Cryptocurrency marketplace Enclave Markets is now getting ready to enable its whitelisted users to trade blocks of digital assets privately, mirroring dark pool trading.
Enclave Gross, which is currently in beta, enables crypto traders to make necessary block trades off-chain. After the traders transfer their assets off-chain, the platform’s technology matches traders along with interested counterparties without displaying their wallet addresses.
Take note that every Enclave Cross trade is performed at the market price. Conducting big orders on current trading platforms can result in market impact, citing Enclave CEO David Wells.
A Hybrid Decentralized and Centralized Model
The product was inspired by dark pools that have long been offered in standard markets. In case you didn’t know yet, crypto dark pools are new, either, with Kraulen launching a selection of dark pools way back in 2015.
SFOX also launched a crypto dark pool in 2020, and a set of crypto prime brokerages also provide similar services. However, Wells explained that no current competitors provide as much anonymity.
He said that in other centralized dark pools, users should trust the exchange operator to be a great actor. The platform’s model is decentralized and trustless, using novel technology to guarantee security, privacy, and fair-trading practices.
Take note that centralized models can experience informational leakage, discouraging their privacy perks, but Enclave hopes to deal with that through an adjudicator approval process, which is similar to a smart contract.
Credit Suisse and Barclays paid about $150 million in penalties in 2016 after being charged with numerous dark pool defilements.
On top of that, the institutions utilizing Enclave Cross should pass know-your-customer (KYC) requirements. The cryptocurrency company also performs anti-money laundering (AML) monitoring and sanctions screening.
Wells explained that systematic trading companies, hedge funds, and asset managers are among those needing that type of product. If one looks at equities, such as sixty percent of the volume is traded by institutions and not retail. He also believes that it’s the direction that cryptocurrency is moving in general.
What’s more, prime brokers and trading companies, such as Blizzard Fund, FBG Capital, Scrypt, Fir Tree Partners, Republic Crypto, LedgerPrime, and Hidden Road Partners, have started testing the service. Enclave Cross presently supports the trading of USD Coin (USDC), bitcoin (BTC), ether (ETH), and avalanche (AVAX).
The firm, which was incubated by Avalanche creator Ava Labs, aims to include more assets and institutions in the upcoming months.
Wells entered the cryptocurrency space way back in 2017 when he started working for blockchain infrastructure firm Paxos. Later on, he worked as a vice president of strategy and product development for about two years at Two Sigma before he became CEO of Enclave Markets in January.
Thanks to his background, Wells said that he’s already acquainted with the infrastructure needs of companies, as well as the types of trading and liquidity tools they seek out.
He also mentioned that Enclave Markets could seek to provide a spot exchange in the near future, as well as swaps and derivates.
Wells explained that he believes the real growth opportunity over the following five years is to create products that particularly fit the needs of those bigger, traditional asset managers that the big banks and the big traditional prime brokers will not be able to serve only because they are slow-moving and risk opposed.
Enclave Cross can function in different places even without a license because it’s a stablecoin-based product, while the firm is presently applying for licenses where they’re needed. The platform aims to employ technology to deal with the mentioned trading concerns.
The growth in institutional interests in cryptos has created opportunities for this type of platform. Wells also mentioned that all exchanges are assets maintained and finished off-chain, mitigating the effect of a timing mismatch between sellers and buyers.
Also, other participants in the marketplaces will just be able to observe when money is already taken from the platform.
Wells elucidated that Enclave doesn’t have access to client order flow before it displays in the order book because they’re exchange operators. What’s more, the platform still lacks internal market makers’ preferential access.
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