- All transactions are carried out peer to peer (Your own app on your own computer or smart phone). The exchange itself is an optional module that can be installed within the wallet in order to trade between currencies.
- The Exchange contains an order book that communicates with other order books on the network to provide real-time trading data.
- A person may trade any currency for any other currency being traded on the exchange via the use of a transactional currency called DEX.
- Within DEX is an algorithm that matches buyers to sellers and enables trades to happen when the specified price points are met.
Practical example
Bob goes to the market with apples (Currency A) and intends to buy Banana’s (Currency Z) if he can find some for the desired price.
- Before Bob sells his Apples, he wants to be sure that he can get the desired price (Instead of Dollars we are using DEX), so he looks at what all the other apples are selling for, and prices accordingly (The order book) . He also checks the price and availability of Bananas.
- Satisfied that the price of each is acceptable he sells his Apples to 6 different people.
- Bob now has money (Which is just a promise of value that everyone agrees upon. In the HoloDEX, DEX performs the role of Money)
- Bob spends the money (DEX) to purchases Bananas from 3 different people.
Bob has effectively exchanged Apples for Bananas. This exchange was able to happen even if none of the Banana sellers wanted apples.
The only difference is that the apples never left Bob’s stall (A module within his account) and the Banana’s never entered Bobs stall (via the Banana module) until all the buyers and sellers were identified.