In today’s global economy, traditional financial markets play an important role in ensuring that all trades are conducted smoothly. They can be thought of as the engines that keep this world running. However, with time, these markets must evolve in order to adapt to new technologies and challenges that come with it. A blockchain based project named Lykke is already working on it, whose aim is to build a global exchange that is well-suited for the 21st century.
What is Lykke?
Lykke is a project whose main goal is to build a global financial marketplace that facilitates the exchange of financial assets. It aims to do so by leveraging the power of blockchain technology into the existing financial system and eliminating the inefficiencies that traditional markets face in today’s world.
You can think of Lykke as the marketplace that essentially bridges the gap between conventional finance and blockchain. It is not like any other cryptocurrency venture; its value proposition lies in building an efficient, quick, and seamless marketplace where trades can be settled immediately in real-time.
Lykke project is being developed by Lykke Corp, a FinTech company incorporated in Switzerland. The company has subsidiaries in Vanuatu, Cyprus, United Kingdom and the U.S.A. At the time of writing this article, Lykke exchange can be used to trade between forex currencies, cryptocurrencies, and between forex and cryptocurrencies.
To understand the problem that Lykke is trying to solve, we need to consider the following:
Some of the leading cryptocurrency exchanges such as Binance, Bittrex, Poloniex, and so on are centralised. That is, if you deposit your funds in an account that is on such an exchange, you will need to trust them with your assets. However, this comes with a great deal of risk since these exchanges are prone to hacking, as seen in the past. Furthermore, they can very well ‘run away’ with your money. At the same time, these centralised exchanges are simple and to use and are extremely fast.
By contrast, a decentralised exchange - an exchange built on blockchain - would eliminate this problem of theft and hacking. However, this high security comes at too great of a price - speed and scaling. Generally speaking, as more and more transactions take place on the blockchain, the risk of it bloating increases.
This is where Lykke comes in - it combined the aforementioned approaches to create a marketplace that is highly secure and fast.
When it comes to executing a trade on a marketplace, there are two steps:
- Matching the demand for the asset with the supply, that is, bringing the buyer and the seller together
- Settlement of the trade, that is, exchanging the assets
Lykke’s matching engine is centralised, whereas its settlement is decentralised.
Its centralised matching engine runs on a high-performance server that is capable of storing data in large quantities. It performs matching operations in the order of milliseconds and sub-milliseconds, similar to other major exchanges.
As for the settlement, it takes place on a public blockchain. This means that people who are trading on the Lykke exchange are not required to store their funds and assets with Lykke. Instead, they hold their respective cryptocurrencies in their respective wallets. Once the match has been made, the exchange conducts an atomic swap to ensure that the trade goes through. The ownership of the asset changes hands on the blockchain, thus making it immune to hacking and other security threats.
Furthermore, Lykke platform runs continuously, ensuring that the market is operational at all times.
Unlike other blockchain based projects which have a native cryptocurrency, Lykke does not have a native coin that is essential to use its services. However, it does have a Lykke coin, represented by LKK. According to the official website, ‘Lykke coin is a cryptographic token that represents the ownership of Lykke, a Swiss registered corporation.’ That is, if you hold Lykke coins, you are essentially a shareholder of Lykke Corp, provided you fulfil KYC requirements.
Each registered share of Lykke Corp is represented by 100 LKK coins. Therefore, if you own 1,000 LKK coins, then you own 10 shares of Lykke Corp. The total supply of Lykke coins is capped at 1,285,690,000. Therefore, at the time of writing this article, there are a total of 12,856,900 shares of the company. Of these, around 1.8 million shares are held by the company.
The official website also states that the company may pay a dividend, but given that it is still in its early stages, it is some time away. Just like any other company which has its stocks in the market, Lykke too will publish its annual reports on its website. In addition to this, there will be an annual shareholder meeting as well, although it will be held electronically. It is advisable to go through the Lykke website in order to understand these topics clearly.
Where to buy LKK coins?
Lykke coins are currently available only on the Lykke Exchange, though this may change in the future.
Lykke (LKK) Wallets
Lykke Corp has developed Lykke Wallet that can be utilised to use the services offered by Lykke Exchange.
Alternately, you can also use cold wallets like Nano Ledger S or Trezor.
It is not possible to mine LKK coins.
Lykke Price Trends
As mentioned earlier, Lykke is not like a traditional blockchain project. It is essentially a marketplace that is meant to facilitate an exchange of digital assets globally. The company behind it - Lykke Corp - has issued its shares in the form of Lykke coins. As a result, the price of LKK coin followed a path entirely different to that of other cryptocurrencies. At the same time, it exhibited a behaviour that is not common among traditional stocks.
The coin started a bull run in April 2017, wherein its value went up from $0.05 to $0.4, in just two months. This translates into an astounding increase in value in a very short span of time. However, soon thereafter, the price collapsed to 0.2 USD by the end of July, only to rise in the subsequent weeks.
Interestingly, the price remained above the $0.3 mark until early December. When other cryptocurrencies started their respective bull runs during that period, Lykke price went down sharply and at the end of the first week of January 2018, 1 LKK coin was worth around 0.18 USD. The collapse continued through the months of February and March, and by April end, the price was close to 0.05 USD.
Risks Associated with Investing in Lykke
Even though Lykke is an interesting project, it is important to remember that it is still in its early stages. The company has got a lot of hurdles to overcome, the most primary being scaling challenges that come with blockchain. Secondly, LKK coins represent shares in the Lykke Corp in addition to being a cryptographic token. It is evident from its price trends that Lykke falls under a volatile asset class whose value depends on how the company performs in the future.
Instead of risking your money in this, it is advisable to consider other investments such as mutual funds. They are relatively safer, less risky, and can deliver good returns in the long run.