We trust people all the time—engineers to build bridges, doctors to prescribe medicine, pilots to fly planes, and loved ones to handle life events. This trust involves relying on others to know the information we don’t and use it to make decisions in our best interest. We choose who to trust based on their reputation and the existence of motivating consequences.
Our lives as regimes of trust often work well because so much of our trust is in people we either know or know about through qualifying processes. We reasonably conclude they have the character and knowledge that will guide them into good behaviour. This trustfulness, though, can fail us when extended to large organizations like corporations, where human psychosis and incompetence hide behind organizational complexity.
Such is the case with cryptocurrency organizations like the centralized exchange FTX that recently declared bankruptcy, reportedly leaving over a million customers without access to billions of dollars of funds. This comes with other recent high‐profile failures, like Celsius, Voyager, and BlockFi, but it is not a recent problem. Irrational trust has been with us in the crypto world from the beginning. The dramatic 2014 failure of Mt Gox, which at one time handled over 70% of all cryptocurrency trading, delivered similar horror.
The problem is not with cryptocurrency. It is with misplaced trust. Unlike the best of our doctors, pilots, friends, and family, those failed organizations were not worthy. Large organizations sometimes hide mistakes and theft for their own benefit. They collude with the government. Time passes without consequence, and the corrupt grow greedier and bolder until they fail spectacularly and lives are devastated.
The good news is that cryptocurrency answers this problem because there are ways to trust cryptocurrency itself in place of human organizations. Most of us in crypto know about self‐custody being superior to holding in-exchange accounts. We are peppered with this: “Not your keys, not your coins.” Self‐custody works because cryptocurrency enables ownership just by knowing a secret, like a password, private key, or 24‐word mnemonic, and this secret‐based ownership can be easily managed with software. With self‐custody, we escape trusting human organizations to hold our money.
Self‐custody, though, does not alone allow us to escape all trust in centralized cryptocurrency exchanges like FTX. To trade one cryptocurrency for another without trusting a centralized exchange, we have to use a Decentralized Exchange (DEX). DEXes use cryptocurrency technologies to allow trading one cryptocurrency for another without trusting others to hold funds. The software makes the interface simple, while complex transactions on blockchains replace what would otherwise be trusted activities at centralized exchanges.
DEXes come in two types. The first type uses a third cryptocurrency to facilitate the exchange of two other cryptocurrencies. This category includes the use of smart contracts for exchanging smart contract tokens. The second type only uses the two cryptocurrencies being exchanged, through what are called atomic swaps. Both types allow you to avoid trusting organizations—you just trust the software and the blockchains.
In timely news, PIVX users will soon be able to exchange PIVX for Monero, Bitcoin, and other cryptocurrencies on a new atomic‐swap‐type DEX called BasicSwap. It is planned for an open beta release on December 8. BasicSwap was created by Particl developers. Particl is a privacy coin, and BasicSwap has a privacy focus. It is one of the few atomic swap DEXes, for example, that include Monero.
BasicSwap works by communicating terms with other traders using Particl’s private message‐passing method. You can either post your own swap offers, seeking other traders to join, or join other traders’ offers. After the terms are established, BasicSwap implements the swap by posting transactions for the coins on corresponding blockchains using nodes hosted on your own computer or Virtual Private Server (VPS). The swapping process usually takes just a few minutes, with Monero swaps taking longer, sometimes up to 20‐30 minutes.
In recent weeks, the author helped test the BasicSwap DEX while it was in closed beta. BasicSwap was installed both on a desktop computer and on a VPS for testing. Installations included Particl, PIVX, and Monero nodes. Trials were made exchanging PIVX for Particl, Particl for PIVX, and Monero for PIVX (using a pair of swaps, first to Particl, then to PIVX). In no case during this testing—even though the software was still in development and issues were being resolved—were funds lost in an atomic swap.
When the BasicSwap open beta is released on December 8 you will be able to download it by following the instructions on BasicSwap’s website, BasicSwapDEX.com. You will configure the installation just for the coins you want to swap, while always including Particl. You could, for example, configure it to swap Bitcoin, Particl, and PIVX if you want to use Bitcoin to buy PIVX. Full nodes will need to be run for each of the configured coins, and syncing the blockchains for these nodes may take hours or days. But once the nodes are operational, you will effectively be running your own cryptocurrency exchange in your own home or on your own server.
In all this, keep in mind that with a DEX you are still trusting the DEX software, and with its December release, BasicSwap will still be in beta. Be careful, monitor forums, try small amounts first, and work with quantities you could stand to lose. For a while, you will be playing with the sharp part of crypto’s cutting edge.
Cryptocurrency gives us ways to avoid trusting big organizations that do not deserve our trust, and we should embrace the use of self‐custody and DEXes. On December 8, PIVX users will have a new option for exchange through BasicSwap, a privacy‐focused DEX. Plan to download BasicSwap, configure it for your favourite coins, and try swapping on your own computer. And when you do, rejoice in your new security and freedom, and in the continued rise of cryptocurrency to better meet human needs.