Lattice Exchange, LTX Token Case and Need for Scalable DEXs

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A little over two weeks ago, Ben Jorgensen, co-founder and CEO of the DeFi app Lattice Exchange, spoke of the community values that brought him to work on blockchain technology and shared his ideas about the future of the space. He built Constellation Network, a third-generation protocol that addresses such apps’ scalability issues. Two days prior, Jorgensen had launched LTX token on Uniswap, reaffirming the need for automated market-making (AMM) algorithms and community-owned protocols to become a preferable solution to centralized exchanges and their practices.

“Our platform will be released at the beginning of December, and early next year we will introduce the governance of our network, which we are pushing to be fully decentralized and be owned by the community that owns Lattice tokens. We want them to be responsible for creating value in the exchange,” Jorgensen told Ashton Addison on the CryptoCoinShow channel.

Lattice is set to solve the issues of latency and high transaction fees that hinder exchanges with a streamlined process between Constellation Network and Ethereum for faster settlements on trades, loans, swaps, and other DeFi transactions. A solution that allows the project to scale and provide deep liquidity pools not available in the currently fragmented DeFi environment. More importantly, Lattice Exchange opens doors for multiple asset-specific AMMs that secure the best price and profitability for users.

Investors have flocked to the idea. The project raised over $3 million in a recently closed private round. Heavyweights of crypto investment circles, such as FBG Capital, Alphabit, GDA Capital, Hillside Capital and Moonrock Capital, backed Lattice Exchange.

Following the advice of partners, Lattice worked with three mid-tier crypto exchanges to offer Initial Exchange Offerings (IEOs) prior to launch and each sold out in minutes. However, Lattice was asked to sign a “cumulative clause” specifying, in essence, the following: if the LTX token goes below a certain threshold, Lattice would need to activate additional market-making resources. This meant that in the event of an unexpected and massive sell-off of the tokens, Lattice would provide further funds to compensate for token collapse and help stabilize the market, thus protecting LTX holders.

On November 6, after launching on all three exchanges, a massive sell-off began. More than 210,000 tokens were sold, dropping the price of LTX from $0.60 to $0.11 within minutes.

Numerous analysts monitoring the trade were shocked. How is it possible that a token on a demonstrated platform, backed by a stellar team, and coming out of a successful private round, was collapsing all of a sudden?

Lattice investors immediately appealed to independent analysts with advanced transaction monitoring capabilities. They confirmed the bad news: the sellout was synchronized and happened instantaneously on the participating exchanges. All three benefited from the initial high token price and the subsequent massive sell-off. Further analysis even revealed that LTX tokens had been funneled to personal accounts. More so, the cumulative clause was invoked for Lattice to allocate more resources and stabilize the price.

After these actions became evident, Lattice asked the exchanges to reimburse the market making fees paid under the cumulative clause. Although this was done, LTX was delisted from each of the three exchanges and continued to be unavailable for trading.

The events of the LTX launch make note of one of the better-known issues in the evolving industry of DeFi. Centralized exchanges still exert undue influence on blockchain project launches because decentralized alternatives, such as Uniswap, are unable to solve latent efficiency issues in interoperability, scalability, and access to asset-specific AMMs.

Ironically, Lattice presents a solution to the same problems that affected its LTX launch: it’s a decentralized exchange designed to offer services at the scale of centralized exchanges.

Investment partners have reacted to the news of the LTX dump by rolling out an action plan to assist Lattice stakeholders and the community that is relying on the project’s continuous success. After all, it is an important fragment of the DeFi development in the near future, on the path towards further decentralization and transparency of the digital assets.

Lattice has also addressed the community in a Twitter message and cited “irregular activities and ethical concerns.” In a more recent Telegram post, the team spared any direct blame for the incident and addressed the community on the future of the token and the app.

“We will build tools and solutions that present ‘honest data’ in the same light as Constellation’s mission. Constellation is building the next evolutionary leap of blockchain technology by validating data endpoints – this will most certainly play a role in the tools that we create on Lattice,” the address said.

Lattice is, undoubtedly, ready to bounce back.

Having obtained a diploma in Intercultural Communication, Julia continued her studies taking a Master’s degree in Economics and Management. Becoming captured by innovative technologies, Julia turned passionate about exploring emerging techs believing in their ability to transform all spheres of our life.