On May 13, Bitifinex announced that Koine would be providing the exchange with a series of services helping professional traders to mitigate counterparty and settlement risks associated with cryptocurrency trades.
Bitfinex claims the new suite of services will help to encourage institutional participation in crypto markets.
Instead of following the established procedures for either “hot” or “cold” crypto-asset storage, its solution uses three separated pieces of technology, dubbed as “Digital Airlocks” as they function similarly to physical airlocks.
Phil Mochan, founder and head of strategy and corporate development at Koine further added:
“Digital assets enter an outer airlock which might conventionally be called a hot wallet but we refer to as a transit account, as the funds are only held there momentarily before moving to the second airlock, when they are dematerialized onto a separate digital ledger and then transferred into a third airlock which is the vault for assets at rest.”
External airlock is still vulnerable to attack, just as a conventional hot wallet would, the difference lies in the fact that “the median balance held there is nil, and we are insured for when it isn’t.”
The whole process apparently occurs within a “sub-millisecond time frame” and relies primarily on hardware, rather than software.
Moreover, Koine’s technology is designed to be almost wholly automated, without relying on human intervention, and can purportedly handle over 200,000 transactions per second.
Traditional markets like those for equities and bonds often dematerialize assets yet they continue to use a multi-tiered trade model that demands intensive work on reconciliations.
By contrast, Koine’s delivery-versus-payment (DvP) solution uses a distributed ledger as a single “source of truth,” likened to the model used by conventional central securities depository entities but without their multi-level custody structures.
Koine’s service ensures continuous legal ownership of all crypto assets and (digitalized) fiat currency by custodying all assets involved in trades within a segregated ownership model.
Phil Mochan further added:
“When a client wants to trade, then Koine locks the collateral of each side of the trade […] before trade execution occurs. This collateral locking is in a sub-millisecond time frame. Post-trade, upon receipt of the settlement instruction from the exchange, Koine conducts a DvP in sub-millisecond time frame.”
Koine and Bitfinex are also building an integration that would “enable Koine customers who are also Bitfinex customers to obtain a line of credit on Bitfinex using the tokens held with Koine.”