Case study of Lykke exchange: architecture and outlook

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.

Fintech Innovations in the Financial Service Industry

“…Fintech payments help in creating huge opportunities for many startups to start a new business model, which would further help in attaining new customers in this payment segment (Raharja et al 2020). Regarding digital payments and the benefits for startups, several case studies were conducted to understand the actual status of payment systems (Altamirano and Beers 2018;Hendriyani and Raharja 2019;Kang 2018;Lee and Lee 2016;Olsen et al 2018;Son and Kim 2018). Chen et al (2022) cite in their article that Fintech Exchange Traded Fund (ETF) has a fast-growing phase compared with the traditional ETF, which is still the dominant sector in the finance industry.…”

“…Blockchain is a type of Distributed Ledger Technology (DLT) that occupies a permanent spot in finance industry by enhancing cryptocurrency technology and other technologies with essential implementation in financial services. A substantial number of studies on Blockchain also discussed it, (Andersen and Bogusz 2019;Cai 2018;Daj 2018;Denisova et al 2019;Gomber et al 2018;Medeiros and Chau 2016;Olsen et al 2018;Singh et al 2019;Xu et al 2019;Yin et al 2019;Zalan 2018). The potential functionality of blockchain poses serious competition for the banking industry, as they are finding it difficult to formulate a strategy that guides distribution of technology (Grover et al 2019;Harris and Wonglimpiyarat 2019).…”

“…Cryptocurrency technology is a widely adopted application of the blockchain (Daj 2018;Gomber et al 2018;Olsen et al 2018; S , cheau and Zaharie 2018). Bitcoin cryptocurrency is often claimed as the most secure and innovative platform for payment networks (Olsen et al 2018).…”

Consortium Capabilities for Enterprise Blockchain Success

“…Other categories within the identified subset include analyses of challenges, determinants, or consequences of blockchain adoption (10%) [35,36,37]; discussion of privacy, security, or regulatory challenges (8%) [38,39,40,41]; a focus on cryptocurrency (4%) [42,43]; or literature reviews (4%) [44,45]. A final category includes papers that explicitly deal with the primary focus of this chapter: challenges related to consortium formation and governance (6%).…”

Blockchain in FinTech: A Mapping Study

“…The full list of the selected papers can be seen in Table 1. Electrical Engineering in Japan [24] Software Engineering and Algorithms in Intelligent Systems [25] Accounting and Finance [26] Journal of Economics and Business [27] Production and Operations Management [28] Quality-Access to Success [29,30] European Business Organization Law Review [31] NMIMS Management Review [9] Strategic Change-Briefings in Entrepreneurial Finance [32] International Journal of Environmental Research and Public Health [33] Proceedings of The International Conference on Business Excellence [34] Technological Forecasting and Social Change [35] 2018 IEEE International Conference on Intelligence and Security Informatics (ISI) [36] Journal of Investment Management [37] Blockchain Technology: Platforms, Tools and Use Cases [38] Handbook of Blockchain, Digital Finance, and Inclusion, Vol 1: Cryptocurrency, Fintech, Insurtech, and Regulation [39] 2018 9th IFIP International Conference on New Technologies, Mobility, and Security (NTMS) [40] Journal of Money Laundering Control [41] Australian Feminist Studies [42] Internet Science, INSCI 2017 [43] Emerging Markets Finance and Trade [44] Financial and Credit Activity-Problems of Theory and Practice [45] 2018 6th International Symposium on Digital Forensics and Security (ISDFS) [46] Journal of Management Information Systems [47] Journal of Risk Finance [48,49] Review of International Business and Strategy [50] International Journal [51] Financial Innovation [52] Business Horizons [53] Enfoque UTE [54] Computer [55] Symmetry-Basel…”