Fireblocks Launches “Off Exchange” Trading System to Eliminate Counterparty Risk
Fireblocks, the multi-party computation (MPC) wallet provider, has introduced a new trading system called “Off Exchange.” This system allows institutional traders to swap tokens without the need to first deposit them on the exchange. The goal is to eliminate counterparty risk on centralized exchanges and prevent collapses like the one experienced by FTX.
How Off Exchange Works
The Off Exchange system works by allowing trading firms to deposit assets into a shared MPC wallet. The private key of this wallet consists of three shards. One shard is held by the trading firm, another by the exchange, and the third is triggered by an oracle. For a transaction to be confirmed, two out of three shards must be used to sign it. This prevents unilateral asset withdrawals by either party.
If one party is unresponsive for a certain period, the third-party oracle can provide a second signature under specific conditions. For example, if the exchange is hacked and unresponsive, the trader can retrieve their principal without requiring approval from the exchange.
Institutional Adoption and Future Plans
Several institutional trading firms, including QCP Capital, BlockTech, and Zerocap, have already implemented Off Exchange for trading on Deribit. Fireblocks plans to extend support to other exchanges in the future, including HTX, Bybit, Gate.io, WhiteBIT, BIT, OneTrading, Coinhako, and Bitget. Currently, Off Exchange is exclusively available for institutions.
Preventing Counterparty Risk
Crypto exchanges have a history of counterparty risk issues resulting in substantial losses for users. Fireblocks claims that Off Exchange will address these issues by locking funds in secure MPC-based shared wallets, eliminating the dual role of exchanges as both custodians and trading venues.
Hot Take: Fireblocks Revolutionizes Institutional Trading with Off Exchange
Fireblocks’ launch of the Off Exchange trading system marks a significant step towards eliminating counterparty risk in the crypto market. By allowing institutional traders to swap tokens without depositing them on exchanges, Fireblocks aims to prevent incidents like the Mt. Gox, Quadriga, and FTX collapses. The shared MPC wallet and multi-shard private key structure provide enhanced security and prevent unilateral asset withdrawals. With institutional adoption already underway and plans for expansion to other exchanges, Fireblocks is revolutionizing institutional trading and bringing greater stability to the crypto industry.
By
By
By
By
By