Veröffentlicht: 27.02.2018

Lykke Coin

Introduction on Lykke Coin

Lykke Coin is based on Lykke Corp, wich is a FinTech company from Zurich that has created a marketplace suitable for all asset classes and instruments. It uses the colored coin protocol, which combines these functions with a blockchain.

This protocol also used to be compared with JAVA, because the final marketplace should also be characterized by a high compatibility and function, regardless of the blockchain used. In the first version, the marketplace for Bitcoin was developed, but then expanded to the Ethereum blockchain. In the future, other Altcoins should be supported.

In addition, any financial instrument can be deposited as collateral within the blockchain by creating a token on that instrument. To do this, the so-called colored coin protocol is applied. This is the concept that a colored Bitcoin means that the issuer is committed to conveying the underlying value to the person who returns the dyed coin.

These colored coins differ from classical cryptocurrencies because they are issued by an issuer and secured by collateral in the form of a financial asset.

Furthermore, colored coins can be easily accounted for, as each colored coin has an International Securities Identification Number (ISIN). This ISIN means that a simple allocation to other financial tools is also possible.

What is Lykke Coin?

The architecture of financial systems has grown organically over the last few years. In the past few decades, many individual steps to handle transactions have been automated, so much of the conventional workflow is now done by computers. However, the basic business process is still unchanged and the settlement is partially manual.

This results in long transaction times, which in some cases amount to one or two days and are no longer considered to be current. In addition, each large bank has its own booking system, so that an adjustment is complex and hardly feasible. This results in high transaction costs to complete investments in financial instruments.

To revolutionize this environment, Lykke was developed. It is a global trading center, hosted on the Internet. All financial instruments are traded on this trading center, with listing as a token being required.

To meet this requirement, the developers have developed the colored coin protocol, which allows the deposit of new coins with financial instruments. Consistency is realized by the blockchain, so that no manipulation is possible.

In addition, a peer-to-peer network is set, which verifies the correctness of the transactions. As with the Internet, this network does not require a central controller. Investing in Lykke Coin also means that investors have the opportunity to participate in the growth of the marketplace.

The architecture of the colored coins trading post

The colored coins subsume asset-backed tokens based on the Bitcoin network. All purchases and sales are initiated through secondary trading venues. If an order is successfully verified, it will be executed on the Bitcoin blockchain as a colored coin exchange. On the other hand, rejected or incomplete orders will be deleted immediately.

The executing trading venue also does not gain any ownership rights to the traded coins, but must have the status of ‘trustworthy’. If these basic conditions are guaranteed, transactions can be completed within a very short time and the costs can be reduced.

When building the trading center, it should be noted that these can be subdivided into different degrees of centralization. In particular, centralized trading venues are usually more efficient, while decentralized trading venues are very secure.

The user-friendliness and efficiency allow a large part of the current trading volume to be handled via centralized trading venues. Most traders also place the most deposits in these trading venues, and therefore, take a high risk, because these trading venues can be vulnerable to hacking attempts.

The decentralized trading venues are characterized by a higher speed but are less successful due to the operational difficulties, which, in the context of Lykke, is due to a decentralized adjustment of orders. However, at the same time, there is a bilateral exchange of assets so that the advantages of both approaches are combined.

Which parties are involved in trading colored coins on Lykke?

The first party to become involved with Lykke is the issuers. The issuers deposit the colored coins with assets so that they can convert any financial instrument into a cryptocurrency.

Each colored coin can be traded on any trading venue. The role of the issuer is passive and the only activity that can be assumed is the control of completed transactions on the blockchain. The second party is the traders, who actively trade the colored coins. These traders usually need to be registered at the trading venue, so that a minimum level of trust is generated.

To carry out transactions, they create orders, which are then reconciled by the platform. The traded assets must then be referenced to a Bitcoin address, since a value transfer must take place. The last involved party is the trading venues that collect the orders in a transaction book. All typical order types are supported and executed by the blockchain.

How has the market capitalization of Lykke Coin developed?

Lykke Coin has been trading since November 14, 2014, under the symbol LKK. Lykke Coin initially recorded an issue price of $0.04787. Initial Coin Offerings, which took place on November 29, 2016, resulted in a market capitalization of $1.394 million. Lykke Coin was able to maintain a consistent price level, such that on April 12, 2017, the token price was 0.054976 USD.

A strong upward movement followed, and on August 5, a market capitalization of $105 million was realized. The price per token also increased to $0.40 per token. October 14 saw the highest level ever reached, at $106.6 million.

Subsequently, however, consolidation set in, which met with resistance at around $50 million. In daily trading, a volume of around $190,000 was realized. The trade between Bitcoin and Lykke Coin is particularly important.

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