Legolas Raises the Bar for Transparency and Security in Cryptomarkets

Oct 02, 2017 at 10:07 // News
Guest Author

Legolas is the name of a popular fantasy character renowned for his courage, wisdom and archery skills. Now this is also the name of a platform that aims at bridging the gap between the idealism of decentralization credo with the real world of professional investors. The latter have requirements that can hardly be satisfied by decentralized crypto markets. Think of security, auditing and unlimited deposits.

Decentralized or Centralized? No, Hybrid

All features that many to-date exchanges are lacking. Many decentralized market aims at providing a means for users to exchange small amounts with very little identification. If this is acceptable when dealing with hobbyist traders this model cannot work when real money is involved.

In the debate about decentralized Vs centralized, the Legolas team proposes to bring together the best of two worlds. It sounds like a pragmatical choice, indeed it is and it might work.

They focus on the centralized platform to offer a premium exchange for institutional trading, but at the same time they build on top of decentralized blockchains the mechanisms for transparency and auditing of their exchange workflow. Operations are centralized, but notarized by means of a decentralized key schema built on top of public blockchains.

No front running

Let’s cherry-pick one of the Legolas features, the integrity of order books. The occasional trader might overlook how exchanges can manipulate the market by means of front running practice. Assume you are in a hurry and want to buy a coin at market price and the lowest sell is at $10k, who can guarantee that the exchange will not take extra profit here? it would be easy for the exchange to insert two fake orders, one buy at $10k to match the current lowest sell, and a new sell at $11k to raise the price market. The exchange will pocket an extra $1k at your full expense.

The Legolas solution to prevent this unfair behavior is to segment the order flow into batches and to push on the blockchain a couple of asymmetric keys for each batch: the first is a public key used by the traders to encrypt new orders, the private one is for the platform to decrypt orders from previous batch. Together with the hash notarization of each batch into the blockchain, this makes just impossible for the broker to alter the order book at its own advantage.

The crowd sale

Legolas is going to launch its ICO which is for the time being open to partners/staff only by the end of October 2017 and sometime soon will be open to all. Just as any new project that aims at collecting capitals through ICOs, the potential investor should ask and find an answer to the following questions:

Is the objective achievable in a practical and sustainable way?

What is the role of the token emitted? Is that representing shares, bonds, or it is a functional token to unlock inner functionalities?

Does the team master all the skills needed to reach the objective?

And last, but not least. How can the token buyers see their rights enforced during the course of the project?

We don’t see any major impediment to achieve the goals addressed by Legolas. The technology risk is likely to be under control. Cryptographic schemas, notarization on blockchain and a cryptocurrency exchange are not rocket science nowadays and a team of devs properly skilled in the art can get the results accomplished.

The token

Regarding the role of the token, the LGO seems to follow the pretty common pattern of token-as-fuel.  Hence, the token will be used for unlocking access to and to pay services inside the exchange. A legit concern about a new token emission is whether the token can be replaced by the native currency (ie. Ether) and which is the reason to pay fees and unlock functions with LGO instead. Usually, a valid reason is related to the different scarcity between the token and the currency. In the case of Legolas, the mass of tokens redeemed by users will be partially destroyed (25%) to enhance the scarcity and the demand of such tokens.

The team 

About skills and team reputation, the guys behind Legolas have a successful record as entrepreneurs. The CEO Montagnon co-founded a couple of ventures and among the others his was sold for more than $300M to Altice. The staff as a whole seems to bring together some of the top talents in the business of fintech.

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