Bitfinex: The Crisis Tested Liquid Exchange King for Bitcoin and Ethereum Trading

An Exclusive Interview with  Paolo Ardoino, Chief Technology Officer, Bitfinex

Bitfinex is one of the most successful cryptocurrency exchanges globally and is owned and operated by iFinex Inc. A favourite of experienced online traders due to its advanced trading tools, Bitfinex is accustomed to handling some of the largest trading volumes in the industry.

During the March 12 stock market crash instigated by the coronavirus pandemic’s disruption to the world economy, cryptocurrency exchanges experienced a massive sell-off of Bitcoin and Ethereum. When the liquidation panic finally settled down, Bitfinex emerged as one of the few exchanges that had been able to take the extreme volatility in stride.

One of the men at the helm of this goliath of the crypto space is Paolo Ardoino, the Chief Technology Officer for Bitfinex. Ardoino is also the CTO for Tether, the world’s most utilized stablecoin.

In this exclusive interview with Blockchain.News, Ardoino discusses his journey, the resilience and future of Bitfinex, stablecoins and Bitcoin’s safe haven status.

Journey Through the Crypto Sphere

Ardoino started in the Bitcoin crypto space between 2012 - 2013. He had been working in the traditional financial sector in London. He had his own start up at the time with a focus on building highly scalable applications as a part of computing and distributed systems.

With a background in finance and scalable applications, Ardoino was a perfect match for Bitcoin, he said, “As soon as I started reading about Bitcoin, I fell in love.”

After conducting his own experiments with the pioneer cryptocurrency, Ardoino was presented with the opportunity to join Bitfinex at the end of 2014. He said, “They had a problem with the matching engine. Given my expertise, I offered my help to build the matching engine to be more scalable.” With Ardoino onboard, “We were able to achieve 1,000 times the previous number of transactions per second.”

Ardoino soon began to grow bored of his own company in London which was mired in traditional finance. He said, “The old, outdated protocols were no longer interesting and I wanted to do something that was related to Bitcoin and the crypto space. I saw this as a huge opportunity to do something that would matter in the long run — to help change the financial system itself and leverage the groundbreaking technologies based on blockchain.”

In mid-2016 Ardoino became the CTO of Bitfinex and to this day remains hands on at the core of the platform’s technology. He said,“I worked hard to bring the platform to what is today. The beautiful interface, carefully designed and really robust, the matching engine and APIs were all a priority, as well as making it all highly scalable. This is basically still my role today. Apart from managing my team, I keep working on the core of the platform.”

Tethered In

In 2017, Ardoino was appointed CTO for Tether, the biggest stablecoin by market capitalization. A huge fan of the project he said, “It’s really one of the most amazing ideas in this sector. Everyone today talks about Tether, but it was really created by a group of visionaries and Bitcoin lovers in 2014. They had this great idea to solve the problem of arbitrage, especially efficient arbitrage across cryptocurrency exchanges.”

Ardoino explained, “The arbitrage opportunities were really big, but the problem is that to exploit those, you have to move wires around different exchanges. It was really painful and really slow — it could take days! Tether was the solution for that and worked out beautifully.”

Bitfinex Remains Liquid During COVID Markets Sell-off

Bitfinex is leveraging its position as a one-stop-shop for crypto trading, offering a variety of services, including spot trading and peer-to-peer financing with up to 5x leverage.

The platform also offers users access to a separate, perpetual swap contract offering 100x leverage through its affiliate, iFinex Financial Technologies Limited. Ardoino highlighted, “One such perpetual swap pair is the Tether Gold/Tether pair (XAUTF0/USTF0) which we launched last month.”

During the March 12 and 13 crashes, Bitfinex was handling up to $11.8 million worth of trades per minute. Ardoino said, “This was possible as Bitfinex is the most liquid exchange for Bitcoin and Ethereum, having such high liquidity, we are able to provide traders with tighter spreads and lower slippage.” He continued, “In most other crypto exchanges, volume can be made by market makers that all quote small sizes near the top of the book. Liquidity is much more precious and harder to replicate. In this regard, Bitfinex is king.”

The Bitcoin and Ethereum sell off was so extreme it prompted another popular exchange, Huobi Global to install a circuit breaker as a precautionary mechanism. Ardoino said that there are no plans to make similar updates to the Bitfinex platform. He explained, “Circuit breakers have the potential to damage our user base by summarily shutting down the exchange. Circuit breakers work in traditional financial markets as exchanges have a duty to implement them. In a nascent and fragmented sector like ours, they can be dangerous. At the same time, we believe it is important that our customers know the risks of trading in cryptocurrencies. We believe we have communicated this through our risk disclosures and our terms of service.”

So what does Bitfinex plan to upgrade in 2020. Ardoino revealed, “Bitfinex is planning on an important expansion into additional business models, as well as implementing more features and products from the UNUS SED LEO whitepaper.”

Notably, in the next few months, Ardoino said, “Bitfinex will add additional social features to its platform and new order types. iFinex Financial Technologies Limited is also considering new derivatives products, and are looking at sports / political events betting through a regulated site.”

Tether, Stablecoin Volume and Chain Interoperability

Tether (USDT) is the largest stablecoin by market capitalization due to its cross-chain interoperability. Ardoino said, “We believe it is important for Tether to be innovative and to try and serve as many communities as possible, such as the Ethereum and EOS blockchains. We also support other blockchains like Algorand, Liquid, and Tron. We understand that a stablecoin needs to be the common ground of different blockchains to be complete and really useful.”

As the coronavirus pandemic continues to seriously disrupt the global economy, there has been an incredible surge in stablecoin activity on-chain, up over 800% since 2019. The build up of stablecoin activity usually precedes periods of crypto market inflation, but Ardoino believes the explanation is much simpler.

Ardoino shared how he views the amassing stablecoins, he said, “With the increasing volatility in both crypto and traditional financial markets due to the Covid-19 pandemic, stablecoins may provide easier access to personal wealth and a relatively stable store of value.”

Recently announced, the Financial Stability Board (FSB) will present ten recommendations on the regulations of stablecoins before an audience of G20 countries, referencing major stablecoins, including USDT, USDC, TUSD, PAX, and DAI.

Ardoino seemed please at the new regulatory oversight, he stated, “We welcome the Financial Stability Board’s recognition of the role of stablecoins in the global economy, and its consideration of financial technology innovation in the digital asset space.”

Tether Gold

As people turn to safe havens amid the economic downturn, the discussion on Gold and Bitcoin as stores of value has reached a fever pitch.

Tether Gold (XAU₮) is the physically backed gold stablecoin from Tether. One XAU₮ token represents one troy fine ounce of gold on a London Good Delivery gold bar.

Explaining the impetus, Ardoino said, “Tether Gold meets the growing interest in a digital asset that provides exposure to the world’s most enduring asset. Tether Gold will enable customers to obtain exposure to an asset traditionally regarded as a safe haven. Tether Gold provides the combined benefits of both physical and digital assets, removing the drawbacks of holding gold in more traditional ways, such as high storage costs and restricted access.”

While the underlying physical gold remains in the custodian’s vaults, Ardoino said, “Tether Gold facilitates certain key economic qualities of gold – such as ownership and value – to flow seamlessly around the world.”

Bitcoin Safe Haven and Crypto Hedging

Before the completion of our interview, we asked Ardoino to add his two cents to the Bitcoin as a safe haven narrative, as well as his expectations for the upcoming bitcoin halving.

He responded, “Neither Bitfinex nor I will make any pre or post halving predictions.”

On Bitcoin’s asset class he divulged, “Bitcoin is not necessarily a safe haven. I firmly believe in the future, that Bitcoin represents a truly decentralized and resilient medium of exchange. But the current market capitalization of Bitcoin may make it still subject to traditional finance trends.”

Next on the horizon for Bitfinex is a project called Dazaar, Ardoino explained, “It is a super scalable, data stream network that gives people the option of creating data streams. This new technology allows people to send real-time data streams in an expedited manner faster than anything available currently, while optionally supporting agnostic micro-payments, which can be in any form of cryptocurrency.”

He concluded, “We will release it fully open-source. Everyone will be able to have it, expanding the support for additional cryptocurrencies or other means of payment. We wanted to give back to our community by creating a product that will help the industry grow.”