A New Protocol Will Enable Users To Control Their Private Keys While Trading
Arwen, a startup formerly known as Commonwealth Crypto has launched a testnet version of its namesake protocol on Monday. The new protocol aimed at enabling crypto users to maintain control of their private keys while trading on centralized exchanges.
The CEO Sharon Goldberg described the protocol as “a layer-two protocol specifically for trading,” in the Medium Post. In other words, trades will take place off-chain. As Goldberg explained:
“You put a smart contract on a blockchain where it locks up coins and once it’s locked up, you can do all sorts of transactions … without posting those transactions to the blockchain.”
Cryptographer Ethan Heilman, one of the authors of the company’s white paper states that the new protocol gives the user full custody of their coins all the time. The app developed by Arwen will act as a user portal that will generate the users’ private keys from a seed phrase. Heilman stated that “ as long as they have those words, they will be able to recover their funds.”
Goldberg adds that the technology will privy the traders to the high levels of liquidity available on centralized exchanges without placing their blind faith in the frequently-hacked platforms to safeguard their funds.
“Even if the exchange is hacked, even if the exchange is malicious the entire time and goes offline, we don’t care. What would happen is Arwen would freeze those coins and give you a time window for when you’d recover the coins.”
The Boston, Massachusetts-based Arwen further notes that the so-called decentralized exchanges have non-custodial trading options, such platforms lack the liquidity of their centralized counterparts. In addition, unlike DEXs, the protocol utilizes atomic swaps for greater security and speed.
Arwin will not be an open source initially, Goldberg says the plan is to publish the code behind its daemon at some future point. At present, Arwen supports transactions made with bitcoin, litecoin and bitcoin cash, with plans to roll out support for zcash, ethereum and ERC-20 tokens.
Crypto exchange KuCoin will be integrating a beta version of the Arwen protocol, once launched. Eric Don, the exchange’s president, and founder elaborating
“It’s totally understandable to question about the security of such operation. What if the security level of this exchange is not strong enough and gets hacked? What if the exchange takes my money and shuts down? We know some people may have such concerns.”
Don added that the exchange has conducted security audits over the protocol, and has assessed the overall plan’s feasibility. In order to integrate the protocol, KuCoin will develop new systems to support the “Request for Quote” model as the exchange currently employs a “Central Limit Order Book” model. He added that the two companies will continue to work together and continue to integrate the system.
Goldberg also notes that the integration process is only beginning. However, he expects KuCoin to launch full support on testnet by the beginning of the second quarter (around the beginning of April). Despite the touted benefits to the protocol, Don was cautious about what sort of reception the protocol might see among KuCoin’s users, concluding:
“I have to say that this is a bold move in the crypto world. We do not expect a mass adoption among our users in the short term, but we believe as blockchain technology continues to progress, the Arwen system will bring confidence to crypto investors with convenience as well as security.”
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