictions. That way, if one jurisdiction is not favoring free trade and is introducing unreasonable regulation that compromises users privacy, an exchange can simply be run from a different jurisdiction — this will create healthy competition, not only between Bitcoin exchanges, but between jurisdictions too. More importantly, Hodl Hodl will be focusing on building, not dealing with regulators — that way we’ll be able to deliver top quality software that is well tested, checked for vulnerabilities, has great UI & UX and is translated into many languages by default.

Another side-effect of this decision is that people will be able to contribute and tweak the exchange to their liking. This will not only increase the usability of the exchange, but will ensure the code is looked over by many eyes.

Additionally, the exchange may be adopted to serve altcoins. While Hodl Hodl remains a purely Bitcoin company, it will not be difficult to replace or extend Bitcoin libraries (written in Ruby and Javascript) used in the Exchange project to support an altcoin (provided the altcoin supports multisig). In fact, when Hodl Hodl launched, it used to support Litecoin (later removed). While we won’t officially be supporting altcoins, we think it’s worth it to sell licences to entities willing to do that job for us and run the exchange for two reasons: it will fund further development of Hodl Hodl Exchange and it will also allow us to discover more issues and potential vulnerabilities, as every running instance of the exchange is an additional source of this kind of information for us.

Hodl Hodl is committed to continue active development of the Exchange project. We think it is an important infrastructure project which deserves to be a part of the open Bitcoin ecosystem. We want to be sure the work we’ve done is available to everyone and is not censored due to some regulator changing their position on non-custodial exchanges. Transacting in Bitcoin cannot be censored, why should exchanging Bitcoin be?

If you’re interested in running your own instance of Hodl Hodl exchange, please contact us at exchange-licence@hodlhodl.com and describe your intentions and your use case.

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Hodl Hodl

P2P Bitcoin trading & lending platform that doesn’t hold user funds