Lykke Changes Operational Mode
Richard Olsen, Lykke founder and CEO
Blockchain technology has been revolutionary. In every industry that has embraced it, we have seen more efficient business processes, more equitable distribution of resources, and a renewed spirit of innovation.
Along with 40% growth of Lykke user base in December, scalability challenges have arisen. As you may have heard, mining fees and transaction times have recently skyrocketed, and the whole industry is now scrambling to find solutions to make blockchains more efficient. Let’s talk numbers: since Lykke Exchange was launched in June 2016, we’ve seen Bitcoin transaction fees increase by more than 24,000%. In first three weeks of December 2017 alone, Lykke has paid more 45 BTC (around USD 740,000) in fees for offchain settlement channels.
Even with those extreme fees, Lykke is breaking even this year, but we could be channeling these funds into new features and products and delivering returns to our investors. Lykke is currently the only exchange to be semi-decentralized and to offer 0% commission to its users. Both of these are core to our philosophy, but right now our main priority is ensuring that Lykke Exchange is functional and accessible to everyone. These considerations led us to decide to switch our exchange to a centralized model.
This is a difficult choice for us, and we did not make it lightly. But we believe this temporary change will improve users’ trading experience while letting us plan our future. We understand that many of you, our investors, partners, and community members, feel as passionate about decentralization as we do. We will switch back to a semi-decentralized model as soon as an efficient and sustainable solution is in reach. We aim to deliver the efficiency and speed of a centralized architecture with the security and individual ownership of a decentralized one.
Security is a primary concern for us, and the move to a centralized exchange carries some additional risks. We will mitigate these by introducing the multisig cold storage to keep 90% of clients funds. Encrypted signatures for the hotwallet are located on a dedicated server.
In order to reduce the impact on our exchange users, we have worked to make the transition as seamless as possible. Here is what you can expect:
We will first make the transition to a centralized model for BTC. The same process will be executed for ETH in the near future.
For the BTC transition, Lykke Exchange will be under maintenance from December 22 19:00 to December 23 01:00 UTC. Once the service is restored, you will see detailed instructions in the app. We will also send them, along with further details, to you by email.
We leave to our users the freedom to choose whether they want to use their BTC funds with Lykke’s new centralized exchange model or to withdraw them to any BTC private wallet.
- In case the user agrees to use centralized Lykke Exchange model, there would be no difference in the trading process and deposit wallet address. The user can continue trading.
- All the users who choose not to use centralized Lykke Exchange model can transfer BTC from the Lykke Trading Wallet to any external BTC address. For these users, Lykke Wallet will no longer be usable for trading BTC.
We appreciate you bearing with us through these changes. Serving our community has always been our top priority, and we invite you to contact us with questions, thoughts, or concerns at [email protected]