Trade.io Aims to Solve the Problems Plaguing Online Forex Brokers
If you’re looking to trade online forex, the first question is determining which brokers are reliable and which are total scams. The annals of Web 2.0 are filled with an ungodly number of forex scams, shady businesses and multi-level marketers. This has spawned an entire community of vigilantes looking to keep pace with the latest forex scam hitting the market.
Although reputable brokers have secured a mile-wide lead on the competition, the retail forex world still has a long way to go to clean up its image. Exuberant fees and a lack of transparency are just some of the issues that currently plague the industry.
It is against this backdrop that Trade.io launched its blockchain-based trading platform.
The company recently launched its pre-ICO with great fanfare, attracting nearly $9 million in funding with time to spare. According to the company’s whitepaper, the platform offers cryptocurrency trading as well as broad access to forex and contracts for difference (CFDs) spanning precious metals, oil, commodities, indices and equities.
Trade.io will use blockchain technology to launch a peer-to-peer trading platform that also functions as a launchpad to other token raises. Hacked has also learned from the team at that it will sponsor an academic incubator to further advance the blockchain space. Clearly, this is about more than just trading.
But on the subject of trading, the Trade.io team identified three major problems their platform was trying to solve.
Problem 1: Dealing desks
When it comes to forex trading, a dealing desk allows brokers to offset trades issued by their clients. In other words, they can give their client real market conditions on MT4, but don’t actually fulfill the trade. In the event that the trader earns profit, the broker pays out of pocket. From the broker’s perspective, this is where solid risk management skills are needed.
By leveraging blockchain and peer-to-peer technology, all brokerage transactions will appear on the public ledger. This effectively makes it impossible for brokers to trade against the client.
To be fair, dealing desks aren’t inherently bad, provided that the broker is liquid and in good standing. It’s also never a good idea to claim you do not operate a dealing desk when you do in fact work one. (Let’s just say this is more common than you think.)
Problem 2: Lack of transparency
One of the most powerful aspects of the blockchain is transparency, and this cuts across many lines. Online brokerages have been known to nickel and dime their customers via inefficiencies and exorbitant fees. Trade.io says its platform will reduce, and in some cases, eliminate high fees associated with the financial markets. We are not sure if this also applies to spreads, but we may soon find out.
Problem 3: Lack of innovation
Although forex brokers have been known to move swiftly on technology, they all tend to follow the same standard template. This extends beyond the assets covered to include the trading infrastructure (i.e. MT4/MT5) governing their platform. According to Trade.io, these brokers have been especially slow at integrating new blockchain solutions. This, in fact, is currently impacting much of the financial industry.
The people at Trade.io are attempting to incentivize participation through the public ledger. This appears to be more of a holistic strategy than any one particular selling point. According to the whitepaper:
“Blockchain technology changes all that for the first time due to its decentralized, incorruptible nature. Control isn’t handed over to a single entity, organisation or government, but rather is shared among all of its network users, thus transparency may be achieved at last.”
It remains to be seen whether Trade.io or platforms like it will be able to solve the myriad of challenges facing online brokers. The blockchain certainly isn’t the only new paradigm shift impacting the forex world. However, there’s little to suggest that brokers cannot integrate it to their benefit.
Social trading is another paradigm shift that the brokerage community has embraced with open arms. The results have been quite positive as more platforms enable collaboration among traders, analysts and other market participants. Blockchain might prove a little more complex, but resilience isn’t something that the best brokers have necessarily lacked.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.