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RESEARCH REPORT ABOUT KYBER NETWORK

RESEARCH REPORT ABOUT KYBER NETWORK
Author: Gamals Ahmed, CoinEx Business Ambassador

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ABSTRACT

In this research report, we present a study on Kyber Network. Kyber Network is a decentralized, on-chain liquidity protocol designed to make trading tokens simple, efficient, robust and secure.
Kyber design allows any party to contribute to an aggregated pool of liquidity within each blockchain while providing a single endpoint for takers to execute trades using the best rates available. We envision a connected liquidity network that facilitates seamless, decentralized cross-chain token swaps across Kyber based networks on different chains.
Kyber is a fully on-chain liquidity protocol that enables decentralized exchange of cryptocurrencies in any application. Liquidity providers (Reserves) are integrated into one single endpoint for takers and users. When a user requests a trade, the protocol will scan the entire network to find the reserve with the best price and take liquidity from that particular reserve.

1.INTRODUCTION

DeFi applications all need access to good liquidity sources, which is a critical component to provide good services. Currently, decentralized liquidity is comprised of various sources including DEXes (Uniswap, OasisDEX, Bancor), decentralized funds and other financial apps. The more scattered the sources, the harder it becomes for anyone to either find the best rate for their trade or to even find enough liquidity for their need.
Kyber is a blockchain-based liquidity protocol that aggregates liquidity from a wide range of reserves, powering instant and secure token exchange in any decentralized application.
The protocol allows for a wide range of implementation possibilities for liquidity providers, allowing a wide range of entities to contribute liquidity, including end users, decentralized exchanges and other decentralized protocols. On the taker side, end users, cryptocurrency wallets, and smart contracts are able to perform instant and trustless token trades at the best rates available amongst the sources.
The Kyber Network is project based on the Ethereum protocol that seeks to completely decentralize the exchange of crypto currencies and make exchange trustless by keeping everything on the blockchain.
Through the Kyber Network, users should be able to instantly convert or exchange any crypto currency.

1.1 OVERVIEW ABOUT KYBER NETWORK PROTOCOL

The Kyber Network is a decentralized way to exchange ETH and different ERC20 tokens instantly — no waiting and no registration needed.
Using this protocol, developers can build innovative payment flows and applications, including instant token swap services, ERC20 payments, and financial DApps — helping to build a world where any token is usable anywhere.
Kyber’s fully on-chain design allows for full transparency and verifiability in the matching engine, as well as seamless composability with DApps, not all of which are possible with off-chain or hybrid approaches. The integration of a large variety of liquidity providers also makes Kyber uniquely capable of supporting sophisticated schemes and catering to the needs of DeFi DApps and financial institutions. Hence, many developers leverage Kyber’s liquidity pool to build innovative financial applications, and not surprisingly, Kyber is the most used DeFi protocol in the world.
The Kyber Network is quite an established project that is trying to change the way we think of decentralised crypto currency exchange.
The Kyber Network has seen very rapid development. After being announced in May 2017 the testnet for the Kyber Network went live in August 2017. An ICO followed in September 2017, with the company raising 200,000 ETH valued at $60 million in just one day.
The live main net was released in February 2018 to whitelisted participants, and on March 19, 2018, the Kyber Network opened the main net as a public beta. Since then the network has seen increasing growth, with network volumes growing more than 500% in the first half of 2019.
Although there was a modest decrease in August 2019 that can be attributed to the price of ETH dropping by 50%, impacting the overall total volumes being traded and processed globally.
They are developing a decentralised exchange protocol that will allow developers to build payment flows and financial apps. This is indeed quite a competitive market as a number of other such protocols have been launched.
In Brief - Kyber Network is a tool that allows anyone to swap tokens instantly without having to use exchanges. - It allows vendors to accept different types of cryptocurrency while still being paid in their preferred crypto of choice. - It’s built primarily for Ethereum, but any smart-contract based blockchain can incorporate it.
At its core, Kyber is a decentralized way to exchange ETH and different ERC20 tokens instantly–no waiting and no registration needed. To do this Kyber uses a diverse set of liquidity pools, or pools of different crypto assets called “reserves” that any project can tap into or integrate with.
A typical use case would be if a vendor allowed customers to pay in whatever currency they wish, but receive the payment in their preferred token. Another example would be for Dapp users. At present, if you are not a token holder of a certain Dapp you can’t use it. With Kyber, you could use your existing tokens, instantly swap them for the Dapp specific token and away you go.
All this swapping happens directly on the Ethereum blockchain, meaning every transaction is completely transparent.

1.1.1 WHY BUILD THE KYBER NETWORK?

While crypto currencies were built to be decentralized, many of the exchanges for trading crypto currencies have become centralized affairs. This has led to security vulnerabilities, with many exchanges becoming the victims of hacking and theft.
It has also led to increased fees and costs, and the centralized exchanges often come with slow transfer times as well. In some cases, wallets have been locked and users are unable to withdraw their coins.
Decentralized exchanges have popped up recently to address the flaws in the centralized exchanges, but they have their own flaws, most notably a lack of liquidity, and often times high costs to modify trades in their on-chain order books.

Some of the Integrations with Kyber Protocol
The Kyber Network was formed to provide users with a decentralized exchange that keeps everything right on the blockchain, and uses a reserve system rather than an order book to provide high liquidity at all times. This will allow for the exchange and transfer of any cryptocurrency, even cross exchanges, and costs will be kept at a minimum as well.
The Kyber Network has three guiding design philosophies since the start:
  1. To be most useful the network needs to be platform-agnostic, which allows any protocol or application the ability to take advantage of the liquidity provided by the Kyber Network without any impact on innovation.
  2. The network was designed to make real-world commerce and decentralized financial products not only possible but also feasible. It does this by allowing for instant token exchange across a wide range of tokens, and without any settlement risk.
  3. The Kyber Network was created with ease of integration as a priority, which is why everything runs fully on-chain and fully transparent. Kyber is not only developer-friendly, but is also compatible with a wide variety of systems.

1.1.2 WHO INVENTED KYBER?

Kyber’s founders are Loi Luu, Victor Tran, Yaron Velner — CEO, CTO, and advisor to the Kyber Network.

1.1.3 WHAT DISTINGUISHES KYBER?

Kyber’s mission has always been to integrate with other protocols so they’ve focused on being developer-friendly by providing architecture to allow anyone to incorporate the technology onto any smart-contract powered blockchain. As a result, a variety of different dapps, vendors, and wallets use Kyber’s infrastructure including Set Protocol, bZx, InstaDApp, and Coinbase wallet.
Besides, dapps, vendors, and wallets, Kyber also integrates with other exchanges such as Uniswap — sharing liquidity pools between the two protocols.
A typical use case would be if a vendor allowed customers to pay in whatever currency they wish, but receive the payment in their preferred token. Another example would be for Dapp users. At present, if you are not a token holder of a certain Dapp you can’t use it. With Kyber, you could use your existing tokens, instantly swap them for the Dapp specific token and away you go.
Limit orders on Kyber allow users to set a specific price in which they would like to exchange a token instead of accepting whatever price currently exists at the time of trading. However, unlike with other exchanges, users never lose custody of their crypto assets during limit orders on Kyber.
The Kyber protocol works by using pools of crypto funds called “reserves”, which currently support over 70 different ERC20 tokens. Reserves are essentially smart contracts with a pool of funds. Different parties with different prices and levels of funding control all reserves. Instead of using order books to match buyers and sellers to return the best price, the Kyber protocol looks at all the reserves and returns the best price among the different reserves. Reserves make money on the “spread” or differences between the buying and selling prices. The Kyber wants any token holder to easily convert one token to another with a minimum of fuss.

1.2 KYBER PROTOCOL

The protocol smart contracts offer a single interface for the best available token exchange rates to be taken from an aggregated liquidity pool across diverse sources. ● Aggregated liquidity pool. The protocol aggregates various liquidity sources into one liquidity pool, making it easy for takers to find the best rates offered with one function call. ● Diverse sources of liquidity. The protocol allows different types of liquidity sources to be plugged into. Liquidity providers may employ different strategies and different implementations to contribute liquidity to the protocol. ● Permissionless. The protocol is designed to be permissionless where any developer can set up various types of reserves, and any end user can contribute liquidity. Implementations need to take into consideration various security vectors, such as reserve spamming, but can be mitigated through a staking mechanism. We can expect implementations to be permissioned initially until the maintainers are confident about these considerations.
The core feature that the Kyber protocol facilitates is the token swap between taker and liquidity sources. The protocol aims to provide the following properties for token trades: ● Instant Settlement. Takers do not have to wait for their orders to be fulfilled, since trade matching and settlement occurs in a single blockchain transaction. This enables trades to be part of a series of actions happening in a single smart contract function. ● Atomicity. When takers make a trade request, their trade either gets fully executed, or is reverted. This “all or nothing” aspect means that takers are not exposed to the risk of partial trade execution. ● Public rate verification. Anyone can verify the rates that are being offered by reserves and have their trades instantly settled just by querying from the smart contracts. ● Ease of integration. Trustless and atomic token trades can be directly and easily integrated into other smart contracts, thereby enabling multiple trades to be performed in a smart contract function.
How each actor works is specified in Section Network Actors. 1. Takers refer to anyone who can directly call the smart contract functions to trade tokens, such as end-users, DApps, and wallets. 2. Reserves refer to anyone who wishes to provide liquidity. They have to implement the smart contract functions defined in the reserve interface in order to be registered and have their token pairs listed. 3. Registered reserves refer to those that will be cycled through for matching taker requests. 4. Maintainers refer to anyone who has permission to access the functions for the adding/removing of reserves and token pairs, such as a DAO or the team behind the protocol implementation. 5. In all, they comprise of the network, which refers to all the actors involved in any given implementation of the protocol.
The protocol implementation needs to have the following: 1. Functions for takers to check rates and execute the trades 2. Functions for the maintainers to registeremove reserves and token pairs 3. Reserve interface that defines the functions reserves needs to implement
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1.3 KYBER CORE SMART CONTRACTS

Kyber Core smart contracts is an implementation of the protocol that has major protocol functions to allow actors to join and interact with the network. For example, the Kyber Core smart contracts provide functions for the listing and delisting of reserves and trading pairs by having clear interfaces for the reserves to comply to be able to register to the network and adding support for new trading pairs. In addition, the Kyber Core smart contracts also provide a function for takers to query the best rate among all the registered reserves, and perform the trades with the corresponding rate and reserve. A trading pair consists of a quote token and any other token that the reserve wishes to support. The quote token is the token that is either traded from or to for all trades. For example, the Ethereum implementation of the Kyber protocol uses Ether as the quote token.
In order to search for the best rate, all reserves supporting the requested token pair will be iterated through. Hence, the Kyber Core smart contracts need to have this search algorithm implemented.
The key functions implemented in the Kyber Core Smart Contracts are listed in Figure 2 below. We will visit and explain the implementation details and security considerations of each function in the Specification Section.

1.4 HOW KYBER’S ON-CHAIN PROTOCOL WORKS?

Kyber is the liquidity infrastructure for decentralized finance. Kyber aggregates liquidity from diverse sources into a pool, which provides the best rates for takers such as DApps, Wallets, DEXs, and End users.

1.4.1 PROVIDING LIQUIDITY AS A RESERVE

Anyone can operate a Kyber Reserve to market make for profit and make their tokens available for DApps in the ecosystem. Through an open reserve architecture, individuals, token teams and professional market makers can contribute token assets to Kyber’s liquidity pool and earn from the spread in every trade. These tokens become available at the best rates across DApps that tap into the network, making them instantly more liquid and useful.
MAIN RESERVE TYPES Kyber currently has over 45 reserves in its network providing liquidity. There are 3 main types of reserves that allow different liquidity contribution options to suit the unique needs of different providers. 1. Automated Price Reserves (APR) — Allows token teams and users with large token holdings to have an automated yet customized pricing system with low maintenance costs. Synthetix and Melon are examples of teams that run APRs. 2. Fed Price Reserves (FPR) — Operated by professional market makers that require custom and advanced pricing strategies tailored to their specific needs. Kyber alongside reserves such as OneBit, runs FPRs. 3. Bridge Reserves (BR) — These are specialized reserves meant to bring liquidity from other on-chain liquidity providers like Uniswap, Oasis, DutchX, and Bancor into the network.

1.5 KYBER NETWORK ROLES

There Kyber Network functions through coordination between several different roles and functions as explained below: - Users — This entity uses the Kyber Network to send and receive tokens. A user can be an individual, a merchant, and even a smart contract account. - Reserve Entities — This role is used to add liquidity to the platform through the dynamic reserve pool. Some reserve entities are internal to the Kyber Network, but others may be registered third parties. Reserve entities may be public if the public contributes to the reserves they hold, otherwise they are considered private. By allowing third parties as reserve entities the network adds diversity, which prevents monopolization and keeps exchange rates competitive. Allowing third party reserve entities also allows for the listing of less popular coins with lower volumes. - Reserve Contributors — Where reserve entities are classified as public, the reserve contributor is the entity providing reserve funds. Their incentive for doing so is a profit share from the reserve. - The Reserve Manager — Maintains the reserve, calculates exchange rates and enters them into the network. The reserve manager profits from exchange spreads set by them on their reserves. They can also benefit from increasing volume by accessing the entire Kyber Network. - The Kyber Network Operator — Currently the Kyber Network team is filling the role of the network operator, which has a function to adds/remove Reserve Entities as well as controlling the listing of tokens. Eventually, this role will revert to a proper decentralized governance.

1.6 BASIC TOKEN TRADE

A basic token trade is one that has the quote token as either the source or destination token of the trade request. The execution flow of a basic token trade is depicted in the diagram below, where a taker would like to exchange BAT tokens for ETH as an example. The trade happens in a single blockchain transaction. 1. Taker sends 1 ETH to the protocol contract, and would like to receive BAT in return. 2. Protocol contract queries the first reserve for its ETH to BAT exchange rate. 3. Reserve 1 offers an exchange rate of 1 ETH for 800 BAT. 4. Protocol contract queries the second reserve for its ETH to BAT exchange rate. 5. Reserve 2 offers an exchange rate of 1 ETH for 820 BAT. 6. This process goes on for the other reserves. After the iteration, reserve 2 is discovered to have offered the best ETH to BAT exchange rate. 7. Protocol contract sends 1 ETH to reserve 2. 8. The reserve sends 820 BAT to the taker.

1.7 TOKEN-TO-TOKEN TRADE

A token-to-token trade is one where the quote token is neither the source nor the destination token of the trade request. The exchange flow of a token to token trade is depicted in the diagram below, where a taker would like to exchange BAT tokens for DAI as an example. The trade happens in a single blockchain transaction. 1. Taker sends 50 BAT to the protocol contract, and would like to receive DAI in return. 2. Protocol contract sends 50 BAT to the reserve offering the best BAT to ETH rate. 3. Protocol contract receives 1 ETH in return. 4. Protocol contract sends 1 ETH to the reserve offering the best ETH to DAI rate. 5. Protocol contract receives 30 DAI in return. 6. Protocol contract sends 30 DAI to the user.

2.KYBER NETWORK CRYSTAL (KNC) TOKEN

Kyber Network Crystal (KNC) is an ERC-20 utility token and an integral part of Kyber Network.
KNC is the first deflationary staking token where staking rewards and token burns are generated from actual network usage and growth in DeFi.
The Kyber Network Crystal (KNC) is the backbone of the Kyber Network. It works to connect liquidity providers and those who need liquidity and serves three distinct purposes. The first of these is to collect transaction fees, and a portion of every fee collected is burned, which keeps KNC deflationary. Kyber Network Crystals (KNC), are named after the crystals in Star Wars used to power light sabers.
The KNC also ensures the smooth operation of the reserve system in the Kyber liquidity since entities must use third-party tokens to buy the KNC that pays for their operations in the network.
KNC allows token holders to play a critical role in determining the incentive system, building a wide base of stakeholders, and facilitating economic flow in the network. A small fee is charged each time a token exchange happens on the network, and KNC holders get to vote on this fee model and distribution, as well as other important decisions. Over time, as more trades are executed, additional fees will be generated for staking rewards and reserve rebates, while more KNC will be burned. - Participation rewards — KNC holders can stake KNC in the KyberDAO and vote on key parameters. Voters will earn staking rewards (in ETH) - Burning — Some of the network fees will be burned to reduce KNC supply permanently, providing long-term value accrual from decreasing supply. - Reserve incentives — KNC holders determine the portion of network fees that are used as rebates for selected liquidity providers (reserves) based on their volume performance.

Finally, the KNC token is the connection between the Kyber Network and the exchanges, wallets, and dApps that leverage the liquidity network. This is a virtuous system since entities are rewarded with referral fees for directing more users to the Kyber Network, which helps increase adoption for Kyber and for the entities using the Network.
And of course there will soon be a fourth and fifth uses for the KNC, which will be as a staking token used to generate passive income, as well as a governance token used to vote on key parameters of the network.
The Kyber Network Crystal (KNC) was released in a September 2017 ICO at a price around $1. There were 226,000,000 KNC minted for the ICO, with 61% sold to the public. The remaining 39% are controlled 50/50 by the company and the founders/advisors, with a 1 year lockup period and 2 year vesting period.
Currently, just over 180 million coins are in circulation, and the total supply has been reduced to 210.94 million after the company burned 1 millionth KNC token in May 2019 and then its second millionth KNC token just three months later.
That means that while it took 15 months to burn the first million KNC, it took just 10 weeks to burn the second million KNC. That shows how rapidly adoption has been growing recently for Kyber, with July 2019 USD trading volumes on the Kyber Network nearly reaching $60 million. This volume has continued growing, and on march 13, 2020 the network experienced its highest daily trading activity of $33.7 million in a 24-hour period.
Currently KNC is required by Reserve Managers to operate on the network, which ensures a minimum amount of demand for the token. Combined with future plans for burning coins, price is expected to maintain an upward bias, although it has suffered along with the broader market in 2018 and more recently during the summer of 2019.
It was unfortunate in 2020 that a beginning rally was cut short by the coronavirus pandemic, although the token has stabilized as of April 2020, and there are hopes the rally could resume in the summer of 2020.

2.1 HOW ARE KNC TOKENS PRODUCED?

The native token of Kyber is called Kyber Network Crystals (KNC). All reserves are required to pay fees in KNC for the right to manage reserves. The KNC collected as fees are either burned and taken out of the total supply or awarded to integrated dapps as an incentive to help them grow.

2.2 HOW DO YOU GET HOLD OF KNC TOKENS?

Kyber Swap can be used to buy ETH directly using a credit card, which can then be used to swap for KNC. Besides Kyber itself, exchanges such as Binance, Huobi, and OKex trade KNC.

2.3 WHAT CAN YOU DO WITH KYBER?

The most direct and basic function of Kyber is for instantly swapping tokens without registering an account, which anyone can do using an Etheruem wallet such as MetaMask. Users can also create their own reserves and contribute funds to a reserve, but that process is still fairly technical one–something Kyber is working on making easier for users in the future.

2.4 THE GOAL OF KYBER THE FUTURE

The goal of Kyber in the coming years is to solidify its position as a one-stop solution for powering liquidity and token swapping on Ethereum. Kyber plans on a major protocol upgrade called Katalyst, which will create new incentives and growth opportunities for all stakeholders in their ecosystem, especially KNC holders. The upgrade will mean more use cases for KNC including to use KNC to vote on governance decisions through a decentralized organization (DAO) called the KyberDAO.
With our upcoming Katalyst protocol upgrade and new KNC model, Kyber will provide even more benefits for stakeholders. For instance, reserves will no longer need to hold a KNC balance for fees, removing a major friction point, and there will be rebates for top performing reserves. KNC holders can also stake their KNC to participate in governance and receive rewards.

2.5 BUYING & STORING KNC

Those interested in buying KNC tokens can do so at a number of exchanges. Perhaps your best bet between the complete list is the likes of Coinbase Pro and Binance. The former is based in the USA whereas the latter is an offshore exchange.
The trading volume is well spread out at these exchanges, which means that the liquidity is not concentrated and dependent on any one exchange. You also have decent liquidity on each of the exchange books. For example, the Binance BTC / KNC books are wide and there is decent turnover. This means easier order execution.
KNC is an ERC20 token and can be stored in any wallet with ERC20 support, such as MyEtherWallet or MetaMask. One interesting alternative is the KyberSwap Android mobile app that was released in August 2019.
It allows for instant swapping of tokens and has support for over 70 different altcoins. It also allows users to set price alerts and limit orders and works as a full-featured Ethereum wallet.

2.6 KYBER KATALYST UPGRADE

Kyber has announced their intention to become the de facto liquidity layer for the Decentralized Finance space, aiming to have Kyber as the single on-chain endpoint used by the majority of liquidity providers and dApp developers. In order to achieve this goal the Kyber Network team is looking to create an open ecosystem that garners trust from the decentralized finance space. They believe this is the path that will lead the majority of projects, developers, and users to choose Kyber for liquidity needs. With that in mind they have recently announced the launch of a protocol upgrade to Kyber which is being called Katalyst.
The Katalyst upgrade will create a stronger ecosystem by creating strong alignments towards a common goal, while also strengthening the incentives for stakeholders to participate in the ecosystem.
The primary beneficiaries of the Katalyst upgrade will be the three major Kyber stakeholders: 1. Reserve managers who provide network liquidity; 2. dApps that connect takers to Kyber; 3. KNC holders.
These stakeholders can expect to see benefits as highlighted below: Reserve Managers will see two new benefits to providing liquidity for the network. The first of these benefits will be incentives for providing reserves. Once Katalyst is implemented part of the fees collected will go to the reserve managers as an incentive for providing liquidity.
This mechanism is similar to rebates in traditional finance, and is expected to drive the creation of additional reserves and market making, which in turn will lead to greater liquidity and platform reach.
Katalyst will also do away with the need for reserve managers to maintain a KNC balance for use as network fees. Instead fees will be automatically collected and used as incentives or burned as appropriate. This should remove a great deal of friction for reserves to connect with Kyber without affecting the competitive exchange rates that takers in the system enjoy. dApp Integrators will now be able to set their own spread, which will give them full control over their own business model. This means the current fee sharing program that shares 30% of the 0.25% fee with dApp developers will go away and developers will determine their own spread. It’s believed this will increase dApp development within Kyber as developers will now be in control of fees.
KNC Holders, often thought of as the core of the Kyber Network, will be able to take advantage of a new staking mechanism that will allow them to receive a portion of network fees by staking their KNC and participating in the KyberDAO.

2.7 COMING KYBERDAO

With the implementation of the Katalyst protocol the KNC holders will be put right at the heart of Kyber. Holders of KNC tokens will now have a critical role to play in determining the future economic flow of the network, including its incentive systems.
The primary way this will be achieved is through KyberDAO, a way in which on-chain and off-chain governance will align to streamline cooperation between the Kyber team, KNC holders, and market participants.
The Kyber Network team has identified 3 key areas of consideration for the KyberDAO: 1. Broad representation, transparent governance and network stability 2. Strong incentives for KNC holders to maintain their stake and be highly involved in governance 3. Maximizing participation with a wide range of options for voting delegation
Interaction between KNC Holders & Kyber
This means KNC holders have been empowered to determine the network fee and how to allocate the fees to ensure maximum network growth. KNC holders will now have three fee allocation options to vote on: - Voting Rewards: Immediate value creation. Holders who stake and participate in the KyberDAO get their share of the fees designated for rewards. - Burning: Long term value accrual. The decreasing supply of KNC will improve the token appreciation over time and benefit those who did not participate. - Reserve Incentives:Value creation via network growth. By rewarding Kyber reserve managers based on their performance, it helps to drive greater volume, value, and network fees.

2.8 TRANSPARENCY AND STABILITY

The design of the KyberDAO is meant to allow for the greatest network stability, as well as maximum transparency and the ability to quickly recover in emergency situations. Initally the Kyber team will remain as maintainers of the KyberDAO. The system is being developed to be as verifiable as possible, while still maintaining maximum transparency regarding the role of the maintainer in the DAO.
Part of this transparency means that all data and processes are stored on-chain if feasible. Voting regarding network fees and allocations will be done on-chain and will be immutable. In situations where on-chain storage or execution is not feasible there will be a set of off-chain governance processes developed to ensure all decisions are followed through on.

2.9 KNC STAKING AND DELEGATION

Staking will be a new addition and both staking and voting will be done in fixed periods of times called “epochs”. These epochs will be measured in Ethereum block times, and each KyberDAO epoch will last roughly 2 weeks.
This is a relatively rapid epoch and it is beneficial in that it gives more rapid DAO conclusion and decision-making, while also conferring faster reward distribution. On the downside it means there needs to be a new voting campaign every two weeks, which requires more frequent participation from KNC stakeholders, as well as more work from the Kyber team.
Delegation will be part of the protocol, allowing stakers to delegate their voting rights to third-party pools or other entities. The pools receiving the delegation rights will be free to determine their own fee structure and voting decisions. Because the pools will share in rewards, and because their voting decisions will be clearly visible on-chain, it is expected that they will continue to work to the benefit of the network.

3. TRADING

After the September 2017 ICO, KNC settled into a trading price that hovered around $1.00 (decreasing in BTC value) until December. The token has followed the trend of most other altcoins — rising in price through December and sharply declining toward the beginning of January 2018.
The KNC price fell throughout all of 2018 with one exception during April. From April 6th to April 28th, the price rose over 200 percent. This run-up coincided with a blog post outlining plans to bring Bitcoin to the Ethereum blockchain. Since then, however, the price has steadily fallen, currently resting on what looks like a $0.15 (~0.000045 BTC) floor.
With the number of partners using the Kyber Network, the price may rise as they begin to fully use the network. The development team has consistently hit the milestones they’ve set out to achieve, so make note of any release announcements on the horizon.

4. COMPETITION

The 0x project is the biggest competitor to Kyber Network. Both teams are attempting to enter the decentralized exchange market. The primary difference between the two is that Kyber performs the entire exchange process on-chain while 0x keeps the order book and matching off-chain.
As a crypto swap exchange, the platform also competes with ShapeShift and Changelly.

5.KYBER MILESTONES

• June 2020: Digifox, an all-in-one finance application by popular crypto trader and Youtuber Nicholas Merten a.k.a DataDash (340K subs), integrated Kyber to enable users to easily swap between cryptocurrencies without having to leave the application. • June 2020: Stake Capital partnered with Kyber to provide convenient KNC staking and delegation services, and also took a KNC position to participate in governance. • June 2020: Outlined the benefits of the Fed Price Reserve (FPR) for professional market makers and advanced developers. • May 2020: Kyber crossed US$1 Billion in total trading volume and 1 Million transactions, performed entirely on-chain on Ethereum. • May 2020: StakeWith.Us partnered Kyber Network as a KyberDAO Pool Master. • May 2020: 2Key, a popular blockchain referral solution using smart links, integrated Kyber’s on-chain liquidity protocol for seamless token swaps • May 2020: Blockchain game League of Kingdoms integrated Kyber to accept Token Payments for Land NFTs. • May 2020: Joined the Zcash Developer Alliance , an invite-only working group to advance Zcash development and interoperability. • May 2020: Joined the Chicago DeFi Alliance to help accelerate on-chain market making for professionals and developers. • March 2020: Set a new record of USD $33.7M in 24H fully on-chain trading volume, and $190M in 30 day on-chain trading volume. • March 2020: Integrated by Rarible, Bullionix, and Unstoppable Domains, with the KyberWidget deployed on IPFS, which allows anyone to swap tokens through Kyber without being blocked. • February 2020: Popular Ethereum blockchain game Axie Infinity integrated Kyber to accept ERC20 payments for NFT game items. • February 2020: Kyber’s protocol was integrated by Gelato Finance, Idle Finance, rTrees, Sablier, and 0x API for their liquidity needs. • January 2020: Kyber Network was found to be the most used protocol in the whole decentralized finance (DeFi) space in 2019, according to a DeFi research report by Binance. • December 2019: Switcheo integrated Kyber’s protocol for enhanced liquidity on their own DEX. • December 2019: DeFi Wallet Eidoo integrated Kyber for seamless in-wallet token swaps. • December 2019: Announced the development of the Katalyst Protocol Upgrade and new KNC token model. • July 2019: Developed the Waterloo Bridge , a Decentralized Practical Cross-chain Bridge between EOS and Ethereum, successfully demonstrating a token swap between Ethereum to EOS. • July 2019: Trust Wallet, the official Binance wallet, integrated Kyber as part of its decentralized token exchange service, allowing even more seamless in-wallet token swaps for thousands of users around the world. • May 2019: HTC, the large consumer electronics company with more than 20 years of innovation, integrated Kyber into its Zion Vault Wallet on EXODUS 1 , the first native web 3.0 blockchain phone, allowing users to easily swap between cryptocurrencies in a decentralized manner without leaving the wallet. • January 2019: Introduced the Automated Price Reserve (APR) , a capital efficient way for token teams and individuals to market make with low slippage. • January 2019: The popular Enjin Wallet, a default blockchain DApp on the Samsung S10 and S20 mobile phones, integrated Kyber to enable in-wallet token swaps. • October 2018: Kyber was a founding member of the WBTC (Wrapped Bitcoin) Initiative and DAO. • October 2018: Developed the KyberWidget for ERC20 token swaps on any website, with CoinGecko being the first major project to use it on their popular site.

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Crypto-Powered: Understanding Bitcoin, Ethereum, and DeFi

Crypto-Powered: Understanding Bitcoin, Ethereum, and DeFi
Until one understands the basics of this tech, they won’t be able to grasp or appreciate the impact it has on our digital bank, Genesis Block.
https://reddit.com/link/ho4bif/video/n0euarkifu951/player
This is the second post of Crypto-Powered — a new series that examines what it means for Genesis Block to be a digital bank that’s powered by crypto, blockchain, and decentralized protocols.
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Our previous post set the stage for this series. We discussed the state of consumer finance and how the success of today’s high-flying fintech unicorns will be short-lived as long as they’re building on legacy finance — a weak foundation that is ripe for massive disruption.
Instead, the future of consumer finance belongs to those who are deeply familiar with blockchain tech & decentralized protocols, build on it as the foundation, and know how to take it to the world. Like Genesis Block.
Today we begin our journey down the crypto rabbit hole. This post will be an important introduction for those still learning about Bitcoin, Ethereum, or DeFi (Decentralized Finance). This post (and the next few) will go into greater detail about how this technology gives Genesis Block an edge, a superpower, and an unfair advantage. Let’s dive in…
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Bitcoin: The First Cryptocurrency

There are plenty of online resources to learn about Bitcoin (Coinbase, Binance, Gemini, Naval, Alex Gladstein, Marc Andreessen, Chris Dixon). I don’t wanna spend a lot of time on that here, but let’s do a quick overview for those still getting ramped up.
Cryptocurrency is the most popular use-case of blockchain technology today. And Bitcoin was the first cryptocurrency to be invented.
Bitcoin is the most decentralized of all crypto assets today — no government, company, or third party can control or censor it.
Bitcoin has two primary features (as do most other cryptocurrencies):
  1. Send Value You can send value to anyone, anywhere in the world. Nobody can intercept, delay or stop it — not even governments or financial institutions. Unlike with traditional money transfers or bank wires, there are no layers of middlemen. This results in a process that is much more cost-efficient. Some popular use-cases include remittances and cross-border payments.
  2. Store Value With nothing but a smartphone, you can become your own bank and store your own funds. Nobody can seize your assets. The funds are digital and stored on a blockchain. Your money no longer needs to be stored at a bank, in a vault, or under your mattress. I covered a few inspiring use-cases in a previous post. They include banking the unbanked, protecting assets from government seizure, mitigating the risk of a bank run, and protection against hyperinflation (like what recently happened in Venezuela).
The fact that there are so few things one can do with Bitcoin is one of its greatest strengths.
Its design is simple, elegant, and focused. It has been 10+ years since Satoshi’s white paper and no one has been able to crack or hack the Bitcoin network. With a market cap of $170B, there is plenty of incentive to try.
https://preview.redd.it/bizndfpkfu951.png?width=800&format=png&auto=webp&s=456c53b798248e60456a65835a33c69b2fe8daf0

Public Awareness

A few negative moments in Bitcoin’s history include the collapse of Mt. Gox — which resulted in hundreds of millions of customer funds being stolen — as well as Bitcoin’s role in dark markets like Silk Road — where Bitcoin arguably found its initial userbase.
However, like most breakthrough technology, Bitcoin is neither good nor bad. It’s neutral. People can use it for good or they can use it for evil. Thankfully, it’s being used less and less for illicit activity. Criminals are starting to understand that transactions on a blockchain are public and traceable — it’s exactly the type of system they usually try to avoid. And it’s true, at this point “a lot more” crimes are actually committed with fiat than crypto.
As a result, the perception of bitcoin and cryptocurrency has been changing over the years to a more positive light.
Bitcoin has even started to enter the world of media & entertainment. It’s been mentioned in Hollywood films like Spiderman: Into the Spider-Verse and in songs from major artists like Eminem. It’s been mentioned in countless TV shows like Billions, The Simpsons, Big Bang Theory, Gray’s Anatomy, Family Guy, and more.
As covid19 has ravaged economies and central banks have been printing money, Bitcoin has caught the attention of many legendary Wall Street investors like Paul Tudor Jones, saying that Bitcoin is a great bet against inflation (reminding him of Gold in the 1970s).
Cash App already lets their 25M users buy Bitcoin. It’s rumored that PayPal and Venmo will soon let their 325M users start buying Bitcoin. Bitcoin is by far the most dominant cryptocurrency and is showing no signs of slowing down. For more than a decade it has delivered on its core use-cases — being able to send or store value.
At this point, Bitcoin has very much entered the zeitgeist of modern pop culture — at least in the West.
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Ethereum: Programmable Money

When Ethereum launched in 2015, it opened up a world of new possibilities and use-cases for crypto. With Ethereum Smart Contracts (i.e. applications), this exciting new digital money (cryptocurrency) became a lot less dumb. Developers could now build applications that go beyond the simple use-cases of “send value” & “store value.” They could program cryptocurrency to have rules, behavior, and logic to respond to different inputs. And always enforced by code. Additional reading on Ethereum from Linda Xie or Vitalik Buterin.
Because these applications are built on blockchain technology (Ethereum), they preserve many of the same characteristics as Bitcoin: no one can stop, censor or shut down these apps because they are decentralized.
One of the first major use-cases on Ethereum was the ability to mint and create your own token, your own cryptocurrency. Many companies used this as a way to fundraise from the public. This led to the 2017 ICO bubble (Initial Coin Offerings). Some tokens — and the apps/networks they powered — were fascinating and innovative. Most tokens were pointless. And many tokens were outright scams. Additional token reading from Fred Ehrsam, Balaji, and Naval.
https://reddit.com/link/ho4bif/video/b5b1jh9ofu951/player

Digital Gold Rush

Just as tokens grew in popularity in 2017–2018, so did online marketplaces where these tokens could be bought, sold, and traded. This was a fledgling asset class — the merchants selling picks, axes, and shovels were finally starting to emerge.
I had a front-row seat — both as an investor and token creator. This was the Wild West with all the frontier drama & scandal that you’d expect.
Binance — now the world’s largest crypto exchange —was launched during this time. They along with many others (especially from Asia) made it really easy for speculators, traders, and degenerate gamblers to participate in these markets. Similar to other financial markets, the goal was straightforward: buy low and sell high.
https://preview.redd.it/tytsu5jnfu951.jpg?width=600&format=pjpg&auto=webp&s=fe3425b7e4a71fa953b953f0c7f6eaff6504a0d1
That period left an embarrassing stain on our industry that we’ve still been trying to recover from. It was a period rampant with market manipulation, pump-and-dumps, and scams. To some extent, the crypto industry still suffers from that today, but it’s nothing compared to what it was then.
While the potential of getting filthy rich brought a lot of fly-by-nighters and charlatans into the industry, it also brought a lot of innovators, entrepreneurs, and builders.
The launch and growth of Ethereum has been an incredible technological breakthrough. As with past tech breakthroughs, it has led to a wave of innovation, experimentation, and development. The creativity around tokens, smart contracts, and decentralized applications has been fascinating to witness. Now a few years later, the fruits of those labors are starting to be realized.

DeFi: Decentralized Finance

So as a reminder, tokens are cryptocurrencies. Cryptocurrencies can carry value. And value is a lot like money. Because tokens are natively integrated with Ethereum, it’s been natural for developers to build applications related to financial services — things like lending, borrowing, saving, investing, payments, and insurance. In the last few years, there has been a groundswell of developer momentum building in this area of financial protocols. This segment of the industry is known as DeFi (Decentralized Finance).
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In Q2 of 2020, 97% of all Ethereum activity was DeFi-related. Total DeFi transaction volume has reached $11.5B. The current value locked inside DeFi protocols is approaching $2 Billion (double from a month ago). DeFi’s meteoric growth cannot be ignored.
Most of that growth can be attributed to exciting protocols like Compound, Maker, Synthetix, Balancer, Aave, dYdX, and Uniswap. These DeFi protocols and the financial services they offer are quickly becoming some of the most popular use-cases for blockchain technology today.
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This impressive growth in DeFi certainly hasn’t come without growing pains. Unlike with Bitcoin, there are near-infinite applications one can develop on Ethereum. Sometimes bugs (or typos) can slip through code reviews, testing, and audits — resulting in loss of funds.
Our next post will go much deeper on DeFi.

Wrap Up

I know that for the hardcore crypto people, what we covered today is nothing new. But for those who are still getting up to speed, welcome! I hope this was helpful and that it fuels your interest to learn more.
Until you understand the basics of this technology, you won’t be able to fully appreciate the impact that it has on our new digital bank, Genesis Block. You won’t be able to understand the implications, how it relates, or how it helps.
After today’s post, some of you probably have a lot more questions. What are specific examples or use-cases of DeFi? Why does it need to be on a blockchain? What benefits does it bring to Genesis Block and our users?
In upcoming posts, we answer these questions. Today’s post was just Level 1. It set the foundation for where we’re headed next: even deeper down the crypto rabbit hole.
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Have you already downloaded the app? We're Genesis Block, a new digital bank that's powered by crypto & decentralized protocols. The app is live in the App Store (iOS & Android). Get the link to download at https://genesisblock.com/download
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Wall Street 2.0: How Blockchain will revolutionise Wall Street and a closer look at Quant Network’s Partnership with AX Trading

Wall Street 2.0: How Blockchain will revolutionise Wall Street and a closer look at Quant Network’s Partnership with AX Trading
AX Trading LLC (AX), a technology-enabled registered broker-dealer and Alternative Trading System (ATS) operator, today announced a strategic partnership with Quant Network a pioneering technology company providing financial and regulatory technology as well as interoperability in financial services, payments and capital markets infrastructure. Through this partnership, Quant Network’s technology, Overledger a blockchain operating system, will enable universal interoperability for regulatory-compliant security tokens and digital assets to be traded on AX ATS, a regulated secondary trading market. AX intends to integrate Overledger to help foster the evolution of traditional capital markets infrastructure to facilitate the mass implementation of interoperable regulated digital assets. With the increased market adoption of digital assets and banking “coins” such as JPMorgan Coin, AX and Quant Network are at the forefront to enable the transferability and movement of digital assets. George O’Krepkie, AX CEO said: “we look forward to partnering with Quant. Their technology will allow our blockchain agnostic security token exchange to communicate seamlessly with issuers, traders, investors, and regulators across different blockchain protocols. This is a key technological breakthrough that will help us bring the benefits of security tokens to Main Street and Wall Street.” It is expected that the first interoperable digital asset offering may commence as soon as January 2020, and that the AX Trading ATS may be ready to enable and list interoperable digital assets and securities in 2020.
Let’s have a closer look at what that means to truly appreciate the significance of the partnership by covering the basics for those not familiar with wall street.
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What is an Institutional Investor / Trader?

An institutional investor is an organization that invests on behalf of the organization's members. They consist of hedge funds, banks, investment banks, pension funds, insurance companies, endowment funds, or any other type of money management firm.
Institutional investors account for about three-quarters of the volume on the New York Stock Exchange (which alone handles more than $20 Trillion a year in volume). In the US, Institutional investors own about 80 % of the total market value of the equity (stock) market, which globally is worth more than $73 trillion.
Wall Street refers to the institutional investors I mentioned above whereas Main Street refers collectively to members of the general public who are not accredited investors and the overall economy as a whole.
Whilst the Equity Market is huge, Institutional investors also invest in other securities which are prime to be tokenised such as Real Estate Market (Globally worth $217 trillion), the Debt Market (Globally worth $215 trillion) and the Derivatives Market (Low end estimates at $544 trillion and high-end estimates at $1.2 quadrillion). All of which makes the current market cap for cryptocurrencies look like a drop in the ocean.

Who are AX Trading?

AX Trading is a SEC-registered broker-dealer and Alternative Trading System (ATS) Operator. They are a member of FINRA (Financial Industry Regulatory Authority)and SIPC ( Securities Investor Protection Corporation) regulated authorities. The SEC has some of the most stringent regulations in the world for listing securities and there are fewer than 50 SEC-registered Alternative Trading System Operators in the United States, of which only a handful are currently implementing Digital Assets. Others are awaiting regulatory approval with Coinbase, Circle etc are all looking at getting into this huge market.
https://www.coindesk.com/stonewalled-by-finra-up-to-40-crypto-securities-wait-in-limbo-for-launch
AX Trading have investors and sponsored brokers including the likes of Credit Suisse, (a multinational investment Bank and Financial services company worth $27.5 billion). AX currently have over 800 Institutional traders (these are not individuals, but corporations such as hedge funds, banks, investment banks, pension funds, insurance companies, endowment funds etc).
AX Trading have also partnered with Euronext, the largest Stock Exchange in Europe with a market cap of $4.65 trillion as of 2018, in the creation of Euronext Block which utilises AX Trading.

What is an Alternative Trading System?

An Alternative Trading System (ATS) is an SEC-regulated trading venue which serves as an alternative to trading at a public exchange. ATS account for much of the liquidity found in publicly traded issues worldwide. They are known as multilateral trading facilities in Europe, electronic communication networks (ECNs), cross networks, and call networks
AX is the world’s first “Electronic Trading Network” (ETN) where institutional traders can proactively connect and trade with other counterparties in a secure environment. Unlike traditional stock exchanges/ECNs that show orders to everyone and traditional dark pools/crossing systems that show orders — presumably — to no one, AX allows institutional traders to pick and choose WHOM they want to notify and also WHAT information they want to share with them.
Institutional investors may use an ATS to find counterparties for transactions instead of trading large blocks of shares on national stock exchanges. These actions may be designed to conceal trading from public view since ATS transactions do not appear on national exchange order books. The benefit of using an ATS to execute such orders is that it reduces the domino effect that large trades might have on the price of an equity.

How does AX Trading Work?

The AX Trading process begins when one trader sends an “initiated” order to AX. The order can be routed to the AX ATS via one of our broker sponsors such as Credit Suisse. The initiated order triggers a “Call Auction” on AX, a period of time when the order will rest in AX to be matched against other orders from auction responders.
The Initiator of an AX auction decides who they want to invite to participate in the auction, whether they be all 800+ institutional members or targeted to specific ones, as well as how much info they want to disclose about the order. Based on these instructions, the AX ATS then notifies the members inviting them to participate in the trade.
The invited members can then participate in the trade by either placing buy orders of their own or placing sell orders. At the end of the AX auction period, all orders are brought together, and a match is performed.
In the traditional, continuous market with displayed bids and offers, traders are often chasing liquidity. In other words, the price may move away from them the more they buy or sell to what is commonly called “market impact.” On AX, the advantage of their call auction model is it brings liquidity — in the form of participant orders to the buyer rather than them chasing liquidity.

What is a Security Token?

Security Tokens are different than Utility Tokens or Cryptocurrencies. A security token is a digital representation of a traditional security. It may represent shares in a company, interest in a fund, real estate, art collectables, or essentially any asset a party can own. Anthony Pompliano wrote an article explaining tokenised securities in more detail which you can see here
Security Tokens are digital assets subject to federal security regulations. In layman terms, they are the intersection of digital assets (tokens) with traditional financial products — a new technology improving old things. If cryptocurrencies like Bitcoin are considered “programmable money” then you can consider Security Tokens a version of “programmable ownership.” This means that any asset with ownership can and will be tokenized (public & private equities, debt, real estate, etc).
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Quant Network community member David W also wrote an excellent piece on the benefits of tokenisation of assets in a lot more detail than what I will briefly cover here and strongly recommend you check it out.
The Tokenisation of assets is therefore inevitable, because it is a better way to record, exchange and monitor asset ownership for all parties involved. The amounts at stake represent many hundreds of trillions of US dollars

What are the benefits of a security token?

  • Lower Fees — having Smart Contracts and compliance programmed into the token itself removes the need for middlemen, reducing costs. Post Trade businesses such as clearing houses would also no longer be required further reducing costs.
  • 24/7 markets — Currently the major US stock markets trade between 9:30am and 3pm during weekdays only. Trading can be done 24/7 and globally whilst remaining compliant.
  • Fractional Ownership — This greatly increases liquidity for previously illiquid assets. Real estate, Artwork, even assets such as Oil Refineries are already in talks about being tokenised through Overledger. If you have an asset such as an oil refinery worth billions of dollars, then naturally this limits the market should you ever want to sell it. However with fractional ownership you could own a tiny percentage of it and receive profits from the oil refinery based upon the percentage you own, which exponentially increases the number ofpotential buyers, increasing liquidity.
  • Rapid Settlement — Currently it takes 3 working days to settle a securities trade, this can be reduced to minutes by having the asset and fiat represented on a blockchain and handled through smart contracts.
  • Automated compliance — Security tokens are programmable, and rules and regulations are hard-coded into the architecture of the token to ensure they always remain compliant. This means that they can be traded globally and still ensure they respect the relevant countries regulations that the participants are located in.
  • The benefits that a blockchain provide such as transparency, security, immutability, high availability. Regulators can also run a node and verify compliance in real time.

Security Token Issuance Platforms

Security token issuance platforms allow issuers to issue Security tokens that represent the security such as Shares in their company etc in return for capital. This is known as a Primary Market. Importantly it’s not just the issuance that they look after, it’s the whole life cycle of a digital security to ensure they remain continuously in compliance as they are traded etc. They also provide reporting to the issuer so they can see who owns the tokens and what dividends to pay out.
Securitize are one of the leading security tokens issuing platforms. They have created the DS Protocol, a blockchain agnostic protocol for security tokens which manages the whole lifecycle of a digital security, ensuring it remains continuously in compliance. They have issued a number of security tokens on the Ethereum network as well as recently working with IBM to tokenise the Corporate Debt Market (worth $82 Trillion). On the back of this they joined Hyperledger, an open source project which includes Enterprise blockchains such as Hyperledger Fabric which IBM is heavily involved with.
https://tokenpost.com/Quant-Network-Securitize-and-others-join-Hyperledger-blockchain-project-1544
They recently also became the first SEC-registered transfer agent, which means Securitize can now act as the official keeper of records about changes of ownership in securities.
There are many companies in this sector which are utilising various blockchains, Other examples include:
  • Harber — R Token protocol for Ethereum
  • Polymath — ST20 protocol for Ethereum
  • Blockstate — a security token issuance platform recently announced plans to migrate a number of ERC-20 tokens from the public Ethereum blockchain to the permissioned blockchain R3 Corda
  • Dusk — Uses the Dusk blockchain
  • Own — Uses the Own blockchain
And many more such as Nefund, Bankex, Capexmove, Swarm, Symbiont, Tokeny etc

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Trading Venues

Whilst the issuance platforms above generally also include their own exchange where the token can be traded on, secondary markets such as those offered through traditional stock exchanges and Alternative Trading Systems provide significantly more liquidity.
Traditional Stock Exchanges have been very active in blockchain with some going through proof of concepts, to those like SIX SDX Digital Exchange which is due to launch later this year. They are using various blockchains and cover the full process from Issuance, Trading and Post Trade / Settlement services. I have briefly outlined which blockchain they are using / testing with along with source to read more about it below:
  • Switzerland’s Stock Exchange — SIX Digital Exchange issue, trading, settlement, custody — Corda — Source
  • Largest Stock Exchange in Germany — Deutsche Borse Franfurt Stock Exchange — Corda — Source and Source
  • South Korea’s Stock Exchange — Korea Exchange — Hyperledger Fabric — Source and Source
  • Japan’s Stock Exchange — Tokyo Stock Exchange — Hyperledger Fabric — Source which the consortium has now grown to 44 companies. Tokyo Stock Exchange are also testing JP Morgan’s Quorum for voting on the blockchain — Source
  • London Stock Exchange Group — Hyperledger Fabric — Source . They are also invested in Nivaura which utilises Ethereum — Source
  • Largest Stock Exchange in Europe — Euronext — Permissioned Ethereum via Liquidshare — Source as well as recently investing in Tokeny a blockchain based project based on public version of Ethereum — Source
  • Singapore Stock Exchange — Ethereum — Source

Post Trade — Central Security Depositories

Situated at the end of the post-trading process, CSDs are systemically important intermediaries. They thereby form a critical part of the securities market’s post-trade infrastructure, as they are where changes of securities ownership are ultimately registered.
CSDs play a special role both as a depository, involving the legal safekeeping and maintenance of securities in a ‘central depository’ on behalf of custodians (both in materialised or dematerialised form); as well as for the issuer, involving the issuance of further securities by issuers, and their onboarding onto CSDs’ platforms.
CSDs are also keeping a number of other important functions, including: dividend, interest, and principal processing; corporate actions including proxy voting; payment to transfer agents, and issuers involved in these processes; securities lending and borrowing; and, provide pledging of share and securities.
Blockchain technology will enable real-time settlement finality in the securities world. This could mean the end of a number of players in the post-trade area, such as central counterparty clearing houses (CCPs), custodians and others. Central Security Despositories (CSD) will still play an important role according to reports:
“CSDs could have an important role to play in a blockchain-based settlement system. As ‘custodians of the code, CSDs could exercise oversight of, and take responsibility for, the operation of the relevant blockchain protocol and any associated smart contracts.” Euroclear Report
Another group of 30 central securities depositories (CSDs) in Europe and Asia are researching possible ways to “join hands” in developing a new infrastructure to custody digital assets. The CSDs will attempt to figure out how to apply their experience in guarding stock certificates to security solutions for crypto assets.
“A new world of tokenized assets and blockchain is coming. It will probably disrupt our role as CSDs. The whole group decided we will be focusing on tokenized assets, not just blockchain but on real digital assets.”
You can read more about how blockchain will affect CSD’s here
Examples of CSD’s in blockchain
  • SIX Digital Exchange and Deutsche Borse are utilising Corda as explained in the trading venues section
  • DTCC the largest in the US process 1.7 Quadrillion US Dollars of securities every year and are planning on moving their Trade Information Warehouse to Axoni’s AXCore Blockchain (Based on permissioned version of Ethereum) later this year — Source
  • Canada CDS are using the Quartz blockchain from Indian IT Services Company Tata Consultancy Services — Source
  • Euroclear in collaboration with the European Investment Bank (EIB), Banco Santander, and EY are developing a blockchain solution — Source
  • French CSD’s too soon go live on Setl Blockchain — Source and Source
  • Russia’s National Settlement Depository is launching a blockchain project using D3ledger (based off Hyperledger) — Source

The Importance Of Interoperability

The evolution of DLT and the wide adoption across industries and across different market segments is resulting in many different ledgers networks, but the ultimate promise of DLT can only be realized when all ledger networks can seamlessly interoperate. — from the recent DTCC whitepaper with Accenture
Some challenges and constraints related to the market infrastructure ecosystem remain open and will need to be addressed in the future to sustain the development of DLT platforms for trading and the post-trade process. At this stage, the questions of interoperability and standardization across these DLT (probably permissioned) platforms remain open and we may see a list of platforms offering no scope for interconnection. This will prevent them from fulfilling the key “distribution” criterion of DLT. Another related challenge that may determine whether or not the technology is adopted is the ability to provide Delivery versus Payment (DvP) settlement, in particular in central bank money. Nevertheless, it is worth mentioning that settlement can also be facilitated in commercial bank money. — https://www2.deloitte.com/content/dam/Deloitte/lu/Documents/technology/lu-token-assets-securities-tomorrow.pdf
It’s clear from the above that interoperability will be crucial in order to unlock the true potential of Distributed Ledger Technology. Issuance platforms will seek to interoperate with as many secondary exchanges as possible to provide maximum liquidity for issuers. Issuance platforms and secondary exchanges are each using a wide range of different blockchains that all need to interoperate as part of the trade process. CSD’s will also need to have interoperability between other CSD’s as well as to the secondary exchanges (again each using different blockchains).

Enter Quant Network’s Overledger

Quant Network’s blockchain operating system, Overledger, provides interoperability between any current and future distributed ledger technology as well as easily connecting Off Chain / Legacy networks as well as plans to connect directly to the Internet. Within 10 months it has proven it can provide interoperability with the full range of DLT technologies from all the leading Enterprise Permissioned blockchains such as Hyperledger, R3’s Corda, JP Morgan’s Quorum, permissioned variants of Ethereum and Ripple (XRPL) as well as the leading Public Permissionless blockchains / DAGs such as Bitcoin, Stellar, Ethereum, IOTA and EOS as well as the most recent blockchain to get added Binance Chain. All without imposing restrictions on connected chains, being Internet scalable and able to easily integrate into existing networks / infrastructure.
https://preview.redd.it/8p6hi942t0m31.png?width=1920&format=png&auto=webp&s=b0536ea9981306feb8bd95788c66e9a5727a4d58
Overledger a blockchain operating system, will enable universal interoperability for regulatory-compliant security tokens and digital assets to be traded on AX ATS, a regulated secondary trading market. AX intends to integrate Overledger to help foster the evolution of traditional capital markets infrastructure to facilitate the mass implementation of regulated digital assets. With the increased market adoption of digital assets and banking “coins” such as JPMorgan Coin, AX and Quant Network are at the forefront to enable the transferability and movement of digital assets
https://www.quant.network/blog/redefining-wall-st-with-decentralised-capital-market-infrastructure-the-possibilities-of-quant-networks-overledger-technology-in-regulated-capital-markets
Overledger enables Universal Interoperability where digital assets can move across blockchains so that they can interact with smart contracts on different blockchains. It does this by locking the asset on one blockchain and then representing it on another blockchain either by creating a representing token or representing it via metadata. This will enable all of these different parties such as Issuance platforms, Exchanges, CSD’s, traders etc to move the digital asset from their respective blockchain onto AX Trading’s platform for secure, immediate and immutable trading to take place. Potentially it would even allow Digital Assets / Securities to settled on a public permissionless blockchain such as the recently connected Binance Chain in a completely safe, secure and compliant way.
https://preview.redd.it/a3o9qxq5t0m31.png?width=443&format=png&auto=webp&s=78d7a7e7d47213bbb354336ba9d5ad92c1c2254a
Regulators would be able to run a node and view transactions in real time ensuring that compliance is being kept. Potentially they could also benefit from using Quant Networks Multichain Search capability http://search.quant.network/ to be able to fully track assets as they move across blockchains.
George O’Krepkie, AX CEO said: “we look forward to partnering with Quant. Their technology will allow our blockchain agnostic security token exchange to communicate seamlessly with issuers, traders, investors, and regulators across different blockchain protocols. This is a key technological breakthrough that will help us bring the benefits of security tokens to Main Street and Wall Street.”

Securrency

AX Trading have also partnered with Securrency (who have previously tokenised over $260 million in real estate assets). Securrency provide a protocol that enables security tokens to remain in compliance regardless of what blockchain the token is on. Due to the layered approach that Overledger has adopted from the learnings of TCP/IP, this protocol can be easily integrated on top of Overledger to enable security tokens to move across blockchains as well as ensuring they remain in compliance with regulations programmed into the token.
https://youtu.be/vSQ2fu9iZGs

Delivery vs Payment (DvP)

A DvP transaction involves the settlement of two linked obligations, namely the delivery of securities and the payment of cash. DvP avoids counterparties being exposed to principal risk, i.e. the risk that the seller of securities could deliver but would not receive payment or that the buyer of securities could make payment but would not receive delivery. Following this requirement, a DvP securities settlement mechanism has to ensure that the delivery of securities and the payment of cash are linked in a way where one leg (obligation) of the securities trade is conditioned to the final settlement of the other leg (obligation) of the trade. Thereby final settlement is defined as “the irrevocable and unconditional transfer of an asset or financial instrument, or the discharge of an obligation by the FMI or its participants in accordance with the terms of the underlying contract”. — STELLA — a joint research project of the European Central Bank and the Bank of Japan
We have seen how Overledger can provide interoperability for the securities to move across Issuers platforms, integrate with Stock exchanges, Central Security Depositories and AX Trading. Now we need to be able to ensure that payment is guaranteed and in a way that offers immediate settlement which is irrevocable. To do this we need to represent FIAT on the blockchain so that it can interact with smart contracts and settle transactions on the blockchain.

J.P.Morgan’s Coin

J.P.Morgan is the largest bank in the United States and ranked by S&P Global as the sixth largest bank in the world by total assets as of 2018, to the amount of $2.535 trillion.
J.P. Morgan was the first U.S. bank to create and successfully test a digital coin representing a fiat currency. The JPM Coin is based on blockchain-based technology enabling the instantaneous transfer of payments between institutional clients.
With J.P.Morgan’s $2.6 trillion balance sheet, expertise in blockchain and global payments network, J.P. Morgan can seamlessly and securely transfer and settle money for clients around the world. J.P. Morgan are supervised by banking regulators in the United States and in the international jurisdictions in which it operates.

How does JPM Coin work?

A Buyer purchases JPM coins in advance which get represented on the Permissioned Quorum blockchain ($1 =1 JPM Coin). Quant Network’s Overledger could then provide interoperability to lock those tokens on Quorum and represent those onto another blockchain / AX Trading’s Network. By being able to represent securities and FIAT on the same blockchain (even though the underlying assets are on different blockchains) this provides instant finality / settlements to occur.
Once the seller receives the JPM coin in exchange for the securities they have sold they will be able to redeem them for USD. It also doesn’t necessarily mean that they have to have a JP Morgan account to redeem them, you could imagine in the future that the Bank instead redeems the JPM Coin and credits the users account. Similarly the buyer of the security token redeems the represented token and unlocks the security token on the original blockchain.
You can read more about JP Morgan’s Coin here as well as its use cases
J.P Morgan is betting that its first-mover status and large market share in corporate payments — it banks 80 percent of the companies in the Fortune 500 — will give its technology a good chance of getting adopted, even if other banks create their own coins. “Pretty much every big corporation is our client, and most of the major banks in the world are, too,” Farooq said. “Even if this was limited to JPM clients at the institutional level, it shouldn’t hold us back.”
Overledger enables different securities tokens / digital coins representing FIAT currencies to be brought together from the various permissioned / permissionless blockchains onto one platform where trading / settlement can take place. Overledger is the only technology that can do this today across the leading permissioned and permissionless blockchains as well as existing networks, all in a secure, scalable and easy to integrate way.
https://preview.redd.it/ngt7q7hdt0m31.png?width=738&format=png&auto=webp&s=60166bdc0fcdf72a502e3472a09de5ddb5e1eb69
Quant Network are working with AX Trading to bring more digital assets, securities and tokenised assets to their existing 800 institutional traders in an already live and connected FINRA and SEC regulated exchange. AX Trading is not just about trading securities but other digital assets such as Bitcoin, Ethereum and potentially even Quant in the Future.
https://preview.redd.it/ibecorcft0m31.png?width=1286&format=png&auto=webp&s=94540cf49654e36a8155f424c2a4bdb5fd549558
This is a multi-trillion dollar market with huge global enterprises, traditional exchanges and global banks are all adopting DLT at a rapid pace and going into production at scale in a matter of months, examples include the NYSE Bakkt launching Bitcoin futures later this month, Swiss Stock Exchange ($1.6 Trillion market Cap) is due to launch their digital exchange running on Corda (SDX) by the end of the year. The DTCC are due to launch their Trade Information Warehouse which processes $10 Trillion of cleared and bilateral derivatives by the end of the year. JP Morgan who transfer $6 Trillion every day are due to launch their JPM coin at the end of year and AX Trading is due to offer their first digital asset by January 2020.
Quant Network’ Overledger enables the bridging of traditional finance infrastructure with the new decentralised finance infrastructure DeFi of the future, helping to redefine Wall Street and Capital Markets.
https://medium.com/@CryptoSeq/wall-street-2-0-17252ffd8919
submitted by xSeq22x to QuantNetwork [link] [comments]

[Part 1] KAVA Historical AMA Tracker! (Questions & Answers)

ATTN: These AMA questions are from Autumn 2019 - before the official launch of the Kava Mainnet, and it's fungible Kava Token.
These questions may no longer be relevant to the current Kava landscape, however, they do provide important historical background on the early origins of Kava Labs.
Please note, that there are several repeat questions/answers.

Q1:

Kava is a decentralized DEFI project, why did you implement the countries restrictions to run the node? Will there be such restrictions by the time of the mainnet?

Q2:

According to the project description it has been indicated that staking reward (in KAVA tokens) varies from 3 to 20% per annum. But how will you fight with inflation?

We all know how altcoins prices are falling, and their bottom is not visible. And in fact, we can get an increase in the number of tokens for staking, but not an increase in the price of the token itself and become a long-term investor.

  • Answer: Kava is both inflationary with block rewards, but deflationary when we burn CDP fees. Only stakers who bond their Kava receive inflationary rewards - users and traders on exchanges do not get this. In this way, rewards are inflated, but given to stakers and removed value from the traders who are speculating like a tax. The Deflationary structure of fees should help counterbalance the price drops from inflation if any. In the long-term as more CDPs are used, Kava should be a deflationary asset by design if all things go well

Q3:

In your allocation it is indicated that 28.48% of the tokens are in the "Token treasury" - where will these tokens be directed?

  • Answer: Investors in financing rounds prior to the IEO have entered into long-term lock-up agreements in-line with their belief in Kava’s exciting long-term growth potential and to allow the projects token price to find stability. Following the IEO, the only tokens in circulation will be those sold through the IEO on Binance and the initial Treasury tokens released.
  • No private sale investor tokens are in circulation until the initial release at the end of Q1 2020 and then gradually over the [36] months The initial Treasury tokens in circulation will be used for a mixture of ecosystem grants, the expenses associated with the IEO as well as initial market making requirements as is typical with a listing of this size. Kava remains well financed to execute our roadmap following the IEO and do not envisage any need for any material financings or token sales for the foreseeable future.

Q4:

Such a platform (with loans and stable coins) is just the beginning since these aspects are a small part of many Defi components. Will your team have a plan to implement other functions, such as derivatives, the dex platform once the platform is successfully launched?

  • Answer: We believe Kava is the foundation for many future defi products. We need stable coins, oracles, and other infrastructure first that Kava provides. Once we have that, we can apply these to derivatives and other synthetics more easily. For example, we can use the price feeds and USDX to enable users to place 100x leverage bets with each other. If they both lock funds into payment channels, then they can use a smart contract based on the price feed to do the 100x trade/bet automatically without counter party risk. In this way, Kava can expand its financial product offerings far beyond loans and stable coins in the future.

Q5:

There are several options for using USDX on the KAVA platform, one of which is Margin Trading / Leverage. Is this a selection function or a compulsory function? Wondering since there are some investors who don`t like margin. What is the level of leverage and how does a CDP auction work?

  • Answer: This is a good #Q . Kava simply provides loans to users in USDX stable coins. What the users do is completely up to them. They can use the loans for everyday payments if they like. Leverage and hedging are just the main use cases we foresee - there are many ways people can use the CDP platform and USDX.

Q6:

Most credit platforms do not work well in the current market. What will you do to attract more people to use your platform and the services you provide? Thank you

  • Answer: Most credit platforms do not work well in the current market? I think that isn't correct at least for DeFi. Even in the bear market, MakerDao and Compound saw good user growth. Regardless, our efforts at Kava to build the market are fairly product and BD focused. 1) we build more integrations of assets and expand financial services to attract new communities and users. 2) we focus on building partnerships with high quality teams to promote and build Kava's core user base. Kava is just the developer. Our great partners like Ripple, Stakewith.Us, P2P, Binance - they have the real users that demand Kava. They are like our system integrators that package Kava up nicely and present it to their users. In order to grow, we need to deepen our partnerships and bring in new ones around the world.

Q7:

KAVA functions as a reserve currency in situations where the system is undercollateralized. In such cases new KAVA is minted and used to buy USDX off the market until USDX becomes safely overcollateralized.

Meaning, there will be no max supply of KAVA?

  • Answer: Yes, there is no max supply of Kava.

Q8:

Why Kava?

  • Answer: ...because people are long BTC and the best way to go long BTC without giving up custody is Kava's platform. Because it is MakerDao for bitcoin. Bitcoin has a 10x market cap of ETH and Maker is 10x the size of Kava. I think we're pretty undervalued right now.

Q9:

How do you plan to make liquidity in Kava?

  • Answer: Working with Binance for the IEO and as the first exchange for KAVA to trade on will be a huge boost in increasing the liquidity of trading KAVA.

Q10:

Most crypto investors or crypto users prefer easy transaction and low fees, what can we expect from KAVA about this?

  • Answer: Transaction fees are very low and confirm if seconds. The user experience is quite good on Tendermint-based blockchains.

Q11:

How do I become a note validator on KavA?

Q12:

It is great to know that KAVA is the first DEFI-supported project sponsored by Binance Launchpad, do you think this is the meaning that CZ brings: Opening the DEFI era, as a leader, you feel like how ?

  • Answer: We are the first DeFi platform that Launchpad has supported. We are a very strategic blockchain for major crypto like BNB. Kava's platform will bring more utility to the users of BNB and the Binance DEX. It feels good of course to have validation from the biggest players in the space like Cosmos, Ripple, CZ/Binance, etc.

Q13:

Since decentralized finance applications is already dominating, how do you intend to surpass those leading in the market?

  • Answer: The leaders are only addressing ethereum. BTC, XRP, BNB, ATOM is a much larger set to go after that current players cannot.

Q14:

What does Ripple play in the Kava's ecosystem, since Ripple is like a top tier company and it’s impressive that you are partnered with them?

  • Answer: Ripple is an equity investor in Kava and a big supporter of our work in cross-chain settlement research and implementations. Ripple's XRP is a great asset in terms of users and liquidity that the Kava platform can use. In addition, Ripple's money service business customers are asking for a stable coin for remittances to avoid the currency heading risk that XRP presents. Ripple will not use USDC or other stable coins, but they are open to using USDX as it can be XRP-backed.

Q15:

Considering the connectivity, Libra could be the biggest competitor if KAVA leverages interchain for efficiency.

  • Answer: With regard to USDX, it is important to understand the users interacting with the Kava blockchain have no counterparty that people could go after for legal actions. A user getting a USDX loan has no counterparty. The software holds the collateral and creates the loan. The only laws that would apply are to the very users that are using the system.

Q16:

Wonder how KAVA will compete with the tech giants

  • Answer: Libra is running into extreme issues with the US Senate and regulators. Even the G7-G20 groups are worried. Its important to understand that Libra is effectively a permissioned system. Only big companies that law makers can go after are able to run nodes. In Kava, nodes can be run by anyway and our nodes are based all over the world. It's incredibly hard for a law maker to take down Kava because they would need to find and legally enforce hundreds of business in different jurisdictions to comply. We have an advantage in this way over the larger projects like Libra or Clayton.

Q17:

In long-term, what's the strategy that KAVA has for covering the traditional finance users as well? Especially regarding the "stability"

  • Answer: Technical risk is unavoidable for DeFi. Only time will tell if a system is trustworthy and its never 100% that it will not fail or be hacked. This is true with banks and other financial systems as well. I think for DeFi, the technical risk needs to be priced in to the expected returns to compensate the market. DeFi does have a better user experience - requiring no credit score, identity, or KYC over centralized solutions.
  • With our multi-collateral CDP system, even with it overcollateralized, people can get up to 3x leverage on assets. Take 100 USD in BTC, get a USDX loan for 66 USDX, then buy $66 BTC and do another loan - you can do this with a program to get 3x leverage with the same risk profile. This is enough for most people.
  • However, it will be possible once we have Kava's CDP platform to extend it into products that offer undercollateralized financial products. For example, if USER 1 + USER 2 use payment channels to lock up their USDX, they can use Kava's price feeds to place bets between each other using their locked assets. They can bet that for every $1 BTC/USD moves, the other party owes 3x. In this way we can even do 100x leverage or 1000x leverage and create very fun products for people to trade with. Importantly, even in places where margin trading is regulated and forbidden, Kava's platform will remain open access and available.

Q18:

In long-term, what's the strategy that KAVA has for covering the traditional finance users as well? Especially regarding the "stability"

  • Answer: Kava believes that stable coins should be backed not just by crypto or fiat, but any widely used, highly liquid asset. We think in the future the best stablecoin would be backed by a basket of very stable currencies that include crypto and fiat or whatever the market demands.

Q19:

Compound, maker they're trying to increase their size via the competitive interests rates. THough it shows good return in terms of growth rate, still it's for short-term. Wonder other than financial advantage, KAVA has more for the users' needs?

  • Answer: Robert, the CEO of Compound is an investor and advisor to Kava. We think what Compound does with money markets is amazing and hope to integrate when they support more than just Ethereum assets. Kava's advantage vs others is to provide basic DeFi services like returns on crypto and stable coins today when no other platform offers that. Many platforms support ETH, but no platform can support BTC, XRP, BNB, and ATOM in a decentralized way without requiring centralized custody of these assets.

Q20:

The vast majority of the cryptocurrency community's priorities is symbolic pricing. When prices rise, the community rejoices and grows. When they fall, many people begin to cast in a negative way. How will KAVA solve the negative problem when the price goes down? What is your plan to strengthen and develop the community to persuade more people to look at the product than the price?

  • Answer: We believe price is an important factor for faith in the market. One of Kava's key initiatives was selecting only long-term partners that are willing to work with kava for 2 years. That is why even after 6 months, 0 private investor or kava team tokens will be liquid on the market.
  • We believe not in fast pumps and then dumps that destroy faith, but rather we try and operate the best we can for long-term sustainable growth over time. It's always hard to control factors in the market, and some factors are out of our control such as BTC price correlations, etc - however, we treat this like a public company stock - we want long-term growth of Kava and try to make sure our whole community of Kava holders is aligned with that the best we can.

Q21:

Do you have any plans to attract non-crypto investors to Kava and how? What are the measures to increase awareness of kava in non-crypto space?

  • Answer: We are 100% focused on crypto, not the general market. We solve the problems of crypto traders and investors - not the average grandma who needs a payment solution. Kava is geared for decentralized leverage and hedging.

Q22:

Adoption is crucial for all projects and crypto companies, what strategy are you gonna use/follow or u are now following to get Kava adopted and used by many people all over the world?

Revenue is an important aspect for all projects in order to survive and keep the project/company up and running for long term, what are the ways that Kava generates profits/revenue and what is its revenue model?

  • Answer: We have already partnered with several large exchanges, long-term VCs, and large projects like Ripple and Cosmos. These are key ways for us to grow our community. As we build support for more assets, we plan to promote Kava's services to those new communities of traders.
  • Kava generates revenue as more people use the platform. As the platform is used, KAVA tokens are burned when users pay stability fees. This deflates the total supply of Kava and should in most cases give rise to the value of KAVA like a stock-buyback in the public markets.

Q23:

In order to be success in Loan project of Cryptocurrency, I think marketing is very important to make people using this service without any registration. What is main strategy for marketing?

  • Answer: Our main strategy is to build a great experience and offer products that are not available to communities with demand. Currently no DeFi products can serve BTC users for example. Centralized exchanges can, but nothing truly trustless. Kava's platform can finally give the vast audiences of BTC, BNB, and ATOM holders access to core DeFi services they cannot get on their own due to the smart contract limitations of those platforms.

Q24:

Currently, some project have policies for their ambassadors to create a contribution and attract recognition for the project! So the KAVA team plans to implement policies and incentives for KAVA ambassadors?

  • Answer: Yes, we will be creating a KAVA ambassador program and releasing that soon. Please follow our social media channels to learn about it in the coming weeks.

Q25:

Currently there are so many KAVA tokens sold on exchanges, why is this happening while KAVA is going to IEO on Binance? Are those KAVA codes fake or not?

  • Answer: For everyone's safety, please understand Kava tokens do not exist yet and they will only exist starting with the Binance IEO. Any other token listings or offerings of Kava are not supported by Kava Labs and I highly discourage you all from trying to get them there. It is most likely a big scam. Please only trust Binance for this.

Q26:

KAVA have two tokens, the first is called Kava - a governance and staking token; the second is called USDX - an algorithmically managed crypto-backed stable coin. What are the advantages of USDX compared to other stablecoins such as: USDT, USDC, TUSD, GUSD, ...?

  • Answer: USDX is one of the few stablecoins to be fully backed by crypto-assets. This means that we do not deal with fiat to back the value, and thus we don't have some of the issues when it comes to storing fiat funds with banks and custodians. This also makes our product fully digital and built for the future of crypto growth.

Q27:

As a CEO, does your background in Esports and Gaming industry help anything to your management and development of KAVA Labs?

  • Answer: Esports no. But having been a multi-time venture-backed foundeCEO and have gone through the start-up phase before has made creating and running a 2nd company easier. Right now Kava is still small, Fnatic had over 80 employees. It was at a larger scale. I would say developing software is much more than doing the hardware at fnaticgear.com

Q28:

Why did Kava choose to launch IEO on Binance and not other exchanges like: Kucoin, Houbi, Gate, ....?

  • Answer: Kava had a lot of interest from exchanges to partner with for IEO. We decided based on a lot of factors such as userbase, diverse exposure across multiple regions and countries, and an amazing team that provides so much insight into so many communities such as this one. Binance has been a tremendous partner and we also look forward to continuing our partnership far into the future.

Q29:

Currently if Search on coinmarketcap has 3 types of stablecoins bearing the USDX symbol (but these 3 stablecoins are no information). So, what will KAVA do to let users know that Kava's USDX is another stablecoin?

  • Answer: All these USDX have no volume or listings. We will be on Binance. I am not worried.

Q30:

In addition to the Token Allocation for Binance Launchpad, what is the Token Treasury in the Initial Circulating Supply?

  • Answer: This is controlled by Kava Labs, but with the big cash we have saved from fundraising, we see no reason why these tokens would be sold on the market. The treasury tokens are for use in grants, ecosystem growth initiatives, development, and other incentive programs to drive adoption of the platform.

Q31:

How you will compete with your competitors? Currently i don't see much but for future how you will maintain this consistency ? No doubt it is Great and Unique project, what is the main problem that #KAVA is currently facing?

  • Answer: Because our industry is just starting out, I don't like to think of them as our direct competitors. We are all working to grow the size of the pie rather than get a larger slice from a small pie. The one thing that we believe will allow us to stand apart is the community we are building. Being able to utilize our own community along with Cosmos and our other partners like Binance for the IEO, we have a strong footing to get a lot of early users onto our platform. Also, we are also focusing on growing Kava internationally particularly Asia. We hope to build our platform for an even larger userbase than just the west.

Q32:

How do you explain your project to a random person who has never heard of your project?

  • Answer: non-crypto = Kava is a lending platform for users of cryptocurrencies.
  • crypto = Kava is a cross-chain DeFi platform for loans and stablecoins backed by BTC, BNB, XRP, ATOM and other major cryptocurrencies.

Q33:

Will KAVA team have a plan on implementing DAO module on your platform since its efficiency on autonomy, decentralization and transparency?

  • Answer: All voting is already transparent on the Kava blockchain. We approved a number of proposals on our test net.

Q34:

how to use usdx token :only for your platform or you have plan to use usdx for payment ?

  • Answer: Payments is a nice use case, but demand for crypto payments is still small. We may choose to focus here later if demand for crypto payments increases. Currently it is quite small with the bulk of use remaining in trading and speculative use cases.

Q35:

Do you have plans to spread KAVA ecosystem across other continents. if yes, what are the strategies and how can I as a community member contribute to making it possible?

  • Answer: We are already across many continents - I don't think we are in antarctica yet. Africa might be light on nodes as well. I think as we grow on major exchanges like Binance, new node operators will get interested and help decentralize Kava further.

Q36:

Maker's CDP lending system is on top in this market and its Dominance is currently sitting on 64.90 % , how kava will compete will maker and compound?

  • Answer: adding assets like bitcoin which have more value and more users than ETH. It's a bigger market that Maker cannot compete with Kava in.

Q37:

Currently, the community is too concerned about the price. As prices rise, the community rejoice and grow, when falling, many people start throwing negatively. So what is KAVA's solution to getting people to focus on the project rather than the price of the token?

What is your plan to strengthen and grow the community to persuade more individuals to look at the product than the price?

  • Answer: We also share similar concerns as price and price direction is always a huge factor in the crypto industry. A lot of people of course are very short-term focused on flipping for bigger profits. One of the solutions, and what Kava has done, is to make sure that everything structured is for the long-term. So that makes sure that our investors and employees are all focused on long-term gains and growth. Locking vesting periods are part of that alignment. Another thing is that we at Kava are very transparent in our progress and development. We will be regularly posting updates within our own communities to allow our users and followers to keep up with everything we're up to. Please follow us or look at our github if you're interested!

Q38:

How did Kava get on Piexgo?

  • Answer: We did not work with Piexgo. We have not distributed tokens to any exchange other than Binance. I cannot speak to what is going on there, but I would be very wary of what is happening there.

Q39:

Why was the 1st round price so much lower than the current price

  • Answer: It is natural to worry that early investors got better pricing and could dump on the market. I can assure you that our investors are in this for the long-term. All private sale rounds signed 2 year contracts to run validators - and if they don't they forfeit their tokens. You can compare our release schedule to any other project. We have one of the most restricted circulating supply schedules of any project EVER and its because all our investors are commiting to the long-term success of the project and believe in Kava.
  • About the pricing itself - it is always a function of traction like for any start-up. When we made our public announcement about the project in June, we were only a 4 man team with just some github code. We could basically run a network with a single node, our own. Which is relatively worthless. I think our pricing of Kava at this time was justified. We were effectively a seed-stage company without a product or working network.
  • By July we made severe progress on the development side and the business side. We successful launched our first test net with the help of over 70 validator business partners around the world. We had a world-wide network of hundreds of people supporting us with people and resources at this point and the risk we would fail in launching a working product was much lower. At this point, the Kava project was valued at $25M. At this point, we had many VCs and investors asking for Kava tokens that we turned away. We only accepted validators that would help us launch the network. It was our one and only goal.
  • Fast forward to today, the IEO price simply reflects the traction and market demand for Kava. Our ecosystem is much larger than it was even a month ago. We have support from Ripple, Cosmos, and Binance amongst other large crypto projects. We have 100+ validators securing our network with very sophisticated high-availability set-ups. In addition, our ecosystem partners have built products for Kava - such as block explorers and others are working on native integrations to wallets and exchanges. Launchpad will be very big for us. Kava is a system designed to cater to crypto traders and investors and in a matter of days we distributed via Binance Launchpad and put in the hands of 130+ countries and tens of thousands of users overnight. It doesn't get more DeFi than that.

Q40:

What is the treasury used for?

  • Answer: Kava's treasury is for ecosystem growth activities.
  • Investors in financing rounds prior to the IEO have entered into long-term lock-up agreements in-line with their belief in Kava’s exciting long-term growth potential and to allow the projects token price to find stability. Following the IEO, the only tokens in circulation will be those sold through the IEO on Binance and the initial Treasury tokens released. No private sale investor tokens are in circulation until the initial release at the end of Q1 2020 and then gradually over the [36] months The initial Treasury tokens in circulation will be used for a mixture of ecosystem grants, the expenses associated with the IEO as well as initial market making requirements as is typical with a listing of this size. Kava remains well financed to execute our roadmap following the IEO and do not envisage any need for any material financings or token sales for the foreseeable future.

Q41:

Everyone have heard about the KAVA token, and read about it. But it would be great to hear your explanation about it. What is the Kava token, what is it's utility? :)

  • Answer: The Kava token plays many roles. KAVA is the native staking token of the Kava blockchain and is used for securing the network. KAVA is delegated to validators, basically professional node operators that run highly-available servers to secure the Kava blockchain. The top 100 validators by weight of staked KAVA earn block rewards that range from 3-20% APR based on the total amount staked in the network. These rewards are split between the validators and the KAVA holders.
  • When users of the platform repay their loans, they must a stability fee (a percentage of the loan) in KAVA tokens. These tokens are burned by the system, effectively deflating the total supply overtime as more users use the CDP system.
  • KAVA is also the primary token used in governance of the platform. KAVA token holders can vote on key system parameter changes and upgrades such as what assets to support, how much USDX in total can be loaned by the system, what the debt-to-collateral ratio needs to be, the stability fees, etc. KAVA holders have a very important responsibility to govern the system well.
  • Lastly, Kava functions as a "Lender of Last Resort" meaning if USDX ever gets undercollateralized because the underlying asset prices drop suddenly and the system manages it poorly, KAVA is inflated in these emergency situations and used to purchase USDX off the market until USDX reaches a state of being over collateralized again. KAVA holders have incentive to only support the good high quality assets so risk of the system is managed responsibly.

Q42:

No matter how perfect and technically thought-out a DeFi protocol is, it cannot be completely protected from any unplanned situations (such as extreme market fluctuations, some legal issues, etc.)

Ecosystem members, in particular the validators on whom KAVA relies on fundamental decision-making rights, should be prepared in advance for any "critical" scenario. Considering that, unlike the same single-collateral MakerDAO, KAVA will be a multi-collateral CDP system, this point is probably even more relevant here.

In this regard, please answer the following question: Does KAVA have a clear risk management model or strategy and how decentralized is / will it be?

  • Answer: Simialar to other CDP systems and MakerDAO we do have a system freeze function where in cases of extreme issues, we can stop the auction mechanisms and return all collateral.

Q43:

Did you know that "Kava" is translated into Ukrainian like "Coffee"? I personally do love drinking coffee. I plunge into the fantasy world. Why did you name your project "Kava" What is the story behind it? What idea / fantasy did your project originate from, which inspired you to create it?

  • Answer: Kava is coffee to you.
  • Kava is Hippopotamus to Japanese.
  • Cava is a region in Spain
  • Kava is also a root that is used in tea which makes your mouth numb.
  • Kava is also crow in Hindi.
  • Kava last but not least is a DeFi platform launching on Binance :)
  • We liked the sound of Kava it was as simple as that. It doesn't have much meaning in the USA where I am from. But it's short sweet and when we were just starting, Kava.io was available for a reasonable price

Q44:

What incentives does a lender get if a person chooses to pay with KAVA? Is there a discount on interest rates on the loan amount if you pay with KAVA? Do I have to pass the KYC procedure to apply for a small loan?

  • Answer: There is no KYC for Kava. Its an open blockchain software platform where anyone with a computer can connect to it and use it.

Q45:

Let's say, I decided to bond my cryptocurrency and got USDX stable coins. For now, it`s an unknown stable coin (let's be honest). Do you plan to add USDX to other famous exchanges? Also, you have spoken about the USDX staking and that the percentage would be higher than for other stable coins. Please be so kind to tell us what is the average annual interest rate and what are the conditions of staking?

  • Answer: Yes we have several large exchanges willing to support USDX from the start. Binance/Binance-DEX is one you should all know ;)
  • The average annual rates for USDX will depend on market conditions. The rate is actually provided by the CDP fees users pay. The system reallocates a portion of those fees to USDX users. In times when USDX use needs to grow, the rates will be higher to incentivize use. When demand is strong, we can reduce the rates.

Q46:

Why should i use and choose Kava's loan if i can use the similar margin trade on Binance?

  • Answer: If margin is available to you and you trust the exchange then you should do whatever is cheaper. For a US citizen and others, margin is often not available and if it is, only for a few asset types as collateral. Kava aims to address this and offer this to everyone.

Q47:

The IEO price is $ 0.46 while the price of the first private sale is $ 0.075. Don't you think that such price gap can negatively affect the liquidity of the token and take away the desire to buy a token on the exchange?

  • Answer: It is natural to worry that early investors got better pricing and could dump on the market. I can assure you that our investors are in this for the long-term. All private sale rounds signed 2 year contracts to run validators - and if they don't they forfeit their tokens. You can compare our release schedule to any other project. We have one of the most restricted circulating supply schedules of any project EVER and its because all our investors are commiting to the long-term success of the project and believe in Kava.
  • About the pricing itself - it is always a function of traction like for any start-up. When we made our public announcement about the project in June, we were only a 4 man team with just some github code. We could basically run a network with a single node, our own. Which is relatively worthless. I think our pricing of Kava at this time was justified. We were effectively a seed-stage company without a product or working network.
  • By July we made severe progress on the development side and the business side. We successful launched our first test net with the help of over 70 validator business partners around the world. We had a world-wide network of hundreds of people supporting us with people and resources at this point and the risk we would fail in launching a working product was much lower. At this point, the Kava project was valued at $25M. At this point, we had many VCs and investors asking for Kava tokens that we turned away. We only accepted validators that would help us launch the network. It was our one and only goal.
  • Fast forward to today, the IEO price simply reflects the traction and market demand for Kava. Our ecosystem is much larger than it was even a month ago. We have support from Ripple, Cosmos, and Binance amongst other large crypto projects. We have 100+ validators securing our network with very sophisticated high-availability set-ups. In addition, our ecosystem partners have built products for Kava - such as block explorers and others are working on native integrations to wallets and exchanges. Launchpad will be very big for us. Kava is a system designed to cater to crypto traders and investors and in a matter of days we distributed via Binance Launchpad and put in the hands of 130+ countries and tens of thousands of users overnight. It doesn't get more DeFi than that.
  • TLDR - I think KAVA is undervalued and the liquid supply of tokens is primarily from the IEO so its a safer bet than other IEOs. If the price drops, it will be from the overall market conditions or fellow IEO users not due private sale investors or team sell-offs.

Q48:

Can you introduce some information abouts KAVA Deflationary Fee Structure? With the burning mechanism, does it mean KAVA will never reach its max supply?

  • Answer: When loans are repaid, users pay a fee in Kava. This is burned. However, Kava does not have a max supply. It has a starting supply of 100M. It inflates for block rewards 3-20% APR AND it inflates when the system is at risk of under collateralization. At this time, more Kava is minted and used to purchase USDX off the market until it reaches full collateralization again.
  • TLDR: If things go well, and governance is good, Kava deflates and hopefully appreciates in value. If things go wrong, Kava holders get inflated.

Q49:

In your opinion what are advantage of decentralized finance over centralized?

  • Answer: One of the main advantages is not needing to pay the costs of regulation and compliance. Open financial software that is usable by anyone removes middle men fees and reduces the barrier for new entrants to enter and make new products. Also DeFI has an edge in terms of onboarding - to get a bank account or an exchange account you need to do lots of KYC and give private info. That takes time and is troublesome. With DeFi you just load up your funds and transact. Very fast user flows.

Q50:

Plan, KAVA how to raise capital? Kava is being supported by more than 100 business entities around the world, including major cryptocurrency investment funds like Ripple and Cosmos, so what did kava do to convince investors to join the project?

  • Answer: We have been doing crypto research and development for years. Ripple and Cosmos were partners before we even started this blockchain with Kava Labs. When we announced Kava the DeFi platform they knew us already to do good work and they liked the idea so they support us.
submitted by Kava_Mod to KavaUSDX [link] [comments]

Beginner’s Guide to BitMEX

Beginner’s Guide to BitMEX

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Founded by HDR Global Trading Limited (which in turn was founded by former bankers Arthur Hayes, Samuel Reed and Ben Delo) in 2014, BitMEX is a trading platform operating around the world and registered in the Seychelles.
Meaning Bitcoin Mercantile Exchange, BitMEX is one of the largest Bitcoin trading platforms currently operating, with a daily trading volume of over 35,000 BTC and over 540,000 accesses monthly and a trading history of over $34 billion worth of Bitcoin since its inception.

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Unlike many other trading exchanges, BitMEX only accepts deposits through Bitcoin, which can then be used to purchase a variety of other cryptocurrencies. BitMEX specialises in sophisticated financial operations such as margin trading, which is trading with leverage. Like many of the exchanges that operate through cryptocurrencies, BitMEX is currently unregulated in any jurisdiction.
Visit BitMEX

How to Sign Up to BitMEX

In order to create an account on BitMEX, users first have to register with the website. Registration only requires an email address, the email address must be a genuine address as users will receive an email to confirm registration in order to verify the account. Once users are registered, there are no trading limits. Traders must be at least 18 years of age to sign up.
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However, it should be noted that BitMEX does not accept any US-based traders and will use IP checks to verify that users are not in the US. While some US users have bypassed this with the use of a VPN, it is not recommended that US individuals sign up to the BitMEX service, especially given the fact that alternative exchanges are available to service US customers that function within the US legal framework.
How to Use BitMEX
BitMEX allows users to trade cryptocurrencies against a number of fiat currencies, namely the US Dollar, the Japanese Yen and the Chinese Yuan. BitMEX allows users to trade a number of different cryptocurrencies, namely Bitcoin, Bitcoin Cash, Dash, Ethereum, Ethereum Classic, Litecoin, Monero, Ripple, Tezos and Zcash.
The trading platform on BitMEX is very intuitive and easy to use for those familiar with similar markets. However, it is not for the beginner. The interface does look a little dated when compared to newer exchanges like Binance and Kucoin’s.
Once users have signed up to the platform, they should click on Trade, and all the trading instruments will be displayed beneath.
Clicking on the particular instrument opens the orderbook, recent trades, and the order slip on the left. The order book shows three columns – the bid value for the underlying asset, the quantity of the order, and the total USD value of all orders, both short and long.
The widgets on the trading platform can be changed according to the user’s viewing preferences, allowing users to have full control on what is displayed. It also has a built in feature that provides for TradingView charting. This offers a wide range of charting tool and is considered to be an improvement on many of the offering available from many of its competitors.
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Once trades are made, all orders can be easily viewed in the trading platform interface. There are tabs where users can select their Active Orders, see the Stops that are in place, check the Orders Filled (total or partially) and the trade history. On the Active Orders and Stops tabs, traders can cancel any order, by clicking the “Cancel” button. Users also see all currently open positions, with an analysis if it is in the black or red.
BitMEX uses a method called auto-deleveraging which BitMEX uses to ensure that liquidated positions are able to be closed even in a volatile market. Auto-deleveraging means that if a position bankrupts without available liquidity, the positive side of the position deleverages, in order of profitability and leverage, the highest leveraged position first in queue. Traders are always shown where they sit in the auto-deleveraging queue, if such is needed.
Although the BitMEX platform is optimized for mobile, it only has an Android app (which is not official). There is no iOS app available at present. However, it is recommended that users use it on the desktop if possible.
BitMEX offers a variety of order types for users:
  • Limit Order (the order is fulfilled if the given price is achieved);
  • Market Order (the order is executed at current market price);
  • Stop Limit Order (like a stop order, but allows users to set the price of the Order once the Stop Price is triggered);
  • Stop Market Order (this is a stop order that does not enter the order book, remain unseen until the market reaches the trigger);
  • Trailing Stop Order (it is similar to a Stop Market order, but here users set a trailing value that is used to place the market order);
  • Take Profit Limit Order (this can be used, similarly to a Stop Order, to set a target price on a position. In this case, it is in respect of making gains, rather than cutting losses);
  • Take Profit Market Order (same as the previous type, but in this case, the order triggered will be a market order, and not a limit one)
The exchange offers margin trading in all of the cryptocurrencies displayed on the website. It also offers to trade with futures and derivatives – swaps.

Futures and Swaps

A futures contract is an agreement to buy or sell a given asset in the future at a predetermined price. On BitMEX, users can leverage up to 100x on certain contracts.
Perpetual swaps are similar to futures, except that there is no expiry date for them and no settlement. Additionally, they trade close to the underlying reference Index Price, unlike futures, which may diverge substantially from the Index Price.
BitMEX also offers Binary series contracts, which are prediction-based contracts which can only settle at either 0 or 100. In essence, the Binary series contracts are a more complicated way of making a bet on a given event.
The only Binary series betting instrument currently available is related to the next 1mb block on the Bitcoin blockchain. Binary series contracts are traded with no leverage, a 0% maker fee, a 0.25% taker fee and 0.25% settlement fee.

Bitmex Leverage

BitMEX allows its traders to leverage their position on the platform. Leverage is the ability to place orders that are bigger than the users’ existing balance. This could lead to a higher profit in comparison when placing an order with only the wallet balance. Trading in such conditions is called “Margin Trading.”
There are two types of Margin Trading: Isolated and Cross-Margin. The former allows the user to select the amount of money in their wallet that should be used to hold their position after an order is placed. However, the latter provides that all of the money in the users’ wallet can be used to hold their position, and therefore should be treated with extreme caution.
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The BitMEX platform allows users to set their leverage level by using the leverage slider. A maximum leverage of 1:100 is available (on Bitcoin and Bitcoin Cash). This is quite a high level of leverage for cryptocurrencies, with the average offered by other exchanges rarely exceeding 1:20.

BitMEX Fees

For traditional futures trading, BitMEX has a straightforward fee schedule. As noted, in terms of leverage offered, BitMEX offers up to 100% leverage, with the amount off leverage varying from product to product.
However, it should be noted that trading at the highest leverages is sophisticated and is intended for professional investors that are familiar with speculative trading. The fees and leverage are as follows:
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However, there are additional fees for hidden / iceberg orders. A hidden order pays the taker fee until the entire hidden quantity is completely executed. Then, the order will become normal, and the user will receive the maker rebate for the non-hidden amount.

Deposits and Withdrawals

BitMEX does not charge fees on deposits or withdrawals. However, when withdrawing Bitcoin, the minimum Network fee is based on blockchain load. The only costs therefore are those of the banks or the cryptocurrency networks.
As noted previously, BitMEX only accepts deposits in Bitcoin and therefore Bitcoin serves as collateral on trading contracts, regardless of whether or not the trade involves Bitcoin.
The minimum deposit is 0.001 BTC. There are no limits on withdrawals, but withdrawals can also be in Bitcoin only. To make a withdrawal, all that users need to do is insert the amount to withdraw and the wallet address to complete the transfer.
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Deposits can be made 24/7 but withdrawals are processed by hand at a recurring time once per day. The hand processed withdrawals are intended to increase the security levels of users’ funds by providing extra time (and email notice) to cancel any fraudulent withdrawal requests, as well as bypassing the use of automated systems & hot wallets which may be more prone to compromise.

Supported Currencies

BitMEX operates as a crypto to crypto exchange and makes use of a Bitcoin-in/Bitcoin-out structure. Therefore, platform users are currently unable to use fiat currencies for any payments or transfers, however, a plus side of this is that there are no limits for trading and the exchange incorporates trading pairs linked to the US Dollar (XBT), Japanese Yen (XBJ), and Chinese Yuan (XBC).
BitMEX supports the following cryptocurrencies:
  • Bitcoin (XBT)
  • Bitcoin Cash (BCH)
  • Ethereum (ETH)
  • Ethereum Classic (ETC)
  • Litecoin (LTC)
  • Ripple Token (XRP)
  • Monero (XMR)
  • Dash (DASH)
  • Zcash (ZEC)
  • Cardano (ADA)
  • Tron (TRX)
  • EOS Token (EOS)
BitMEX also offers leverage options on the following coins:
  • 5x: Zcash (ZEC)
  • 20x : Ripple (XRP),Bitcoin Cash (BCH), Cardano (ADA), EOS Token (EOS), Tron (TRX)
  • 25x: Monero (XMR)
  • 33x: Litecoin (LTC)
  • 50x: Ethereum (ETH)
  • 100x: Bitcoin (XBT), Bitcoin / Yen (XBJ), Bitcoin / Yuan (XBC)

Trading Technologies International Partnership

HDR Global Trading, the company which owns BitMEX, has recently announced a partnership with Trading Technologies International, Inc. (TT), a leading international high-performance trading software provider.
The TT platform is designed specifically for professional traders, brokers, and market-access providers, and incorporates a wide variety of trading tools and analytical indicators that allow even the most advanced traders to customize the software to suit their unique trading styles. The TT platform also provides traders with global market access and trade execution through its privately managed infrastructure and the partnership will see BitMEX users gaining access to the trading tools on all BitMEX products, including the popular XBT/USD Perpetual Swap pairing.
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The BitMEX Insurance Fund

The ability to trade on leverage is one of the exchange’s main selling points and offering leverage and providing the opportunity for traders to trade against each other may result in a situation where the winners do not receive all of their expected profits. As a result of the amounts of leverage involved, it’s possible that the losers may not have enough margin in their positions to pay the winners.
Traditional exchanges like the Chicago Mercantile Exchange (CME) offset this problem by utilizing multiple layers of protection and cryptocurrency trading platforms offering leverage cannot currently match the levels of protection provided to winning traders.
In addition, cryptocurrency exchanges offering leveraged trades propose a capped downside and unlimited upside on a highly volatile asset with the caveat being that on occasion, there may not be enough funds in the system to pay out the winners.
To help solve this problem, BitMEX has developed an insurance fund system, and when a trader has an open leveraged position, their position is forcefully closed or liquidated when their maintenance margin is too low.
Here, a trader’s profit and loss does not reflect the actual price their position was closed on the market, and with BitMEX when a trader is liquidated, their equity associated with the position drops down to zero.
In the following example, the trader has taken a 100x long position. In the event that the mark price of Bitcoin falls to $3,980 (by 0.5%), then the position gets liquidated with the 100 Bitcoin position needing to be sold on the market.
This means that it does not matter what price this trade executes at, namely if it’s $3,995 or $3,000, as from the view of the liquidated trader, regardless of the price, they lose all the equity they had in their position, and lose the entire one Bitcoin.
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Assuming there is a fully liquid market, the bid/ask spread should be tighter than the maintenance margin. Here, liquidations manifest as contributions to the insurance fund (e.g. if the maintenance margin is 50bps, but the market is 1bp wide), and the insurance fund should rise by close to the same amount as the maintenance margin when a position is liquidated. In this scenario, as long as healthy liquid markets persist, the insurance fund should continue its steady growth.
The following graphs further illustrate the example, and in the first chart, market conditions are healthy with a narrow bid/ask spread (just $2) at the time of liquidation. Here, the closing trade occurs at a higher price than the bankruptcy price (the price where the margin balance is zero) and the insurance fund benefits.
Illustrative example of an insurance contribution – Long 100x with 1 BTC collateral
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(Note: The above illustration is based on opening a 100x long position at $4,000 per BTC and 1 Bitcoin of collateral. The illustration is an oversimplification and ignores factors such as fees and other adjustments.
The bid and offer prices represent the state of the order book at the time of liquidation. The closing trade price is $3,978, representing $1 of slippage compared to the $3,979 bid price at the time of liquidation.)
The second chart shows a wide bid/ask spread at the time of liquidation, here, the closing trade takes place at a lower price than the bankruptcy price, and the insurance fund is used to make sure that winning traders receive their expected profits.
This works to stabilize the potential for returns as there is no guarantee that healthy market conditions can continue, especially during periods of heightened price volatility. During these periods, it’s actually possible that the insurance fund can be used up than it is built up.
Illustrative example of an insurance depletion – Long 100x with 1 BTC collateral
https://preview.redd.it/vb4mj3n54cc41.png?width=707&format=png&auto=webp&s=0c63b7c99ae1c114d8e3b947fb490e9144dfe61b
(Notes: The above illustration is based on opening a 100x long position at $4,000 per BTC and 1 Bitcoin of collateral. The illustration is an oversimplification and ignores factors such as fees and other adjustments.
The bid and offer prices represent the state of the order book at the time of liquidation. The closing trade price is $3,800, representing $20 of slippage compared to the $3,820 bid price at the time of liquidation.)
The exchange declared in February 2019, that the BitMEX insurance fund retained close to 21,000 Bitcoin (around $70 million based on Bitcoin spot prices at the time).
This figure represents just 0.007% of BitMEX’s notional annual trading volume, which has been quoted as being approximately $1 trillion. This is higher than the insurance funds as a proportion of trading volume of the CME, and therefore, winning traders on BitMEX are exposed to much larger risks than CME traders as:
  • BitMEX does not have clearing members with large balance sheets and traders are directly exposed to each other.
  • BitMEX does not demand payments from traders with negative account balances.
  • The underlying instruments on BitMEX are more volatile than the more traditional instruments available on CME.
Therefore, with the insurance fund remaining capitalized, the system effectively with participants who get liquidated paying for liquidations, or a losers pay for losers mechanism.
This system may appear controversial as first, though some may argue that there is a degree of uniformity to it. It’s also worth noting that the exchange also makes use of Auto Deleveraging which means that on occasion, leveraged positions in profit can still be reduced during certain time periods if a liquidated order cannot be executed in the market.
More adventurous traders should note that while the insurance fund holds 21,000 Bitcoin, worth approximately 0.1% of the total Bitcoin supply, BitMEX still doesn’t offer the same level of guarantees to winning traders that are provided by more traditional leveraged trading platforms.
Given the inherent volatility of the cryptocurrency market, there remains some possibility that the fund gets drained down to zero despite its current size. This may result in more successful traders lacking confidence in the platform and choosing to limit their exposure in the event of BitMEX being unable to compensate winning traders.

How suitable is BitMEX for Beginners?

BitMEX generates high Bitcoin trading levels, and also attracts good levels of volume across other crypto-to-crypto transfers. This helps to maintain a buzz around the exchange, and BitMEX also employs relatively low trading fees, and is available round the world (except to US inhabitants).
This helps to attract the attention of people new to the process of trading on leverage and when getting started on the platform there are 5 main navigation Tabs to get used to:
  • **Trade:**The trading dashboard of BitMEX. This tab allows you to select your preferred trading instrument, and choose leverage, as well as place and cancel orders. You can also see your position information and view key information in the contract details.
  • **Account:**Here, all your account information is displayed including available Bitcoin margin balances, deposits and withdrawals, and trade history.
  • **Contracts:**This tab covers further instrument information including funding history, contract sizes; leverage offered expiry, underlying reference Price Index data, and other key features.
  • **References:**This resource centre allows you to learn about futures, perpetual contracts, position marking, and liquidation.
  • **API:**From here you can set up an API connection with BitMEX, and utilize the REST API and WebSocket API.
BitMEX also employs 24/7 customer support and the team can also be contacted on their Twitter and Reddit accounts.
In addition, BitMEX provides a variety of educational resources including an FAQ section, Futures guides, Perpetual Contracts guides, and further resources in the “References” account tab.
For users looking for more in depth analysis, the BitMEX blog produces high level descriptions of a number of subjects and has garnered a good reputation among the cryptocurrency community.
Most importantly, the exchange also maintains a testnet platform, built on top of testnet Bitcoin, which allows anyone to try out programs and strategies before moving on to the live exchange.
This is crucial as despite the wealth of resources available, BitMEX is not really suitable for beginners, and margin trading, futures contracts and swaps are best left to experienced, professional or institutional traders.
Margin trading and choosing to engage in leveraged activity are risky processes and even more advanced traders can describe the process as a high risk and high reward “game”. New entrants to the sector should spend a considerable amount of time learning about margin trading and testing out strategies before considering whether to open a live account.

Is BitMEX Safe?

BitMEX is widely considered to have strong levels of security. The platform uses multi-signature deposits and withdrawal schemes which can only be used by BitMEX partners. BitMEX also utilises Amazon Web Services to protect the servers with text messages and two-factor authentication, as well as hardware tokens.
BitMEX also has a system for risk checks, which requires that the sum of all account holdings on the website must be zero. If it’s not, all trading is immediately halted. As noted previously, withdrawals are all individually hand-checked by employees, and private keys are never stored in the cloud. Deposit addresses are externally verified to make sure that they contain matching keys. If they do not, there is an immediate system shutdown.
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In addition, the BitMEX trading platform is written in kdb+, a database and toolset popular amongst major banks in high frequency trading applications. The BitMEX engine appears to be faster and more reliable than some of its competitors, such as Poloniex and Bittrex.
They have email notifications, and PGP encryption is used for all communication.
The exchange hasn’t been hacked in the past.

How Secure is the platform?

As previously mentioned, BitMEX is considered to be a safe exchange and incorporates a number of security protocols that are becoming standard among the sector’s leading exchanges. In addition to making use of Amazon Web Services’ cloud security, all the exchange’s systems can only be accessed after passing through multiple forms of authentication, and individual systems are only able to communicate with each other across approved and monitored channels.
Communication is also further secured as the exchange provides optional PGP encryption for all automated emails, and users can insert their PGP public key into the form inside their accounts.
Once set up, BitMEX will encrypt and sign all the automated emails sent by you or to your account by the [[email protected]](mailto:[email protected]) email address. Users can also initiate secure conversations with the support team by using the email address and public key on the Technical Contact, and the team have made their automated system’s PGP key available for verification in their Security Section.
The platform’s trading engine is written in kdb+, a database and toolset used by leading financial institutions in high-frequency trading applications, and the speed and reliability of the engine is also used to perform a full risk check after every order placement, trade, settlement, deposit, and withdrawal.
All accounts in the system must consistently sum to zero, and if this does not happen then trading on the platform is immediately halted for all users.
With regards to wallet security, BitMEX makes use of a multisignature deposit and withdrawal scheme, and all exchange addresses are multisignature by default with all storage being kept offline. Private keys are not stored on any cloud servers and deep cold storage is used for the majority of funds.
Furthermore, all deposit addresses sent by the BitMEX system are verified by an external service that works to ensure that they contain the keys controlled by the founders, and in the event that the public keys differ, the system is immediately shut down and trading halted. The exchange’s security practices also see that every withdrawal is audited by hand by a minimum of two employees before being sent out.

BitMEX Customer Support

The trading platform has a 24/7 support on multiple channels, including email, ticket systems and social media. The typical response time from the customer support team is about one hour, and feedback on the customer support generally suggest that the customer service responses are helpful and are not restricted to automated responses.
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The BitMEX also offers a knowledge base and FAQs which, although they are not necessarily always helpful, may assist and direct users towards the necessary channels to obtain assistance.
BitMEX also offers trading guides which can be accessed here

Conclusion

There would appear to be few complaints online about BitMEX, with most issues relating to technical matters or about the complexities of using the website. Older complaints also appeared to include issues relating to low liquidity, but this no longer appears to be an issue.
BitMEX is clearly not a platform that is not intended for the amateur investor. The interface is complex and therefore it can be very difficult for users to get used to the platform and to even navigate the website.
However, the platform does provide a wide range of tools and once users have experience of the platform they will appreciate the wide range of information that the platform provides.
Visit BitMEX
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#Binance Guide: How to Sell Crypto using Binance P2P

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