Ethfinex is a Bitfinex sister company that seeks to pioneer a hybrid decentralized token exchange model. While Ethfinex has begun to roll-out decentralized services architecture, it remains fully centralized at this stage. The team is working to move towards a hybrid model that leverages Bitfinex’s order book and Ethfinex’s (future) decentralized architecture. This will allow Ethfinex users to transact in a truly decentralized fashion (non-custodial orders), while still maintaining access to user orders that were originated on Bitfinex.
To that end, Ethfinex is planning to integrate 0x and several other decentralized exchange protocols. To encourage the development of new tools and protocols, Ethfinex hopes to ‘provide a zone for experimentation’ by providing new protocols access to the platform’s large liquidity pool and diverse set of trading opportunities. While the Bitfinex order book should provide high levels of liquidity for the time being, Ethfinex has launched its own loyalty reward token designed to incentivize liquidity that originates from the decentralized portion of the platform, i.e, individual (non-custodied) users. The reward function has been designed to benefit market makers directly by allocating them a stake in the future of the platform, and other users indirectly, by virtue of incentivizing increased system liquidity.
The Nectar Token (NEC) is a loyalty reward token used to encourage market making on Ethfinex and facilitate the distribution of loyalty rewards and governance interest. Half of all total trading fees paid by makers and takers are directed into a smart contract, and, each month, NECs are issued and distributed to makers in proportion to the total maker trading volume for which each maker was responsible. Makers can redeem tokens upon receipt, hold them, or sell them to other users that are enrolled in the Ethfinex market maker loyalty scheme. Tokenholders will also be able to advise on the token’s governance— large tokenholders or coalitions of smaller tokenholders can elect advisory board representatives, with board seats entitled to anyone with a position of 5% or greater. Ethfinex will initially retain the majority of NECs, relinquishing ownership to users over time as the platform becomes increasingly decentralized.