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Case study of Lykke exchange: architecture and outlook

Richard Olsen (Lykke Corp, Zurich, Switzerland)
Stefano Battiston (Department of Banking and Finance, Zurich, Switzerland)
Guido Caldarelli (IMT Alti Studi Lucca, Lucca, Italy)
Anton Golub (Lykke Corp, Zurich, Switzerland)
Mihail Nikulin (Lykke Corp, Zurich, Switzerland)
Sergey Ivliev (Department of Economics, Perm State University, Perm, Russian Federation)

Journal of Risk Finance

ISSN: 1526-5943

Article publication date: 1 December 2018

Abstract

Purpose

This paper aims to explain the architecture and design choices of the exchange. Lykke is a FinTech company based in Zurich that has launched the global marketplace for all asset classes and instruments digitized on the blockchain. The authors discuss how the exchange will evolve over time. They explore the macroeconomic benefits of the new blockchain technology. The Lykke exchange is compatible with any type of public blockchain.

Design/methodology/approach

The authors present the architecture of an exchange for colored coins. By colored coins, they mean issuer-backed securities on the Bitcoin blockchain. Orders are collected and matched by a semi-trusted exchange. Matched orders are settled on the Bitcoin blockchain, where each successful trade between parties appears as a set atomic-colored coins swap transactions. Unfilled and expired orders are discarded. The exchange does not take possession of the traded coins, but needs to be trusted to match trades correctly.

Findings

Lykke has launched the exchange initially for the main currencies, cryptocurrencies and Lykke coin (entitlement to the shares of Lykke company). Perspective asset classes include futures and options on digital assets, crowd-funded loans for retail and private equity financing for small and medium-sized enterprises, contracts for difference, zero coupon bonds and other fixed income and natural capital bonds.

Originality/value

Lykke exchange and all its tools and services are open source; the transparency of technology is ideal for research. The paper provides a high-level overview of the exchange and concludes with a research agenda.

Keywords

Citation

Olsen, R., Battiston, S., Caldarelli, G., Golub, A., Nikulin, M. and Ivliev, S. (2018), "Case study of Lykke exchange: architecture and outlook", Journal of Risk Finance, Vol. 19 No. 1, pp. 26-38. https://doi.org/10.1108/JRF-12-2016-0168

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited