Komodo to Soon Release Atomic Swap-Enabled Trading App, CTO Reveals

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Cryptocurrency exchanges have been under fire so far this year, as hackers have kept on targeting them and other events hurt the confidence users have in certain platforms. Atomic swap technology is set to revolutionize the way we trade cryptocurrencies and more.

As CryptoGlobe covered, a Chainalysis report has found that 60% of cryptocurrency exchange hacks were the work of two major players, dubbed “Alpha” and “Beta.” Alpha was described as a “giant, tightly controlled organization partly driven by non-monetary goals” that appeared eager to “create havoc as to maximize profits.”

Beta, on the other hand, was described as a “less organized” player that focused more on monetary gains from their endeavors, moving money less, and waiting longer before cashing out. Together, these have reportedly stolen over $1 billion from exchanges.

Moreover, cryptocurrency exchange Cryptopia was hacked earlier this year in an attack described as “unusual” by Elementus, as it lasted longer than regular attacks, and saw hackers cash out over $2 million from decentralized exchanges.

On top of all this, crypto exchange QuadrigaCX recently went down after its founder and CEO Gerald Cotten unexpectedly passed away. Cotten was reportedly the only person with access to $145 million worth of customer funds in cold storage. The complex situation cost one crypto trader his $420,000 life savings, and is still unfolding.

While decentralized exchanges exist, their liquidity problems have seen most users stay away from them. The solution, peer-to-peer exchange, has trust-based risks, which are hard to fix without the transaction being made in person. This, as seen, carries risks.

Enter atomic swaps. This type of technology, according to the CTO of multi-chain platform Komodo (KMD),Kadan Stadelmann, can potentially revolutionize P2P transactions, as it eliminates the need the need for any central party.

This, he said, won’t make centralized cryptocurrency exchanges useless, as there’s room for both. CryptoGlobe caught up with Stadelmann to learn more about atomic swaps and Komodo itself.

CryptoGlobe: Can you introduce our audience to Komodo?

Kadan Stadelmann: Komodo itself is a blockchain platform that was founded a couple of years ago. Our vision is blockchain interoperability, the interconnectivity between different blockchain systems, between different communities, between different blockchain protocols, and also different technologies.

We have a varied set of different technologies and tools that together do reflect this vision that we have. As you maybe know we have decentralized exchanges, applications using blockchain technology, and some sort of smart contract system. As you can see it’s a pretty complex framework, and that basically is Komodo.

CG: Can you help us better understand atomic swaps?

KS: Sure. So there are different forms of atomic swaps, I'll just make it as abstract and as simple as possible. What I'm talking about now is the so-called "cross-chain atomic swap," this is basically the atomic swap everyone is talking about right now.

In simple terms an atomic swap would mean an exchange of coins from one person to another, without any central party involved. This is a direct line between me and you, so we can use the atomic swap protocol to exchange our tokens without any central technology. This cross-chain atomic swap is basically the idea of trading, exchanging something in a trustless way, with the help of specific mathematics and cryptography.

A cross-chain atomic swap can involve different blockchain protocols, so we can trade for example Ethereum for Bitcoin, and this trade takes place on our central computers - there's no central server like a centralized exchange. The most important aspect of this technology is that we're able to trade without anyone else involved, just me and you.

CG: What do you see in the technology's future? What potential applications can you imagine?

KS: I think this technology can cover a lot of things. Not just exchanging coins and tokens, but also exchange technology, exchanging information, and other data forms and data in general. I think atomic swaps - this technology of exchanging something in decentralized and trustless ways - opens door to the whole industry.

We're potentially talking about doctors exchanging information, Universities exchanging knowledge, making it a medium of exchange. These universities could use atomic swaps to exchange knowledge in a trustless way. I think for the technology the use cases are endless, as it's very promising.

Where I see it going is of course the financial area: trading, exchanges, etc. Those will be utilizing atomic swaps first. I see atomic swaps on smartphones, apps, and even on a smartwatch app. It's a mighty technology.

CG: Specifying cryptocurrency exchanges, how will atomic swaps affect them? Will they be an asset to them?

KS: I think it's going to definitely be an asset, something that's positive for the industry. We even see centralized exchanges developing decentralized exchange technology, take Binance for example - it's a centralized exchange building a decentralized exchange.

The biggest benefit of a decentralized exchange is the security, as trades just happen between me and you. It's very very different from a centralized exchange. I personally believe there will always be users who're familiar with the centralized exchange and will always feel more comfortable just opening a browser and entering an exchange this way. I think centralized and decentralized exchanges will likely co-exist for a couple of years, before we see hybrid forms get created.

CG: How will atomic swaps work with layer-two scaling solutions like Bitcoin's Lightning Network?

KS: [Atomic swaps] will be possible on layer-two scaling solutions, definitely, but they'll be a little bit different. Basically you would need some sort of gateway. Even though the coins are "locked" on the scaling solution, I believe atomic swap implementations could wait until the tokens arrive at the endpoint, exit the LN, and get unlocked again.

So if we did a trade and the LN was involved, it wouldn't be confirmed until the last steps were done - coins unlocked and tokens out of the second layer. We've developed something we call a trust API - while we're always trying building trustless systems we know normal users don't like to wait for confirmations, so in this case the system will allow a trade without the wait for the confirmation, or without waiting for the bitcoins to exit the LN.

I see other systems doing the same, so we would have an additional validation and confirmation layer allowing us to use the LN for atomic swapping. But it'll be different.

CG: When will Komodo's BarterDEX be live?

KS: Our decentralized exchange is live, publicly accessible, and already online. However, BarterDEX just entered the alpha testing stage two to three weeks ago and we're preparing for beta testing. We will make a public pre-release soon, however this is still a backend software, there is no graphical UI available right now.

We are planning to release a mobile solution - a smartphone trading application utilizing atomic swaps - later this year. A third-generation decentralized exchange.

CG: What's the Komodo token's role in all of this?

KS: We haven't really created Komodo as some sort of gas or fueling token for a decentralized exchange or any other technology. Our tech is 100% open and Komodo is the flagship token of the platform itself. The coin utilizes all the technologies we've built, and Komodo is more or less a "mothership," in the sense that it's the big spaceship where everything else - the other small projects - are created.

Komodo is like this big base foundation that we've laid for all the new tokens we see. We have dozens of blockchains being created with Komodo, that's its role. It's the glue that sticks dozens of projects, developers, and communities together and connects them while providing them a compatibility layer.

CG: Komodo hit a near $12 all-time high during the crypto market's peak, and now it's under $1, are you worried about its price performance, or the impact this may have on people's perspective into the market?

KS: To be honest I have no issue with the current market condition. While people say this was a really bad bear market, I think its normal as all coins are kind of pegged to bitcoin and if bitcoin goes down they all do.

At the end of the day 2018, the year everyone calls the worst crypto year, was the best one for me and every developer I know. We never had so much technology get created, we never had so many contracts and deals be made in the blockchain space. Although prices are down and Komodo along with it, the price to me is completely irrelevant. For me personally, it's irrelevant and the market should never be linked to the technology layer, they're two different things.

CG: Is there anything else you'd like to share with our audience?

KS: Yes, take a look at Komodo. It is a very promising technology, a young platform, and we've never really looked at the rest of the ecosystem as competition. If someone's following the media, we have security collaborations and vulnerability disclosure agreements.

Our big, big vision was to connect blockchain and provide this compatibility layer - and we've done it. We're open for other blockchains, users and developers to join.

Brazil Is for Blockchain but Against Crypto

Brazil, or the Federative Republic of Brazil, is a Portuguese-speaking state in South America with more than 200 million inhabitants. It is in fifth place among all countries of the world in terms of area and sixth in terms of population.

The Brazilian economy ranks ninth in the world in terms of nominal GDP and seventh in purchasing power parity. The country is a member of the UN, G20, WTO, Mercosur and the Union of South American Nations, and is also one of the BRICS countries.

Despite the active development of IT in the country and massive investments in this industry, large investors and financial institutions have preferred to stay out of cryptocurrencies. Brazil has tightened crypto control: investment funds are now banned from buying cryptocurrencies, and banks have demonstrated unfriendly attitudes by blocking the accounts of cryptocurrency companies and crypto owners.

Nevertheless, Brazil is actively integrating blockchain technology into its infrastructure and economy and even launching its own instant payment system. More on that in the article written by Solomon Brown, Head of PR for Freewallet, a cryptocurrency wallet developer.

Cryptocurrency Regulation in Brazil

Interest in the crypto industry is growing in Brazil, and regulation is slowly catching up. The main managerial authority that currently deals with crypto companies is CADE - Council for Economic Protection of Brazil. Regulators have still not taken decisive action. They first showed their willingness to do so in November 2018, submitting for consideration a bill on the taxation of crypto assets.

On May 31, 2019, the chairman of the Brazilian Chamber of Deputies ordered the creation of a commission to consider cryptocurrency regulation in the country. The commission is tasked with overseeing the digital asset industry. Also, the Brazilian Federal Revenue Office (RFB) has issued new rules requiring cryptocurrency exchanges to inform the regulator of user transactions in order to detect tax fraud, local news outlet Livecoins reported.

The guideline states that cryptocurrency trading platforms in Brazil have to inform the agency about the movement of user funds in cryptocurrencies and comply with the requirements of standard 1.888 / 2019, published last May, “whenever the monthly volume of operations exceeds 30,000.00 Brazilian reals ($5.140).” In addition to the transaction volume, operators must also provide additional data including the citizenship of the owner of the digital currency, his place of residence, registration number and a description of the crypto assets used in the transaction.

At the moment, there are no other specific laws regarding holders: those who store crypto without transferring their assets to fiat don’t have to pay income tax. Some investors have to report to the tax service — there is a provision requiring you to pay a 15% income tax on earnings of more than 35,000 reals per month, which is approximately $6,000.

Meanwhile, the four largest financial agencies in Brazil have teamed up to create a regulatory sandbox and develop regulation for new technologies, including blockchain. The Ministry of Finance, the Central Bank, the Securities Commission and the Superintendent for Private Insurance of Brazil announced their intention to put together a set of rules for fintech and cryptocurrency businesses.

Regulators said the new rules will affect Brazil's securities, finance and capital markets. In addition, institutions will create a normative sandbox to facilitate new developments in technology.

A new regulatory initiative came soon after the announcement of plans to establish a Cryptocurrency Regulatory Commission in Brazil. Although new regulatory efforts are defining the boundaries of using cryptocurrency and blockchain technologies in business, many cryptocurrency sellers are still not classified in the financial market.

The Minister of Finance has hailed the benefits that DLT technology has brought to Brazil's financial markets, also mentioning cryptocurrencies and ICOs in the field of finance. Brazil currently has the largest number of cryptocurrency users in Latin America and ranks fifth in the world in this respect. According to experts, at the end of 2019, 8% of the Brazilian population owned some form of crypto asset. But with all that red tape, a basic question arises: How do locals buy cryptocurrencies?

Cryptocurrencies in Brazil: Where to Buy and How to Spend

Local Bitcoin Exchanges

Despite the government’s bearishness, Brazilian cryptocurrency exchanges and exchangers still exist and are operating, but not actively enough, compared to the countries that are more friendly to the crypto industry. Here is a summary of the volume data of Bitcoin buy and sell transactions collected from 40 local exchanges, such as BitBlue and Braziliex.

According to Cointrader Monitor, a local website monitoring cryptocurrency quotations in Brazilian brokerages, exchanges reported having handled 395,209.48 Bitcoins from January 1, 2019 to March 31, 2020. The highest volume exchange was demonstrated by MercadoBitcoin with 120.889.34 Bitcoins traded, corresponding to 30.58% of the national market.

The day that registered the biggest Bitcoin movement in the period was June 26, 2019, with 5,070.38 BTC. And the day with the least movement was January 1, 2020 with 64.90 BTC. Analysts suggested that the downtrend might be a consequence of cryptocurrency companies having lost credibility due to litigation with their clients.

Talking about the BTC trading volume, it is interesting to note that the 2020 numbers are encouraging, compared to the figures from the first quarter of 2019.

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Source: CointraderMonitor

From January to March 2019-2020, the national Bitcoin market saw a 32.64% increase. Thus, if the trend continues, we can expect a volume of more than 480,000 Bitcoins traded in Brazil in 2020.

These figures prove a considerable number of Brazilians are sticking to local crypto services, exchanges and wallets. Nevertheless, the country is in Freewallet’s top 20 list by number of users, which makes us extremely proud.

What to Buy for BTC

In the Brazilian city of Fortaleza, citizens will be allowed to pay for public transport with cryptocurrency, according to Cryptoglobe, which cited local media. The Ceart State Autonomous Carrier Cooperative (COOTRAPS) announced that a new function for buying tickets via QR codes will appear as part of a special application. Currently, debit and credit cards are the supported means of payment.

COOTRAPS is also considering adding cryptocurrencies other than Bitcoin. City authorities want to increase the efficiency of the payment system, reduce its cost and attract more people who will use this service. This is a way to reduce bureaucracy and make the system easier for users with the help of crypto.

In December 2018, Oásis Supermercados began accepting cryptocurrencies as a payment method. Now, shoppers in Rio de Janeiro can pay for purchases with Bitcoins, Bitcoin Cash and Litecoin. For this, the supermarket chain is working with CoinWISE. In this arrangement, the withdrawal of cryptocurrencies to fiat occurs every three days.

In Brazil, more and more local companies are beginning to support crypto. Clients of the Technisa construction company can get a 5% discount when paying with Bitcoins. Bitcoin Cash and Litecoin are accepted by transport companies Brasil Sul and Viação Garcia and metro operator Metrô Brasília.

In 2017, Dash announced a partnership with the Brazilian platform CoinBR. After that, the altcoin began to be accepted in 13,000 stores. Earlier Dash announced a collaboration with the Uphold platform.

According to a statement by Dash CEO Ryan Taylor, this will allow 94 percent of the population to use tokens in everyday life. Simultaneously with these events, the digital currency rate has more than doubled, since November 2017, when the coin was worth $300.

Analysts even believed at one point that, due to its widespread distribution in Brazil, the price of the altcoin would rise to $1,000, which wasn’t that far-fetched back when the price was around $840.

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Source: newsbtc

But, as we all know, nothing lasts forever, and Dash is currently trading around $74, according to CryptoCompare.

Brazil: Blockchain for Good

Unlike crypto, which hasn’t been warmly welcomed, blockchain is employed in many Brazilian social institutions.

In early September 2019, the first birth certificates were issued exclusively through blockchain technology without having to go through registration in the registry office. A new type of registration project was developed by technology company Growth Tech in partnership with IBM. Registration is done through Growth Tech’s Notary Ledgers platform, which provides virtual notarial services.

The Brazilian Ministry of Education has proposed the creation of a blockchain platform for the issuance of digital certificates of education among non-state universities in order to combat the falsification of diplomas. Brazil Education Minister Abraham Weintraub said the government is considering this opportunity. The resources for financing the development of the platform will come from private educational institutions themselves, as they will be solely responsible for issuing diplomas.

In addition, to implement this measure, the ministry will require universities to create independent departments responsible for managing the blockchain-based platform. Local media have also reported that at least 14 private universities have already shown interest in the government’s proposal. Gilberto Garcia, the former president of the National Board of Education, said the initiative also includes all educational institutions in the system, which will support the concept of transparency that the blockchain can offer.

PIX: The Prospects of Cryptocurrency in Brazil

Brazilian cryptosphere has had a bumpy road due to the slow development of crypto regulation in the country. For instance, recently the XDEX Brazilian cryptocurrency exchange, owned by the largest brokerage company in Latin America, XP Investimentos, announced its closure. And it’s not the only company that has had to make this difficult decision due to disappointing market forecasts. A lot of cryptocurrency companies have had  to continue fighting banks in order to be provided with financial services. Just recently the Mercado Bitcoin exchange won its court case over a bank closing its bank account this March.

Nevertheless, the government is eager to implement blockchain decisions to improve the lives of its citizens. For instance, this February, the Central Bank of Brazil launched the PIX instant payment system which uses QR-codes and doesn’t require personal data. This initiative is a tool to fight against alternative digital payment means, including cryptocurrencies.

The system, which involves all state banks, will allow for almost instant payments using mobile applications, Internet banking and ATMs 24/7. Hopefully, this measure will add to the blockchain adoption that’s happening right now in Brazil. And, who knows, maybe after PIX proves the benefits of anonymity and cashless transfers, cryptocurrencies will also get regulated and be welcomed by the state.

Featured image by sergio souza on Unsplash


Solomon Brown, Head of PR at Freewallet. Drawn to the blockchain space by a belief in its ability to restructure global finance and passionate about telling stories, Solomon cut his teeth in blockchain startup promotion before joining Freewallet's Team in 2018. LinkedIn