Nash, the True DeFi with Non-Custodial BTC Trading

Nash, the True DeFi with Non-Custodial BTC Trading 1024 500 Crypto Rand Group
nash

This study explores the blockchain-based fintech company Nash, its various products, its role in the growth of blockchain industry and its future plans.


Nash is a blockchain-based fintech company that has emerged as one of the leaders in the digital finance space. Previously known as the Neon Exchange (NEX), Nash’s core technologies are a multi-chain second-layer state channel solution and decentralized API keys powered by secure multi-party computation (MPC). These technologies form the basis of a cross-chain non-custodial exchange that uses an innovative off-chain matching engine. The exchange can rival the speed and functionality of centralized exchanges without taking custody of user assets.


Nash also leverages its technology to provide an all-purpose non-custodial cryptocurrency platform, with other services including MPC-secured user wallets, a payments solution (Nash Pay), a fiat ramp (Nash Cash), and an upcoming interest-generating product for holders (Nash Savings). These services are available on both desktop and mobile.


Nash was founded in 2017 by five open-source blockchain developers: Fabio Canesin, Fabian Wahle, Ethan Fast, Thomas Saunders, and Luciano Engel. It is registered in Vaduz, Liechtenstein. The Nash founders had previously worked together in the “City of Zion” project, developing core infrastructure for the NEO blockchain like Neon Wallet, the NEOSCAN explorer and neo-python. The company raised over $10 million from leading venture capital firms and over $20 million in a public security token offering of the revenue-sharing Nash Exchange token (NEX). Although the founders have a background in NEO and NEX is a NEP-5 token, Nash itself is blockchain agnostic and is focused on multi/cross-chain solutions.


Nash states that its mission is to bring decentralized finance (DeFi) to everyone around the world and greater transparency to the financial sector through decentralization. For this reason, the company has a strong focus on legal compliance and user experience, besides providing solutions to increase blockchain compatibility and usability.


This study contains the following sections:

  • The Nash Exchange: Core Technologies
  • The NEX Token
  • Other Nash Services (Mobile App, Nash Pay, Nash Cash, Nash Savings)
  • What’s Next?
  • Bottom Line

1. The Nash Exchange: Core Technologies

Nash employs unique technology. It is currently the only exchange in the space to provide certain key features:

  • Nash is the only non-custodial exchange that can offer high-performance orderbook-based markets for Bitcoin pairs.
  • Nash is the only non-custodial exchange with decentralized API keys, allowing algorithmic traders to use an API with a withdrawal address whitelist.
  • Nash provides <20ms order placement and cancelation speeds.
  • Nash provides a non-custodial wallet for all key assets (BTC, ERC-20, NEP-5) in one place. An imminent upgrade will apply Nash’s decentralized API technology to user wallets, allowing holders to set withdrawal and transaction limits.
  • Nash’s own fiat ramp (Nash Cash) allows traders to invest in coins to trade and cash out directly from state channels, thus avoiding blockchain transfer fees.


The core technologies that enable these features are state channels for fast, non-custodial cross-chain trading and secure multi-party computation (MPC) for decentralized API keys with whitelisting.


In combination, these technologies provide a security profile that has not been seen before in the trading industry. Funds are secure even if both Nash and a trader’s servers are compromised.


Non-custodial trading


Nash has constructed a multi-chain second-layer solution. Traders place funds in state channels, which interact with an off-chain matching engine. The matching engine manages these state channels across different blockchains. As users make trades, it updates their balances for each blockchain, which are periodically written to the chain itself.


This system overcomes the speed bottleneck around settlement faced by other decentralized exchanges. It also enables genuine non-custodial trading across different blockchains because Nash does not have to resort to wrapped tokens. Wrapped tokens are, in effect, a form of custody, because a user trading wrapped Bitcoin has left their real Bitcoin with a custodian and is trading a derivative. On Nash, they trade real Bitcoin within a system similar to the Lightning Network.


The state channel system is secure and non-custodial. All interactions (e.g. order placement) must be signed with the user’s cryptographic signature, so funds resting in the channels are always under user control. It is also possible to withdraw manually from these channels at any time by sending an appropriate request to the Nash smart contracts. Nash promises to release a simple offline tool making this functionality more accessible to users who might require it.


Decentralized API keys


Blockchain transactions must be authorized with a signature. On traditional exchanges, a signature is generated directly with a user’s private key. By contrast, Nash’s API uses MPC to split the generation of the signature between two parties: Nash and the user. This means that neither party acting alone can sign a transaction. As a result, Nash can enforce security policies, e.g. refusing to sign a transaction to an address not on a whitelist or refusing to sign a transaction above a certain limit. These policies are set by the user and enforced by Nash.


Security policies like this are a norm on centralized exchanges, but come with the price of a custodial solution. Other decentralized exchanges require a user to sign all transactions with their private key directly. This places all these funds at risk and does not allow for multiple traders to have their own API keys.


By generating signatures using MPC, Nash is able to offer the same functionality of API keys on a centralized exchange but with superior security to both centralized and decentralized exchanges.
Nash is currently expanding its MPC solution to all areas of the platform, further protecting user wallets and improving trading security even for users who do not interact with Nash using the API.

Fast, liquid orderbooks


Much liquidity is provided by market makers and algorithmic traders who need to place and cancel orders quickly around the current market spread. Market makers are also highly sensitive to exposing their assets to risk. As a result, they are not attracted to decentralized exchanges, which are too slow to support high-frequency trading and do not offer secure APIs.


Some decentralized solutions (e.g. Uniswap) try to provide liquidity from a pool at the expense of using orderbooks (instead, a price oracle determines a spot price for all trades). This makes it impossible for traders to place orders above and below market price, the backbone of trading activity.


By contrast, Nash’s core technology allows it to overcome the limitations of other decentralized exchanges and provide fast, liquid orderbook-based markets. The company has partnerships with various funds and market makers and recently launched a paid market-making program. This ensures liquidity on all major pairs, like BTC/USDC.


Nash leads the industry in order placement and cancelation speed, with a <20ms latency.

Non-custodial wallets, all in one place


In addition to its exchange, Nash offers simple, non-custodial funds management tools, generating wallets for the Bitcoin, Ethereum and NEO blockchains. New blockchains will be added in the near future, with the next set to be Elrond (ERD). This allows users to manage a series of wallets that only they control within the same platform they use for trading.


User private keys are not stored by Nash. Instead, all transactions are signed client-side in the user’s browser. Nash is currently extending the MPC functionality used for its API keys to standard user wallets. This will allow the entire platform to be protected by address whitelists and withdrawal limits. In effect, this will offer user wallets with similar security to hardware devices but at absolutely no cost.

Integration with Nash Cash: Invest/cash out without fees


Nash’s own fiat ramp solution, Nash Cash (see below), will initially provide the European region with 0% transaction fee purchases and sales.


Cryptocurrency purchases with Nash Cash are credited directly to a user’s trading channel balance and so can be used immediately on the exchange. As a result, there is no requirement to make a blockchain transfer into the state channel system. Similarly, users can sell cryptocurrency to Nash directly from the trading state channels.


Traders can take advantage of Nash Cash to invest additional fiat and begin trading immediately, or cash out gains, without having to pay any blockchain transfer fees at all.


Zero fees for makers


Nash does not charge fees from market makers. When placing a limit order, users can check the box “Post only” so as to place an order only as a maker. Taker fees are also relatively low, ranging from 0.03% to 0.25%. Higher volume traders qualify for lower fees.

No KYC for low-volume traders


Nash does not ask for a Know Your Customer (KYC) check below $1k trading volume per day. However, to combat fraud, it requires a limit on trading activity for those accounts that have not undergone identity verification. To raise the trading limit, a KYC check is required. From Tier 1 to Tier 3, KYC verification is mandatory. The verification process for Tier 1 can be completed in under five minutes using the Nash mobile app (see below). KYC data is not held by Nash but securely stored by the respected third-party provider Jumio.


Simple and intuitive UI


Nash has a simple and intuitive interface that is easy to understand for both beginners and advanced users.

nash

2. The NEX Token


Nash issued the Nash Exchange token (NEX) in a public offering in September 2018, raising funds for the company. Nash believes that all exchange tokens (e.g. those offering revenue shares) are in practice security tokens. For this reason, the company registered the token with the Financial Market Authority (FMA) of Liechtenstein as the first-ever approved security token in Europe.


By registering NEX as a security, Nash is legally able to pay token holders a share of company revenue as a dividend. The token can also be listed upon conventional European securities exchanges. At the same time, the token’s official status protects investors against market manipulation, fraud, and insider trading. Crucially, unlike investors in unregistered exchange tokens, NEX investors do not need to worry about the consequences of regulations eventually being enforced. NEX is already compliant.


Simple tokenomics


NEX has simple tokenomics following a dividend discount model (DDM). The higher the trading volume on the Nash Exchange, the higher dividends paid to NEX holders will be. As a result, the price of NEX should increase as volume on the Nash Exchange increases.


The Nash Pay service (see below) will also contribute volume to the Nash Exchange in the form of currency conversions.


NEX staking in detail


NEX token holders can choose to lock (“stake”) their tokens for 1 to 24 months in exchange for a proportionate share of trading fees generated by the Nash Exchange. The dividends received depend on two factors: (i) the number of tokens locked as a proportion of the total supply; (ii) the period for which they are locked. Locking for 1 month will offer a 25% proportionate share of exchange fees, which increases up to 75% for a 24-month stake.

Example
A user has 1000 NEX, and monthly volume of trading on Nash was $5 billion. That volume generated fees worth $8 million. Assuming the user has staked NEX at the 24-month staking rate of 75%, they are eligible for dividends worth:


$8,000,000 [fees] x 1,000 [user tokens] / 50,000,000 [total supply] x 0.75 [staking rate] = $120


If we would take that example for the whole 12 months, that would result in a yearly dividend yield of 1440$ per 1000 NEX.


Looking at the calculation above, what seems very attractive is the fair value for 1 NEX based on Discounted Dividend Models at 6% yield:


($1440/1000 NEX)/0.06 = $24 per NEX


A fee is generated for all assets traded by Nash Exchange, so that users will receive dividends in each of these traded assets, in the same proportion as to the markets the fees were made. Fee is also generated for every transaction that goes through the matching engine of Nash Exchange, like NashPay and NashCash.


When NEX tokens are locked for staking, the user cannot remove staked NEX token from the smart contract until the contract length is completed. Dividends are paid out every 24 hours.


ICO/STO, distribution and price history


The NEX security token offering (STO) was conducted on the basis of a fair lottery selection and raised $20 million. In addition, over $10 million were raised from various venture capital firms.


STO details

  • Max supply: 50 million
  • STO sale amount: 25 million


The sale was conducted in two rounds, with the objective of allowing as many people as possible to invest in the token and to avoid transfer races.


Round 1: Everyone selected for Round 1 could contribute a maximum of $1000 and a minimum of 1 NEO.


Round 2: If all NEX tokens could not be sold in Round 1, those selected for Round 2 could contribute up to a maximum of $9000 and a minimum of 1 NEO.


Price for both rounds: 1 NEX= $1.00

Distribution of all 50,000,000 tokens

  • E.S.O.P = 1%
  • Company Fund = 4%
  • Partnerships = 10%
  • NEO council = 15%
  • Founders = 20%
  • Public ICO = 50%


Founders’ tokens were locked in a smart contract with slow release over two years to give confidence to investors. As founders’ tokens have become unlocked, they have proceeded to stake them and receive dividends.


Price history since launch

  • 2018 top price was $2.36
  • 2019 top price was $3.13
  • 2020 top price is $1.03

3. Other Nash Services (Mobile App, Nash Pay, Nash Cash, Nash Savings)


Nash’s core technologies enable its high-performance non-custodial exchange. However, the company is also leveraging these technologies to provide other non-custodial products that build a complete digital financial ecosystem.


The company’s goal is to offer all key digital asset services (pay, trade, invest) within a single, easily accessible and non-custodial platform.


Here is a brief overview of Nash’s other products.


Nash mobile app


All of Nash’s services are available through its web client. The company aims to offer a feature-complete mobile app, allowing users to make full use of the platform any time, anywhere. At present, the mobile app supports the following features:

  • Simplified trading interface
  • Non-custodial wallets for BTC, NEO, ETH
  • Nash Cash integration (fiat ramp)
  • Simple KYC procedure (scan documents and get verified in <5 mins)
  • WalletConnect integration with Ethereum dapps


The following features, expected in Q3 2020, will complete the mobile version of the platform:

  • Advanced trading interface
  • NEX staking
  • Full MPC support for extra security


Nash Pay


Nash is pioneering a payments solution to meet the needs of merchants who wish to accept cryptocurrency payments as quickly and safely as possible. Nash Pay is based on two principles:

  • Merchants do not need to perform any blockchain integrations themselves. They can begin accepting Bitcoin as a payment medium and Nash will convert the asset and pay them out in a national currency of choice (at launch: EUR, GBP and USD).
  • Merchants do not need to worry about volatility and risk. They specify a price in their national currency of choice and Nash will transfer them this exact amount, with no transaction fees. Nash handles all risk for merchants.


Since Nash Pay uses the Nash Exchange to carry out currency conversions, it will contribute to volume and generate dividends for NEX token holders.


Nash Cash


Nash has developed its own fiat ramp so that users do not have to look to other platforms for investing in cryptocurrency or cashing out their gains.


Nash Cash services the majority of the European region and supports SEPA transfers as a payment method. It offers the following highly competitive features:

  • 0% transaction fee
  • 24-hour delivery of assets
  • Protections against price volatility
  • Assets delivered directly to the Nash trading channels (no blockchain transfer fee for traders)
  • Sell crypto assets to Nash directly from the trading channels (no blockchain transfer fee for traders)


Instant credit card payments are expected to be integrated in the near future.


Outside of Europe, Nash offers fiat ramp services through a number of third-party partners. These services do not use the Nash trading channels but deposit to a user’s personal wallet. Fees are dependent upon the partner.


Nash Savings


A number of general details are available about this upcoming DeFi product, which the company has announced via Twitter. Targeting cryptocurrency holders (rather than traders), Nash Savings will allow users to lock assets in smart contracts and receive a dividend. A small proportion of dividends will also be distributed to NEX token holders. Ease of use will be one important focus, giving users a simple and less risky alternative to current DeFi offerings.

4. What’s Next?


Besides Nash Savings, full MPC support and a feature-complete mobile app, Nash has a number of plans for expanding its current offering:

  • Addition of more trading pairs and blockchains to the Nash Exchange
  • Addition of more blockchains to the funds management tools
  • Integration with the Bitcoin Lightning Network
  • Leveraging state channels for instant currency transfers (not just using them for trading)

As Nash enters its growth phase, the areas and products that prove most successful will dictate the company’s future direction.

5. Bottom Line


Nash is a solid, innovative project that currently remains somewhat under the radar. The company has spent the two years since its STO building out and iterating on its initial offering before beginning promotional efforts.


Nash boasts many unique features that offer significant advantages over existing solutions:

  • Traders can enjoy a high-performance exchange with a unique non-custodial security profile
  • Investors can store their funds in a secure, convenient manner, with easy access to a fiat ramp
  • Merchants can begin accepting cryptocurrency without worrying about complex blockchain integrations or managing market risk


Technical innovations are accompanied by a strong design team, making Nash products simple and enjoy able to use.


Nash has set itself the ambitious target of 1 billion users by 2030, in line with its mission of bringing decentralized finance to everyone. If the company is able to market and scale its products appropriately, this target may not be unrealistic.


With the digital asset industry shifting towards non-custodial offerings, Nash offers unique solutions to the main pain points of blockchain technology, overcoming the major issues posed by other decentralized platforms. It is a strong candidate for the title of true DeFi leader.