Why processing crypto asset transactions requires more than just API connections
Part 2 by Duke Kim, Director Sales and Account Management, Lukka, Inc.
Decentralized markets create unique challenges for transaction processing and when institutional investors enter the crypto asset ecosystem, they quickly discover just how extensive those challenges can be.
A GROWING ECOSYSTEM
The explosive growth of the crypto ecosystem offers tremendous opportunities to investors, but it also requires them to maintain API-based connections to an ever-growing number of trading venues, custodians, and pricing services in order to effectively aggregate and process transactions.
DO-IT-YOURSELF FALLS SHORT
A cottage industry has emerged to address these connectivity needs, with developers creating off-the-shelf API solutions for firms intent on stitching together a system of connections rather than partnering with an infrastructure provider. While a “do-it-yourself” approach to implementing API solutions may initially appear to offer some advantages, the simple truth is that no bespoke system of connections (neither purchased nor built in-house) is likely to provide the institutional-grade connectivity, scalability, and standardization essential to support the operations of an institutional investor.
MANAGING COMPLEXITY AND RISK
Lukka Crypto Office, however, offers the most frictionless transaction processing experience within the crypto ecosystem by maintaining more than 70 API connections to exchanges, OTC desks, banks, custodians, and 3rd party pricing services. As one of, if not the largest single consumers of post-trade crypto data in the world, we can often develop proprietary relationships with exchanges in order to ensure we can reliably maintain uninterrupted connectivity. As the market grows and new venues are developed, we will continue to incorporate them into a single point of connection.
PEACE OF MIND CONTROLS
Unlike generic API solution providers, Lukka connectors are also built within a SOC 1 Type 2 control framework. The strict enforcement of controls provides an additional layer of assurance to the accuracy and completeness of the data consumed by Lukka on behalf of its institutional clients. The integration of API data directly into Lukka Crypto Office also provides transparency on the data Lukka collects. Users are able to view the underlying, raw API data in a clean, easily-digestible format, on screen, at any time. This level of assurance and transparency surpasses any other product in the marketplace.
Lukka’s constant attention to connectivity and scalability ensures that clients can quickly process transactions while avoiding some of the major issues associated with the fragmentation of the crypto asset market. The hurdles that accompany the lack of standardization in the market are often some of the most difficult for institutional investors to overcome. Using a network of independently-developed API solutions, institutional investors can find it increasingly difficult to normalize data as transaction volumes grow. Lukka’s best-in-breed reference data service, on the other hand, seamlessly manages the daunting task of standardization, ensuring that firms receive clean, consumable data on the correct assets.
MITIGATING RISK WITH OUTSOURCED PROCESSING
While partnering with an infrastructure provider is a sensible choice for investors from the outset, the arguments for outsourcing processing infrastructure become stronger as firms dive deeper into the crypto asset ecosystem. In markets for both traditional and crypto assets, infrastructure providers like Lukka exist because investors experience no increased edge in developing their own systems of connections. Customers come to recognize that it’s extremely inefficient to develop and maintain a proprietary blend of connections when a robust alternative exists at a reasonable price. Some firms nonetheless attempt to save money by farming out API builds a la carte. However, they quickly learn the truth of the maxim “you get what you pay for.” Cheap API solutions can quickly turn into expensive mistakes as essential updates, add-ons, and modifications pile up. This approach can become a major distraction from core business tasks such as investing, reporting, and fund administration.
LEVERAGING A UNIVERSAL VIEW
Lukka Crypto Office provides institutional investors with the most robust network of API connections on the market, and our list of connectivity and data integrations is growing all the time. We have built our reputation for excellence on highly accurate processing of institutional crypto transactions and a constant focus on our clients’ experience. With an unparalleled understanding of the market as a whole, Lukka is able to provide powerful connectivity solutions that off-the-shelf software can’t approach. We understand that when it comes to API connections, it’s not just the number that matters. A well-built, well-maintained network of connections can assist institutional investors in bridging the gap between the crypto asset and traditional financial asset ecosystems, making it that much easier for a firm to grow its footprint in the marketplace.