Centralised Exchange Problems
How long will Coinbase take to offramp my money this time? Why hasn’t Crypto.com acknowledged the deposit of my funds - it’s already been an hour. Why have I been temporarily suspended from my account just as my meme token started mooning?
Minor irritations like this are just the start of the problem. Why do I get the feeling my long and short positions are being countertraded by the market maker? (On this one, we mention no names, but you can insert any CEX you choose to think of - most would likely be guilty). Or perhaps, if I log in tomorrow, will my funds still be there?
Maybe some tech bro spaffed it up the wall chasing political power. Or maybe the company won’t exist at all anymore, its location-unregistered ownership decamping to disappear into the night. Or perhaps they just went bankrupt.
Crypto is about custody. It’s about security. It’s about ownership. Sound money: an antidote to a society reliant on banks storing citizen’s wealth only to gamble it away chasing commission. It’s about creating decentralised systems where we no longer have to take things on trust, but can absolutely verify where our money is, stored safely on an immutable tamper-proof blockchain which no actor can meddle with.
Why Are People Attached to CEXs?
So why, then, do the majority of crypto owners, traders and institutions use centralised exchanges (CEXs) to trade? Are they just gluttons for punishment? It’s not that they don’t know any better (although some might not). Every die-hard crypto enthusiast has an exchange account, whilst 95% of all retail users use CEXs to manage and, shock horror, store their crypto, frequently at their own risk.
Well, there are many good reasons.
First, because crypto, for all its immense progress, is hard to use. At times, it’s veritably arcane. Grandma is not going to be able to use Uniswap or Osmosis or Raydium without having a panic attack. Even experienced crypto users can find their trades instantly deleterious just through simple errors like setting the wrong slippage tolerance. Try telling johnny-come-lately how to use a block explorer to find a contract address (and ensure he doesn’t get scammed in the process). UI and UX in crypto is still incredibly nascent and at times naturally obstructive to a fluid experience.
And that’s just the start of it. Tokens - as you know - exist on different chains. A retail crypto trader may enthusiastically load up USDT on his Metamask only to be dismayed and confused as to why they can’t find $BONK or $JUP on Uniswap, before falling down a (perhaps even literal) wormhole working out how to bridge their tokens to Solana, and becoming furious at the whole process eating up their initial capital through gas fees.
Decentralised trading is a brilliant innovation, but tokens are still siloed on their own chains, bridging is expensive, and undercapitalized liquidity pools are a danger to the uninitiated who have to puzzle as to why they got only got 30,000 $PEPE tokens when the simulation said they’d get 100,000. And that is, of course, if the swap even succeeds due to the machinations of the market moving too fast.
These are just the problems facing the inexperienced. For experienced traders - including institutional ones - decentralised trading is still too infantile to create sophisticated portfolios that make use of leverage, options, stop-losses, and advanced charting. Much great work is being done to bring these features to decentralised trading but the truth is nothing will beat the speed of a CEX saying ‘trust me bro’ and simply outlining your position in theory and then paying out, or taking your funds, as required.
How CEXs Offer Fluid Experiences
This is because CEXs, who deal in promissory notes, not actual tokens, have no such obstacles. They are free to whitelabel their entire UI to function like a smooth Web2 app where you trade their representative ‘tokens’ through fluid, clean - and at times gamified - UI. On a CEX, you can trade BTC for ETH. Doing that in a decentralised fashion is still - and perhaps always will be - an expensive headache.
Bitcoin and Ethereum’s architectures are just different, they don’t easily compose with one another. Same for Solana, Cosmos, and Avalanche. The interoperable future is coming - but it’s a long way off. If it wasn’t, then you’d have to question the validity of the security consensus powering them in the first place. CEXs allow for direct trading between these pairs because it’s all just ‘on paper’. It’s not real until you actually withdraw your tokens. That is what allows for the fluid, clean UI that retail users need, and experienced traders demand, to maximise their experience, their profits and - if we’re being real - their entertainment.
Maroon: Building The Better Exchange
Maroon is a pathway for both inexperienced retail traders and experienced investors to trade with all the fluidity of a CEX without sacrificing the core principles of crypto custody and ensuring that their funds are truly in their possession.
Maroon is a Hybrid CEX that adheres to every and all legislation in the jurisdictions it operates, and provides the ability for users to validate their funds on-chain at any time for peace of mind. If the worst happens to Maroon, nothing happens to you. Funds aren’t just SAFU, the funds never left the user's possession in the first place. It’s how it should be. Maroon doesn’t need to say ‘don’t be evil’, they simply can’t be.
Maroon trades users' funds by using an off-chain order matching engine that processes trades with the lightning quick throughput required to keep up with the high-frequency crypto market. The trading engine is centralised, yes, but funds only ever depart from a users multi-sig protected on-chain wallet for the briefest instant as trades execute, as invisible as to be unnoticeable. In the interests of transparency - yes. The moment the trade is made, minor custody risk is incurred - custody risks that end at the speed it takes to write this sentence. Otherwise, Maroon never has custody of users' funds. Moreover, all crypto traded is fully insured by Lloyds of London on the faint chance any issue occurs.
Maroon is focused on the UK and EU for its initial rollout come Summer 2024, but will accept users from every jurisdiction. The Hybrid CEX is redrawing the paradigm of what it means to trade crypto. It delivers the fluid UI and UX, trading options, gamified entertainment and vast asset choice users demand without needing to ever take control of the user's funds. It’s the solution that the crypto space has been yearning for since crypto existed - and it’s here, now, and, come the summer, ready for everyone to take advantage of.
The crippling custody crises that have afflicted crypto can make trading what is supposed to be an infinitely secure asset a paranoia-inducing headache. Yet users demand fluid UI, and so subject themselves to risk. Maroon is creating the alternative - a hybrid centralised exchange that offers all the features and UX a CEX offers, while never taking custody of user funds.
