Liquid Stake with compassSOL for an 7.50% APY from staking, MEV + fees

Enjoy the freedom of liquid staking in Solana Defi while delegating your stake to the high performance Solana Compass validator. Stake or unstake at any time here, or with a Jupiter swap.

Benefit from our high staking returns and over 2 years experience operating a Solana validator, and receive additional yield from priority fees + MEV tips

Earn 6.4% APY staking with Solana Compass

Help decentralize and secure the Solana network delegating your stake to us and earn an impressive 6.4% APY yield on your SOL, while supporting us to create new guides and tools. Learn more

Stake your SOL

  1. Click to connect your wallet
  2. Enter the amount you wish to stake
  3. Kick back and enjoy your returns
  4. Unstake from your wallet or our staking dashboard

Earn 6.4% APY staking with Solana Compass

Help decentralize and secure the Solana network delegating your stake to us and earn an impressive 6.4% APY yield on your SOL, while supporting us to create new guides and tools.

Learn more

Bartosz On Building A Tamper-Proof CEX - Cube Exchange

By Unlayered

Published on 2024-01-30

Discover how Cube Exchange is transforming the centralized exchange landscape with innovative MPC wallets, offering unparalleled security and user control in the wake of the FTX collapse.

The Rise of Cube Exchange

In the wake of the FTX collapse, the cryptocurrency industry has been eagerly seeking solutions to prevent similar catastrophes from occurring in the future. Enter Cube Exchange, a revolutionary centralized exchange (CEX) that aims to redefine security and user control in the crypto trading space. Founded by Bartosz, a former engineer at Solana and Wall Street veteran, Cube Exchange is leveraging cutting-edge multi-party computation (MPC) technology to create a tamper-proof trading platform that puts users first.

The FTX Catalyst

The collapse of FTX in late 2022 sent shockwaves through the cryptocurrency world, exposing the vulnerabilities of traditional centralized exchanges. Bartosz, like many others, was personally affected by the FTX debacle, losing funds in the process. This event served as a catalyst for the creation of Cube Exchange, with Bartosz and his team determined to build a platform that would prevent such incidents from recurring.

"Immediately when things were happening and that was in Portugal during breakpoint, actually didn't have access to FTX. I lost a bunch of money on it," Bartosz recalls. "So like personally, it was not happy, but I knew a lot of people that lost like many more thousands that I did. And it felt like it was just wrong."

Reinventing Centralized Exchanges

Cube Exchange is not just another run-of-the-mill trading platform. It's a complete reimagining of how centralized exchanges should operate. The key innovation lies in its use of multi-party computation (MPC) wallets, which ensure that only users have access to their funds. This approach addresses one of the most significant concerns in the crypto space: the risk of exchanges mishandling or losing user funds.

The Power of MPC Wallets

MPC technology is at the heart of Cube Exchange's security model. Unlike traditional centralized exchanges that use omnibus accounts to store user funds, Cube Exchange employs MPC wallets to create a unique address for each user's sub-account on the exchange. This approach offers several advantages:

  1. Enhanced Security: MPC wallets distribute the private key across multiple parties, eliminating single points of failure.
  2. User Control: Only the user can initiate transactions, preventing unauthorized access to funds.
  3. Transparency: All trades are settled directly on layer-one blockchains, providing a clear audit trail.

Bartosz explains the significance of this approach: "We wanted to change that by introducing this like infrastructure with the MPC concrete, like wallets that settle all the trades directly to layer ones and each user has a dedicated address for each of their sub accounts on the exchange."

The Technical Challenge of MPC Implementation

Implementing MPC technology across multiple blockchains was no small feat. Bartosz and his team faced significant technical challenges in integrating MPC wallets with Bitcoin, Ethereum, and Solana. The complexity of this task tested their technical skills and required innovative solutions to ensure seamless functionality across different blockchain ecosystems.

Centralized vs. Decentralized Elements

While Cube Exchange leverages decentralized technology for its wallet infrastructure, it maintains certain centralized elements to ensure optimal performance and regulatory compliance. The matching engine, KYC infrastructure, and website are centralized, while the upchain, MPC infrastructure, and settlement processes are decentralized.

This hybrid approach allows Cube Exchange to offer the best of both worlds: the security and transparency of decentralized systems combined with the speed and efficiency of centralized operations.

The Regulatory Landscape

Navigating the complex regulatory environment for cryptocurrency exchanges is a significant challenge. Cube Exchange has taken a cautious approach, carefully selecting the markets in which it operates based on regulatory requirements and licensing considerations.

Bartosz explains the regulatory considerations: "Each country has, like the or most of the countries have their own regulation. Sometimes it's lightweight, sometimes it's much more heavy, I think. So the first question that you look at is like, 'Hey, do we need the license in this country?' And why?"

User Experience and Interface Innovation

Cube Exchange isn't just focusing on security and regulatory compliance; it's also revolutionizing the user experience for crypto traders. The platform features a unique and intuitive interface that sets it apart from the cookie-cutter designs of many existing exchanges.

"I think it's disappointing that if you open all the like existing exchanges, like it's almost impossible to tell the difference," Bartosz notes. "And I think we could do better."

One standout feature is the introduction of "bundles," which allow users to easily trade groups of assets. This innovation has been well-received by the community and demonstrates Cube Exchange's commitment to improving the trading experience.

Building a Global Team

Creating a platform that caters to a global market requires a diverse and talented team. Cube Exchange has taken a unique approach to team building, combining a distributed workforce with a core group of co-located engineers in Chicago.

Bartosz emphasizes the importance of in-person collaboration for the engineering team: "I think it's very hard to build engineering culture remotely. I tried, you know, during COVID for a couple of years and it was super hard. So I kind of like swung the opposite way for engineering talent."

This approach allows Cube Exchange to maintain a strong engineering culture while also tapping into global talent for other aspects of the business.

The Competitive Landscape

The cryptocurrency exchange market is highly competitive, with established players like Binance and Coinbase dominating much of the trading volume. However, Cube Exchange sees an opportunity to differentiate itself through its innovative security model and user-centric approach.

Bartosz believes that the key to success lies in offering a superior product: "Right now, Coinbase has around 60, 77 million registered users that trade it on the exchange. And I think from the competition perspective, this like at top of the funnel, you have like users that are primed, educated about crypto, and then it's just around like, 'Hey, like we actually have a better product.'"

The Future of Centralized Exchanges

As the cryptocurrency industry continues to evolve, the role of centralized exchanges remains a topic of debate. Some argue that decentralized exchanges (DEXs) will eventually render CEXs obsolete, while others believe that centralized platforms will continue to play a crucial role in the ecosystem.

Bartosz takes a nuanced view, suggesting that the future may lie in hybrid models that combine the best aspects of both centralized and decentralized systems. He notes, "I think it really depends on the regulation and where it goes in different countries."

Integrating with DeFi and On-Chain Protocols

While Cube Exchange is primarily focused on building a robust centralized exchange, the team is also exploring ways to integrate with decentralized finance (DeFi) protocols and on-chain services. This could potentially allow users to access a wider range of financial products and services directly through the Cube Exchange platform.

"We definitely have on our roadmap the ability to interact with like on-chain protocols," Bartosz reveals. This forward-thinking approach positions Cube Exchange at the intersection of centralized and decentralized finance, potentially offering users the best of both worlds.

The Importance of Native Assets

One key advantage that centralized exchanges like Cube have over many decentralized alternatives is the ability to trade native assets across different blockchains. Bartosz highlights this point: "When I think of Bitcoin, even Solana, even just like three main tokens, you actually on Binance, you trade them natively. But if you wanted to trade Solana on you, you swap it would be some form of like wormhole wrapped Solana."

This ability to trade native assets is crucial for many users who prefer to hold their cryptocurrencies on their respective native blockchains rather than wrapped versions on other networks.

The Role of Fiat Integration

While Cube Exchange currently operates as a crypto-only platform, the team is exploring ways to integrate fiat currencies in the future. However, Bartosz is cautious about this approach, noting the technical and philosophical challenges of implementing MPC-like security for fiat transactions.

"Before we go there, I really want to figure out with the right partner how something similar to MPC can be built on the banking front, where Qubitself does not have customers bank accounts," he explains.

Rewarding Early Users

In the competitive world of cryptocurrency exchanges, attracting and retaining users is crucial. Cube Exchange recognizes the importance of rewarding early adopters and is exploring innovative ways to incentivize user participation.

Bartosz draws an interesting parallel to the early days of smartphones: "I had the first iPhone when it came out and I had the first Android phone when it came out. I think for Android was like G1 developer device. And, you know, I didn't get anything for it."

He believes that crypto offers a unique opportunity to reward early users and advocates, potentially through token distributions or other incentive mechanisms.

The SVM Fork and Potential for App Chains

One of the most intriguing aspects of Cube Exchange's technology stack is its fork of the Solana Virtual Machine (SVM). This approach allows Cube to leverage the high-performance capabilities of Solana while customizing the environment to suit the specific needs of a centralized exchange.

Bartosz explains the rationale behind this decision: "At the end of the day, I didn't want it to rebuild all the great work that Solana did on the validator client. And, you know, with fire dancer coming, and like other clients coming out there as well. I think it gives us a lot for free."

This approach could potentially pave the way for an ecosystem of Solana-based app chains, each tailored to specific use cases while benefiting from the robust infrastructure of the Solana network.

The Importance of Focus in Product Development

While there are many potential avenues for expansion, Bartosz emphasizes the importance of maintaining focus on building the core exchange product. He resists the temptation to branch out into ancillary products or services too quickly, recognizing the need to establish a strong foundation first.

"The main thing that they want to focus on is building the best exchange out there," Bartosz states. "And I think as soon as you start talking about like, hey, we will build, you know, this API for people to use MPC or maybe we'll build like our own wallet or like anything else, right? It's like you end up fragmenting the team and maybe losing a bit of focus."

The Role of Community Feedback

Cube Exchange places a high value on user feedback and community engagement. Bartosz encourages users to try the product and share their thoughts, noting that the team is often able to implement changes and improvements within a day or two of receiving feedback.

This commitment to rapid iteration and user-driven development sets Cube Exchange apart in an industry that can sometimes be slow to respond to user needs.

The Potential for Cross-Chain Interoperability

As the cryptocurrency ecosystem continues to evolve, the need for seamless interoperability between different blockchains becomes increasingly important. Bartosz recognizes this challenge and sees potential for Cube Exchange to play a role in facilitating cross-chain interactions.

"I think the main thing that we would need to figure out is an equivalent of like IBC really in Cosmos for all those, like, chains to communicate with each other," he notes. This forward-thinking approach positions Cube Exchange to adapt to the changing landscape of blockchain technology.

The Importance of Regulatory Compliance

While innovation is at the heart of Cube Exchange, the team also recognizes the critical importance of regulatory compliance. Bartosz and his team have taken a cautious approach to entering new markets, carefully evaluating the regulatory requirements of each jurisdiction.

This commitment to compliance is essential for building trust with users and establishing Cube Exchange as a legitimate and reliable platform in the long term.

The Role of Education in Crypto Adoption

Bartosz recognizes the important role that exchanges play in educating new users about cryptocurrency. He notes that established exchanges like Coinbase have done significant work in bringing new users into the crypto space and educating them about the technology.

Building on this foundation, Cube Exchange aims to provide a more advanced and secure platform for users who are already familiar with cryptocurrency trading.

The Future of Cube Exchange

As Cube Exchange continues to grow and evolve, Bartosz and his team remain focused on their core mission of building a secure, user-friendly, and innovative trading platform. While they are open to exploring new opportunities and integrations, they are careful not to lose sight of their primary goal.

Bartosz invites developers and entrepreneurs in the Solana ecosystem to reach out for advice and collaboration, demonstrating his commitment to fostering innovation and growth in the broader cryptocurrency community.

Conclusion

Cube Exchange represents a significant step forward in the evolution of centralized cryptocurrency exchanges. By leveraging innovative MPC technology, focusing on user security and control, and maintaining a commitment to regulatory compliance, Cube is positioning itself as a leader in the next generation of crypto trading platforms.

As the cryptocurrency industry continues to mature and evolve, platforms like Cube Exchange will play a crucial role in bridging the gap between traditional finance and the decentralized future of money. With its focus on security, user experience, and technological innovation, Cube Exchange is well-positioned to shape the future of cryptocurrency trading and contribute to the ongoing growth and development of the Solana ecosystem.

Facts + Figures

  • Cube Exchange was founded in response to the FTX collapse in late 2022
  • The platform uses multi-party computation (MPC) wallets to ensure user fund security
  • Cube Exchange settles trades directly on layer-one blockchains
  • The exchange operates in multiple countries, with regulatory considerations varying by jurisdiction
  • Cube Exchange has forked the Solana Virtual Machine (SVM) for its infrastructure
  • The platform features innovative "bundles" for easier asset trading
  • Cube's engineering team is primarily co-located in Chicago
  • The exchange does not currently support fiat currency deposits
  • Cube Exchange is exploring integration with DeFi and on-chain protocols
  • The platform aims to reward early users and advocates
  • Cube Exchange implements changes based on user feedback within 1-2 days
  • The exchange is considering cross-chain interoperability solutions
  • Coinbase has approximately 60-77 million registered users
  • Binance currently dominates the crypto exchange market with 78-80% of total trading volume
  • Cube Exchange is preparing for the Jupiter token launch

Questions Answered

What is Cube Exchange?

Cube Exchange is a centralized cryptocurrency exchange that uses innovative multi-party computation (MPC) wallet technology to enhance security and user control. Founded by Bartosz, a former Solana engineer and Wall Street veteran, Cube Exchange aims to prevent incidents like the FTX collapse by ensuring that only users have access to their funds. The platform settles trades directly on layer-one blockchains and offers a unique user interface with features like asset "bundles" for easier trading.

How does Cube Exchange's MPC wallet technology work?

Cube Exchange's MPC wallet technology distributes the private key for user accounts across multiple parties, eliminating single points of failure. When a user initiates a transaction, the signature is computed collectively without any single party holding the entire private key. This approach ensures that user funds remain secure and under the control of the account holder, preventing unauthorized access or misuse by the exchange itself. The MPC infrastructure also allows for direct settlement of trades on layer-one blockchains, providing transparency and reducing counterparty risk.

What are the main differences between Cube Exchange and traditional centralized exchanges?

The primary difference between Cube Exchange and traditional centralized exchanges lies in its approach to fund custody and security. While traditional exchanges often use omnibus accounts to store user funds, Cube Exchange provides each user with a dedicated MPC wallet for each sub-account. This ensures that users maintain control over their assets at all times. Additionally, Cube Exchange settles trades directly on layer-one blockchains, offering greater transparency compared to the off-chain settlement methods used by many traditional exchanges. The platform also features a unique user interface and innovative features like asset "bundles" to enhance the trading experience.

How is Cube Exchange addressing regulatory challenges in different countries?

Cube Exchange takes a cautious approach to regulatory compliance, carefully evaluating the requirements of each jurisdiction before entering new markets. The exchange currently operates as a digital asset-only platform, which simplifies some regulatory concerns related to fiat currency integration. Bartosz and his team work closely with legal experts to ensure compliance with local regulations, including KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements. The exchange also limits operations in certain jurisdictions, such as the United States and the United Kingdom, to adhere to regulatory constraints.

What future developments can we expect from Cube Exchange?

While Cube Exchange is primarily focused on perfecting its core exchange functionality, several future developments are on the horizon. The team is exploring integration with DeFi and on-chain protocols to expand the range of services available to users. They are also considering solutions for cross-chain interoperability, similar to the IBC protocol in the Cosmos ecosystem. Additionally, Cube Exchange is investigating ways to implement MPC-like security for potential fiat currency integration in the future. The platform remains committed to rapid iteration based on user feedback and may introduce new features and improvements as the cryptocurrency market evolves.

Related Content

Cube: The Solana Aligned CEX | Bartosz Lipiński

Discover how Cube is revolutionizing the crypto exchange landscape with Solana-aligned technology, MPC wallets, and innovative features for traders and developers.

Bonkbot & Memecoin Trading On Telegram with Karol

Discover how Bonkbot is transforming Solana's memecoin landscape with its innovative Telegram trading interface, offering unparalleled speed and accessibility for traders.

Jupiter: The Aggregator Fueling Solana's GDP | Meow

Discover how Jupiter Exchange is transforming Solana's ecosystem, onboarding millions of users, and driving the future of decentralized finance.

Audius: Building Spotify On Chain | Ray Jacobson (Audius)

Discover how Audius is transforming the music industry with decentralized streaming, empowering artists, and creating new monetization opportunities.

Level Up. Go Crankless. w/ Jarry Xiao (Ellipsis Labs)

Discover how Phoenix is transforming DeFi with its innovative crankless order book design, offering unparalleled capital efficiency and market maker benefits on Solana.

Sports Betting Built On Solana | Nigel Eccles & Varun Sudhakar

Discover how BetDEX is transforming sports betting with blockchain technology, offering competitive odds and solving key industry issues on Solana.

Powering Solana's Onchain Economy | Garrett Harper & Stepan Simkin

Discover how Squads Protocol is transforming Solana's ecosystem with innovative smart account solutions, enhancing security and user experience for both enterprises and consumers.

Web3 Domains on Solana with AllDomains - Solfate Podcast #52

Discover how AllDomains is transforming the domain landscape on Solana, offering innovative solutions like tokenized web2 domains and emoji domains.

Unlocking DeFi With Infinex | Kain Warwick

Discover how Infinex is transforming DeFi with improved UX, cross-chain integration, and innovative token distribution models on Solana and beyond.

How Pyth Propagates Financial Data At The Speed of Light | Mike Cahill

Discover how Pyth Network is transforming the oracle landscape, bringing real-time financial data to blockchain with unparalleled speed and accuracy.

Meet DeFi 2.0 ft. Timeswap

Discover how Timeswap is transforming DeFi with its innovative oracle-less lending and borrowing protocol, offering a new paradigm for decentralized finance.

Colosseum: The Y-Combinator for Solana with Matty Taylor

Discover how Colosseum is transforming Solana's developer landscape with innovative hackathons, accelerators, and pre-seed funding for crypto startups.

Leading Solana's DePin Future | Amir Haleem

Discover how Helium Mobile is disrupting the telecom industry using Solana blockchain and crypto incentives to build decentralized wireless networks.

EtherMail: Reimagining Email for Web3

Discover how EtherMail is transforming Web3 communication with wallet-based email, offering anonymity, encryption, and new possibilities for blockchain projects and users alike.

Breakpoint 2023: Ending the CEX Cartels: OPOS with SwissBorg

SwissBorg unveils its vision for decentralizing the exchange market with OPOS (Open Protocol for Order Submission) at Solana Breakpoint 2023.