New Decentralized Crypto Exchange Plays Up Transparency After FTX Collapse

David Pan, Bloomberg News

LONDON, ENGLAND - APRIL 25: In this photo illustration of the litecoin, ripple and ethereum cryptocurrency 'altcoins' sit arranged for a photograph beside a smartphone displaying the current price chart for ethereum on April 25, 2018 in London, England. Cryptocurrency markets began to recover this month following a massive crash during the first quarter of 2018, seeing more than $550 billion wiped from the total market capitalisation. (Photo by Jack Taylor/Getty Images) , Photographer: Jack Taylor/Getty Images

(Bloomberg) -- A new decentralized crypto exchange is pledging faster speeds and greater transparency, positioning itself as an alternative to centralized entities like Binance and Coinbase that have faced increasing regulatory scrutiny.

Blockchain firm Vertex will launch the low-latency, decentralized exchange Wednesday, giving institutions immediate access to its spot and derivatives trading, before the platform is open to others in the second quarter.

Typically, decentralized exchanges have high latency, or long delays, since they process orders directly on a blockchain, whereas centralized exchanges operate the same as any stock exchange. But Vertex Co-founder Darius Tabatabai said the new platform — which will use “off chain” programming to speed transactions — “can achieve comparable performance with centralized exchanges.”

“It provides a high-speed, low-latency, high-throughput way for primarily high-frequency traders — but also users via our front end — to transact,” said Tabatabai, a former head of metals trading at both Credit Suisse and Merrill Lynch, in an interview. Vertex counts Hack VC and Dexterity Capital’s venture arm among its investors, in addition to Jane Street, Hudson River Trading, GSR, Huobi and others.

The launch comes as crypto companies have been responding to heightened scrutiny following the collapse of FTX in an attempt to assuage both investors and regulators.

Last week US senators called Binance a “hotbed” of illegal activity, saying FTX — another centralized exchange — had shown the need for “real transparency.”

The US arm of Binance said it is confident in the strength of its operations and broader compliance programs. But Vertex is betting traders might prefer the transparency decentralized exchanges, or DEXs, can offer.

Transaction data can readily be found on the blockchains powering DEXs, whereas the same information on centralized exchanges is more opaque.

Read more: Binance Explores Retreat From US Amid Crypto Crackdown

Tabatabai said DEX latency is typically anywhere between one and 30 seconds, but that Vertex should only be 10 to 13 milliseconds, which is in a similar range to centralized exchanges.

The Vertex Protocol will be able to save time and cut costs by processing orders “off chain” with a matching system based on Rust — a common programming language for high-frequency trading. However, like other DEXs, Vertex is subject to scalability issues on blockchain and may not be able to process as much volume as centralized exchanges. Eventually, the firm plans to decentralize the order matching process as well.