With the time, the number of dark pools (known for the anonymous transactions) have been increased in the crypto markets. As per the WSJ report, the decentralized dark pool, namely Republic Protocol is known for Ether, ERC20 tokens, and Bitcoin atomic trading. It has raised around 35,000 Ether worth $33.8 million from the cryptocurrency hedge funds in order to establish dark pool trading platform.
In the past years, the ratio of cryptocurrency trading dark pools has increased. For instance, Kraken (a renowned cryptocurrency exchanged based in San-Francisco) started providing dark pool trading to the customers at extra fees in the year 2015.
Similar to Kraken, Bitfinex also provides dark pool trading services to the customers. Witnessing the same, TradeZero (broker and dealer) along with Jered Kenna (a Bitcoin pioneer) also launched dark pool trading services in 2016.
Difference between Standard Dark Pools and Crypto Dark Pools
Dark pools major function is to enable trading in between large investors apart from the standard exchanges. The worst part of the dark pools is transactions made on the network are not reported and even cause crashes whenever disclosed.
In the ecosystem of cryptocurrency, dark pools serves as trading platform in between institutional investors that needs the search for purchaser. In return, it helps in lifting up the exchanges’ liquidity.
Cryptocurrency dark pools differentiate from equities counterparts in two ways.
1. They need transactions or cross-chain transactions in between various blockchains of cryptocurrencies. Numerous exchanges provide pairings for buying and selling of dark pool orders and enable trading in between cryptocurrencies. The whitepaper of Republic Protocol entitles that cross-chain atomic swaps will be offered by it that clearly means trading in between different cryptos on the Republic’s decentralized dark pool.
2. The dark pool orders’ execution in is different, especially in Republic Protocol. Instead of matching purchase and sold orders, the system of Republic Protocol uses an engine that makes use of MPC (Multiparty Computation) protocol. The engine divides a large order in various small orders, connected to purchasers, restored via identifying information.
This division of orders confirms anonymity and security. As per the whitepaper of Republic Protocol, the dark pool liquidity can’t be estimated reasonably by any of the pool participant.
Will Cryptocurrency Dark Pool Affect the Price of Cryptocurrencies?
About 40% of the stocks trading was kept away from the regulated cryptocurrency exchanges in the year 2016. Dark pools accounted around one-quarter of the overall 38% of trading in December 2017. However, such transactions made limited impact on the stock market movements as there are certain caps that are tracing the trades and amount, taking place in the dark pools.
In WSJ report, the 21-year young founder of Republic Protocol, Taiyang Zhang said that he expects the Republic Protocol dark pool to have cryptocurrencies trading that are worth $9 Billion on monthly basis. Besides, Bitcoin placed in over $10 billion trading volumes within 24 hours.