Fireblocks has announced a new trading system that will reduce the risks posed by the use of centralized crypto exchanges (CEX).
Fireblocks, an Israeli company specializing in secure ways to work with digital assets, has unveiled the Off Exchange trading system. The new development allows institutional traders and asset managers to trade on centralized exchanges, minimizing counterparty risks.
The system is based on crypto wallets powered by multi-party computation (MPC) technology. The private key of such a wallet is divided into three shards. The first one is held by the owner of the assets, the second by the trading platform, and the third shard is triggered by a blockchain oracle. Two of three shards must be signed to confirm the transaction, so that neither the trader nor the exchange can unilaterally withdraw the assets.
This system enables trading on the CEX without transferring digital assets to its custodial addresses. In most cases, transactions are confirmed when the exchange and the trader sign the transaction. But when the exchange doesn’t respond for some reason within a certain amount of time, a second signature can be provided by the blockchain oracle. The oracle script is activated when a number of programmable conditions are met; for example, if the exchange is technically malfunctioning. In this situation, the trader gets the opportunity to return their assets unilaterally.
Michael Shaulov, CEO of Fireblocks, told Cointelegraph in a comment that the Off Exchange system is already being used by institutional traders QCP Capital, BlockTech, and Zerocap to trade on the Deribit exchange. In the foreseeable future, the company plans to add support for other trading platforms, including HTX, Bybit, Bitget, Gate.io, WhiteBIT, and others.
According to the developers, the Off Exchange system will help protect institutional traders in case of FTX-like incidents and other cases when client assets are blocked on the accounts of crypto platforms for various reasons.