Decentralized Accounts as a Game Changer in Customer Security

Take advantage of trading that allows you to control your funds directly while accessing the speed and liquidity inherent to centralized exchanges

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How do
dAccs work?

Decentralized accounts are built using a proprietary clearing protocol based on principles similar to those of the Lightning network. They combine centralized trading with segregated fund storage, so the exchange never has direct access to clients’ funds

Customer
50
BTC
50
BTC
Multi-sig

The client creates a channel and deposits, say, 50 BTC to it. The channel-opening transaction is settled to the blockchain, creating a multi-sig wallet storing these funds, and the initial state is as follows:

  • Xena Exchange can withdraw 0 from the channel
  • The client can withdraw 50 BTC
Customer
New state
47
BTC
3
BTC
New state

The client wants to open a position for 60 BTC and decides on the distribution of funds within the channel. For example, the state may be something like Xena Exchange — 3 BTC, client — 47 BTC. This means the balance of the client’s margin account is 3 BTC and the effective leverage for the position will be 1:20

47
BTC
3
BTC
Open position
Xena
Exchange
Open position

Now the client can open a position. The client’s counterparty risk on Xena Exchange is only 3 BTC, which will be used as collateral to open leveraged positions on Xena Exchange

Margin call request
Customer
47
BTC
3
BTC
Xena
Exchange
Margin call request
47
BTC
3
BTC

If the margin level of the client’s account approaches the stop-out level, Xena Exchange issues a margin call, and the client can send a new state of the channel, allocating more funds from the multi-sig wallet to the account on Xena Exchange

The client can transfer funds from a secure wallet to the account in less than a second

This way, dAccs significantly reduce counterparty risks while increasing market risks. But the market risks are mitigated, as the client can allocate additional funds to the exchange in less than a second to avoid liquidation

In the first stage, dAccs will be used for margin trading on Xena Exchange, and later, they may be adapted for the spot market as well

The interaction between clients and Xena Exchange occurs through the public Xena Exchange dAccs API. Xena Exchange has also developed a basic client application that allows clients to open and close channels and respond to margin calls.

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