DutchX - Communicating and Addressing Risks

If you read the materials and listen the talks, it’s been all praise for DutchX model, but in practices there have been some significant hurdles and risks users (sellers) face when transacting with DutchX exchange. If DutchX is to gain any mainstream success, these must be clearly communicated and addressed:

  1. Psychological hurdle of not knowing the exchange rate in advance and waiting 6 hours to learn it. This is in my opinion number one detractor for DutchX exchange, as traders are simply not accustomed in trading with an unknown (albeit game-theoretically likely fair) price. There is nothing we can do about the process, but we can give traders some assurances that it will go well (see below).

  2. Real risk of not having enough sell liquidity. Currently auctions only start if there is enough sell liquidity. That means users risk their funds being locked indefinitely in a unmaintained auction.

  3. Real risk of not having enough buy liquidity. That means there are not enough buyers (market makers) to cover the orders. If there is not enough buy liquidity, a large slippage may occur, sellers getting a very bad exchange rate.

Addressing all the above, it would provide great assurance to traders if we could, in user friendly way, list prices and volumes for a few past auctions compared directly to historic rates of a few reputable exchanges. In addition to that, DutchX governors should promote and list only auctions they are willing to actively maintain. Users should clearly see on the web page that the auction has been running well for some time, so they are comfortable putting their money in. Comparing past auction volume and rates to broader ecosystem will also provide a performance metric for governors to measure how well the system is performing and if there is a need to tighten sell/buy bot parameters.

Also, we should start small. Listing only the tokens we are willing to support, that have a broad and healthy ecosystem. That way trust can be build. And trust is essential. If users start trusting DutchX will get them good enough rates for small orders and possibly better rates for large orders, then everything become easier and things start flowing.