Shanghai-based exchange LakeBTC says it has taken a step towards bypassing the delays and costs associated with international transfers by becoming a Ripple gateway.
Previously, users around the world wired fiat money to LakeBTC’s account directly. However, they may now deposit funds with a Ripple gateway in their local area in any currency, and transfer it to a LakeBTC USD account via the Ripple network instead. The same applies to withdrawals.
CEO Thomas Xie told CoinDesk the decision to add the Ripple network transfer option was the result of customer demand and a dissatisfaction with the way traditional banks were handling transfers.
“The traditional banking/clearance system has been slow (surprise!) to respond to [customers’ needs] in the new millennium. They charge hefty fees and the [delays are] not acceptable in the modern world.”
Additionally, a significant proportion of the population don’t have access to regular banking services, he added, which has triggered yet another layer of problems.
“From time to time, our customer support got user complaints about the wire delays, bounced transfers, and outrageous fees charged by the so-called ‘intermediary banks’ or ‘correspondent banks’.”
However, the addition of Ripple means that funds can now be moved in and out of LakeBTC accounts instantaneously and at minimal cost, no matter where users live.
LakeBTC had been evaluating a number of other alternative methods for users to streamline the deposit and withdrawal process, Xie continued, before deciding on Ripple.
Users can also access LakeBTC accounts via EgoPay, and the company is still planning to add more banking and payment processor options in future.
“Our goal is to build a bitcoin platform with security, liquidity, and extraordinary service.”
Ripple: sending and receiving funds
A Ripple gateway functions in a similar way to a traditional bank branch. Just as banks take your cash and move it into and out of the international banking system, so do Ripple gateways with the Ripple network.
A basic demonstration of how gateways function is below:
Each account requires a minimum balance of 20-30 XRP (about $0.17). XRP is the currency of the Ripple network and is often compared to postage stamps on an envelope.
You can add funds to your Ripple account by setting up a ‘trust line’ with a local Ripple gateway, which are the entry and exit points for assets into the Ripple network.
Funds can be sent to the gateway using local bank transfer, PayPal, Credit Cards, or any other payment system they accept.
The gateway then issues you an ‘IOU’ for that amount, and you’re free to send it anywhere in world within the Ripple network at almost no cost: this now includes LakeBTC accounts.
When you want to withdraw the funds, use your wallet to notify the gateway, and the gateway must deliver those real-world amounts to you.
This is also why it’s important to use gateways you trust. IRBA certification is just one option, and it’s wise to do your own online research as well.
LakeBTC, one of the world’s largest exchanges
Started in March 2013, it was initially run as a bitcoin exchange for a small group of financial professionals before opening to the general public later that year.
Xie said LakeBTC is marketed towards all participants in the bitcoin ecosystem, including traders and institutions, miners, merchants and individual investors. Risk management and internal controls made LakeBTC stand out from the crowd, he added.
“For financial firms, technology is only [the] tip of the iceberg to safeguard inventors’ funds and personal information. The real challenge is on the financial turf: any weak link in risk management or process control will allure predators to sink the entire ship at the cost of all users.”
High availability with fast trade matches were key to LakeBTC’s liquidity, Xie said. The platform also provided market data and trading APIs for advanced users looking for arbitrage, market-making and algorithmic trading.
The exchange recently added ‘Dark Pools’ feature allows orders of 50 BTC or over to be ‘invisible’ to other users, preventing them from causing large price fluctuations and avoiding the attention of ‘financial predators’ who watch for potentially large price movements.
LakeBTC is currently owned by Lake Investments Limited, with Shanghai Trading IT, Inc. providing the service’s technical and customer support.