Decentralized Exchange Bitsquare Aims to Fulfill the Dreams of the Cypherpunks

March 31, 2017 - Bitcoin
Decentralized Exchange Bitsquare Aims to Fulfill the Dreams of the Cypherpunks


This week chatted with Manfred Karrer, the founder of the decentralized cryptocurrency exchange Bitsquare.

The platform Bitsquare considers itself to be the first fully decentralized cryptocurrency exchange that operates with privacy-centric foundations. The Bitsquare protocol was created in 2014, offering bitcoin trading against a number of altcoins and national currencies with no third party centralization. Karrer gives our readers some insight on the platform’s recent development, its rebranding phase, and the upcoming DAO white paper.


‘Bitsquare Tries to Make Bitcoin the Success Cypherpunks Have Dreamed Of’ (BC): How has development been going with Bitsquare?

Bitsquare Aims to Fulfill the Dreams of the CypherpunksManfred Karrer (MK): We are very busy with a huge release including our new DAO model and the rebranding to “bisq.” With those big changes, we used the opportunity to add more features and improvements which we could not have added before without breaking backwards compatibility. Those features include tx fee estimation, user defined security deposit, dynamic trading fee based on amount and distance to market price, and much more. Besides that, we got support for internationalisation and 13 translators are working on translating the app into 15 languages.

We broke backwards compatibility for the first time since we launched the beta a year ago. I think the coming improvements and the DAO are worth it. But no worry, people will still be able to run the old version in parallel with the new version that will start with a separate new network. We expect that the old version will fade out soon. We also have more developers on board. One is working on APIs, a feature which was heavily requested and should help us get more market makers.

The most exciting part will be our DAO model. Stay tuned, we will release a white paper soon.

BC: Many peer-to-peer exchanges like Localbitcoins have been seeing increased volumes this year. Would you say Bitsquare volumes have increased as well?

Bitsquare Aims to Fulfill the Dreams of the Cypherpunks
Bitsquare’s Manfred Karrer.

MK: Yes, volume has increased, though not as much as at Localbitcoins. But I think in many of those markets Bitsquare is still not known and we do not have all the translations to other languages at the moment. Besides that, in emergent market countries, the requirements to install a desktop application instead of using a web-based exchange and keep the app running if you have an offer open, might be a limiting factor as well.

We did not spend much effort on promotion as well as our limited resources have been focused on development, the DAO model, and the rebranding. So the good thing is;

We see that there is still a lot of headroom and potential and we are happy that an exchange model like Localbitcoins has success in a context where most exchanges are operating like banks and will face more and more regulatory pressure.

BC: Would you say Bitsquare is more complicated to use for the average user? 

MK: I’ve heard from first-time users and bitcoiner newbies that they have been surprised how easy it was to use. That said we know there is a lot to improve on usability, but I think it’s not a big problem for the userbase we are targeting.

But sure, Bitsquare has it’s limitations compared to centralized exchanges – it is not very well suited for day-trading-style speculative activities. Bitsquare is mainly designed for those who want to get in or out of Bitcoin. For speculators, we have some solutions in mind for the future.

Those users who appreciate Bitsquare’s high level of protection of their privacy will understand that there are tradeoffs and that decentralisation comes with some costs. Same applies to Bitcoin. Beside conceptual limitations, we will try to improve what is possible. The DAO model will help us to scale up with a decentralized funding model to pay developers and contributors who implement all those improvements.

Bitsquare Aims to Fulfill the Dreams of the Cypherpunks
The Bitsquare dashboard.

BC: Besides Bitcoin what are the most traded altcoins on Bitsquare currently?

MK: Monero is the top currency on the altcoin side. But also many others, often less-known altcoins. It’s happened to me a few times that I get surprised by the high trading activity of an altcoin I was not familiar with, just to find out a few months later that this altcoin has gotten very successful. I saw that with Decred and Sia for instance. The success of an altcoin was of course not because of the trading volume in Bitsquare but I think it is not a coincidence that those who support Bitsquare, those who share similar motivations, and despite the low trading volume, take the extra effort to use and support Bitsquare. Those often have strong potential, which over time get reflected in high market capitalisations. Maybe that is an “over-interpretation” or “wishful thinking” but at least it helped me a few times to make some good investments.

BC: With the price so high do you think it’s more important these days for people to use a decentralized exchange rather than holding funds on a centralized exchange?

MK: Yes, the high-security risk of leaving your bitcoin on a centralized exchange has not changed since Mt Gox. With higher prices, the risks are higher as well. Sure the companies get more professional (hopefully) over time but so do the hackers and the “bounties” if they succeed. With all the risks and incidents, more pressure will arise for regulation. So even those who are not using these services will suffer from the negative effects produced by centralized exchanges. Unfortunately externalizing costs is a very common pattern in our society.

BC: Is there a way to tell how large your user base is?

MK: We had about 10000 downloads of the app for the last version which was online for about 40 days. The current release got 2000 in about 1 week. I think these numbers reflect our actual user base quite well. 2000 users who frequently use it and 10000 users who use it occasionally (which is not so uncommon for those who just want to buy or sell once a month and are not using Bitsquare as heavy traders).

BC: Where do you see decentralized exchanges go in the next five years?

MK: Five years might be a bit long horizon to make any prediction. The only prediction I would risk to make is that Bitcoin will still be here. So if Bitcoin survives, it will stay decentralized and censorship-resistant.

If Bitcoin loses those properties it will fail for sure, as it is inferior to competitors like Paypal or Visa without the censorship resistance.

For becoming relevant on a larger scale, the conversion to traditional currencies (fiat) is crucial. This area will become a very political one. We might end up with just banks acting as exchanges and the current path, which centralized exchanges are going down, will lead in that direction. Regulatory hurdles will become too high — so only banks will be able to fulfill that. Privacy protection will not be part of such a setup. Bitsquare is a counterpole to that.

We might end up in a similar situation as the telecoms in relation to the Internet. They are aliens to the spirit of the Internet but they control the critical infrastructure — the gateways. If we manage to get an exchange infrastructure which follows the same principles as Bitcoin we might end up in a better situation. If we do so or not is hard to predict. But it is in our hands and it is not too late yet. The decisions that are made today, and tomorrow — probably won’t be the same in five years. Bitsquare tries to help to make Bitcoin the success the cypherpunks have dreamed of.

Images via Shutterstock, and Bitsquare.