CDzExchange
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1. Executive Summary
CDzExchange is a cross-chain crypto derivatives exchange with fast speed, low fees and unified trading experience.
CDzExchange aims to solve the trilemma of slow transactions, high fees and poor user experience in current decentralized derivatives exchanges. Users can trade leveraged perpetual contracts, stablecoins and assets like BEP20, ERC20s and other major assets. CDzExchange aims to support cross-chain technology with top chains, all without compromising on speed or security. The platform also provides staking and liquidity mining to unlock new opportunities enabled by cross-chain DeFi.
CDzExchange’s governance token allows the community to define future protocol decisions. Other usages of the CDzExchange token include staking rewards, fee sharing and liquidity provider incentives.
2. Opportunities in the DeFi Market
2.1 Disrupting Traditional Finance
Decentralize Finance (DeFi) is a broad term of open finance built on smart contracts and distributed ledger technologies. It is a rapidly growing and expansive set of new financial technologies disrupting traditional finance which are highly centralized. Products and services that billions of people use today, including banking, lending, borrowing, derivatives, insurance and trading are being redefined from the ground up through DeFi.
DeFi is a paradigm shift from centralized entities controlling a large majority of financial services to trustless smart contracts that perform similar functions to traditional finance services.
The DeFi Total Locked Value (TVL) reached US$45.5 billion in February 2021, achieving an exponential 3926% growth in just 12 months [1]. The rapid growth of the DeFi market is a clear reflection of DeFI’s exciting new opportunities that are solving decade-old problems of centralized finance.
2.2 Problems in DeFi
DeFi is invariably still in its infancy, starting in late 2017 with the launch of MakerDAO [2]. Although the exact scope of DeFi varies among the community, MakerDAO’s DAI stablecoin was one of the first major use cases and real adoption of DeFi.
The major popularity of Ethereum, which encompasses a majority of DeFi activity, led to the explosive rise in dapps ranging from:
- Non-custodial stablecoins (example: MakerDAO DAI)
- Lending and borrowing protocols (example: Compound)
- Liquidity Pools (example: Balancer)
- DEXs (examples: Uniswap, SushiSwap)
- Derivatives (examples: Hegic, DerivaDEX, Opium Network)
- Synthetics (example: Synthetix)
- Insurance (example: Nexus Mutual)
- Prediction (example: Auger)
- Yield Aggregators (example: Yearn.finance)
DeFi projects from non-Ethereum protocols have also exploded in popularity such as Binance Smart Chain, which grew 5,100% during February to March 2021 [3]. However, Etherereum is still the dominantly used protocol for DeFi [4].
The huge momentum shift towards DeFi adoption has exemplified core roadblocks that still need to be addressed, especially for decentralized derivatives. The trilemma of balancing transaction speed, fees and overall user experience has yet to be truly solved - especially for decentralized crypto derivatives exchanges.
2.3 Slow Transactions
The dominance of DeFi apps currently running on the Ethereum blockchain means that on average, only 15 transactions per second (TPS) can be processed [5]. This bottleneck has undoubtedly plagued DeFi apps that need faster transactional capability with fair resource allocation. Currently, this means that users who pay more gas fees will be favored, which decreases motivation for others who cannot afford to pay high fees.
From 2018 to 2021, Ethereum transactions ranged from 5 to 15 TPS, struggling to meet the increasing demand from DeFi applications (Source: blockchair.com)
DeFi apps that are especially sensitive to time, such as trading on DEXs, face critical problems when it comes to transactional speed. For decentralized derivatives trading to be a mainstream reality, we must first solve the core issue of scalability for on-chain transactions.
2.4 High Fees and Cost
The average transaction fee on Ethereum topped more than US$23.42 [6]. Even simple transactions on popular DEXs cost up to US$75, while complex transactions charging users in the thousands of dollars were reality [7].
This leaves out many DeFi users who cannot afford such costly transaction fees. In effect, this discourages any trading on decentralized derivatives exchanges that use on-chain trading.
2.5 Poor User Experience
For professional derivatives or spot trading, full-fledged UIUX is required for adoption to truly take off. Centralized exchanges have robust trading UI, advanced order types and API integrations with third parties that make the overall trading experience much more cohesive than a fragmented platform. DeFi trading platforms, including derivatives platforms, fall short when it comes to a solid user experience.
However, translating this same experience to decentralized derivatives platforms has been a challenge due to the on-chain requirements of smart contracts.
3. Solutions with CDzExchange
CDzExchange solves the trilemma challenge with a cross-chain decentralized derivatives platform that enables fast, low cost and unified trading experience.
3.1 Balance is Key
CDzExchange focuses on the optimal balance between performance, fees and UI/UX for a far improved decentralized derivatives trading experience. Combined with our cross-chain transfers and low on-chain transaction cost, CDzExchange is powered by Binance Smart Chain for its balance of high speed and low cost.
3.2 Cross-chain
We believe that each type of architecture has its own pros and cons for different use case applications. For decentralized derivatives to truly gain widespread adoption, there must be bridges between existing protocols that allow for frictionless transfers of assets. This would enable a new paradigm of untapped capital to interchange between the different chains, and create a plethora of new opportunities in staking, swapping and trading assets along with derivatives.
3.3 Decentralized Perpetual Contract Trading
Trade perpetual derivatives contracts for popular assets, settled in USDT. Traders can leverage up to 100x on a non-custodial decentralized trading platform.
3.4 Unified Trading Experience
Our platform is being designed to be easy to use without the steep learning curve. Users can use existing wallets such as Metamask for a familiar DeFi approach.
Our aim is to make DeFi trading a better overall experience for the user. In addition to perpetual crypto markets, CDzExchange offers spot DEX functionality for major assets.
With cross-chain technology, users can even transfer different assets between different blockchains, such as Binance Smart Chain and Ethereum. Keeping interoperability in mind will break past barriers of the fragmented DeFi ecosystem, and tap into capital that is currently siloed within each chain.
4. Cross-chain Interoperability
As a cross-chain derivatives DEX, we believe that integrating with existing protocols will enhance the overall user experience. CDzExchange aims to cross-chain assets between Binance Smart Chain, Ethereum, Polkadot, HECO and other major protocols with active communities.
The first version will deploy an Ethereum to Binance Smart Chain to capture the largest DeFi activity within these popular chains. As a blockchain-agnostic DeFi platform, CDzExchange aims to integrate with all of the top chains to create a multi-highway cross-chain economy.
This would encourage the flow of assets between the interconnected chains, and create new opportunities to swap, stake and earn. As such, new channels for arbitrage as an example will be possible with the introduction of new chains to the ecosystem trading the same asset across different chains.
Ultimately, the growth of cross-chain support will also aid in the increased creation and trading volume of crypto derivatives. As new types of markets are being built with complex “money legos”, decentralized derivatives contracts will be able to leverage the expansive cross-chain infrastructure.
5. Perpetual Contracts
5.1 Why Perpetual Contracts?
Perpetual contracts are one of the most popular forms of derivatives trading for crypto-based assets. Perpetuals are like Futures in that traders either long or short positions in anticipation of predicting the future price of the underlying asset. One key difference from Futures is that Perpetuals don’t have a settlement or expiration date. It can be held indefinitely.
Users are highly encouraged to have prior knowledge of perpetual markets. The core concepts are summarized below with particulars pertaining to CDzExchange.
5.2 Spot, Margin and Leverage
Mark and Spot Prices
- Mark Price is the price of the perpetual contract for a given market.
- Spot Price is the price of the underlying asset in the perpetual contract.
Both the Spot Price and Mark Price are determined using the Time-Weighted Average Price (TWAP).
All contract sizes, Mark Price, Spot Price and position balances are denominated in USDT.
Example: A BTCUSDT perpetual contract’s Mark Price is 50,200 USDT and the Spot Price is 50,000 USDT. There is a positive difference of 200 USDT between the Mark and Spot Prices for BTCUSDT market.
Margin Trading
CDzExchange has two types of margin trading: Isolated and Cross Margin.
By default, accounts are in Isolated Margin setting meaning that each leveraged position needs to have its own dedicated USDT as margin collateral. The dedicated USDT for each position cannot be used as margin collateral on other positions in Isolated Margin mode.
CDzExchange also supports Cross Margin where the user’s total margin amounts can be shared across different positions of the same market. This is riskier than Isolated Margin since there can be greater chances of liquidations depending on the position balance and leverage.
Leverage
CDzExchange users can leverage their positions with a maximum of 100x. A leverage of 1x is equivalent to spot trading.
Leverage must be used with caution to exercise responsible trading. All perpetuals will be automatically liquidated if the total value of the open position falls below the minimum maintenance margin.
Initial Margin Rate (IMR)
The minimum margin rate is required to open a leveraged position. This is the ratio of the trader’s own collateral asset relative to the total position size.
Initial Margin Value (IMV)
The total amount of the trader’s own USDT collateral is required to open a leveraged position.
Example: The IMR is 10% for a BTCUSDT contract. A trader buys 1 BTCUSDT contract worth 50,000 USDT. The trader must put up at least (10% * 50,000 USDT) = 5,000 USDT to open the leveraged position.
Notional Value (NV) is the total value of the position factoring in the leveraged balance, margin balance and PnL. This represents the total value of the open or closed position factoring in both unrealized and realized PnL.
Example: A trader buys 2 BTC perpetual contracts at 50,000 USDT per contract. The NV is (2*50,000) = 100,000 USDT. This 100,000 USDT includes the IMV when the position was opened.
Margin Rate (MR) is the ratio of the position’s collateral (margin value) relative to the NV. The MR factors in the unrealized and realized PnL of the trader’s account. The MR is usually constantly changing in reflection of the fluctuating Mark Price.
Margin Value (MV) is the current total balance of the collateral factoring in the unrealized and realized PnL.
Maintenance Margin Value (MM)
The minimum margin balance that an open position must maintain to avoid liquidation. When the MV becomes less than the MM, the position is automatically liquidated to prevent further losses.
Maintenance Margin Rate (MMR)
The minimum margin rate that an open position must maintain to avoid liquidation.
Example: Continuing on the previous example, the MMR for the open BTCUSDT contract position is 8%. The Mark Price falls, incurring unrealized losses such that the MV of the position becomes less than the MM.
The MM is (8% * 50,000 USDT) = 4,000 USDT. The IMV started at 5,000 USDT and has now dropped in value to be worth 3,000 USDT. Since the MV is now 1,000 USDT less than the MM, the position is automatically liquidated as soon as the MV becomes less than 4,000 USDT.
5.3 Funding Rate
The Funding Rate is a dynamic payment or discount rate set to encourage the Mark Price to converge closer to the Spot Price. Perpetuals tend to trade at or near the Spot Price, due to the Funding Rate mechanism. Overall it works to promote price stability between the Mark and Spot prices.
If the Funding Rate is positive, then long traders pay a premium to short traders.
If the Funding Rate is negative, then short traders pay a premium to long traders.
In other words, the Funding Rate incentivises traders to open positions that go against the current trend, but in no ways guarantee that actual outcome.
The Funding Interval is 3, meaning that it is set every 8 hours at 04:00 UTC, 12:00 UTC and 20:00 UTC.
The Time-Weighted Average Price (TWAP) for an 8-hour rolling period is used in the calculations of the Mark and Spot prices. A decentralized oracle will be used to fetch the TWAP data for the Spot Price.
The Funding Rate is composed of the Interest and Premium Rates.
The Interest Rate is initially fixed at 0.03% per 24 hour period, or 0.01% every 8 hours.
The Premium Rate is the ratio of the difference between the Mark and Spot prices.
Funding Rate Calculation
The Funding Rate is capped at +0.6% or -0.6%.
Example 1: BTCUSDT’s Spot Price is 49,900 USDT. The Mark Price at the time of opening the position is 50,000 USDT. The Funding Rate is
Example 2: The market is very volatile. BTCUSDT’s Spot Price is 49,900 USDT. The Mark Price at the time of opening the position is 50,800 USDT. The Funding Rate calculates to , which is greater than the cap of 0.6%. The final Funding Rate is therefore capped at 0.6%.
Funding Payment
Funding Payment is the total premium or discount applied for open positions during the beginning of each Funding Interval. Funding Payment applies only to open positions. Closed positions do not pay any premium or get discounts. Funding Payment is directly made between traders.
5.4 Liquidation
The CDzExchange smart contract liquidates any open positions where the Margin Value falls below the Minimum Margin amount. Liquidations occur when the value of your collaterals is less than the minimum collateral amount required to keep the position open.
Liquidations incur a 0.4% fee of the total liquidated value. The collected fee is deposited to the Protocol Insurance Fund.
To avoid the fee, traders can manually close the position before the automatic liquidation is triggered. The trader can also add more collateral to their margin value to keep it above the required minimum margin amount.
5.5 Protocol Insurance Fund
The Protocol Insurance Fund (PIF) covers losses if liquidation occurs and the liquidated balance is not enough to cover all of the losses. It functions to deliver realized profits to the winning traders, as perpetual contracts work in a zero-sum outcome. For every winning trader, there is a losing trader within the closed contract position.
The PIF is especially important during times of high volatility, where the liquidation may not occur fast enough. When the PIF is used, it helps prevent the losing trader from going into a negative balance.
The PIF collects 40% of all trading fees to gradually accrue funds over time. If there are not enough funds in the PIF to cover losses, payments will be processed after the PIF accrues back enough funds.
6. Trading Fee Discount
To incentivise traders, users can benefit from up to 50% discount in trading fees.
Trading Fee Discount Tiers:
Tier
$CDZ held as % of Margin Balance (denoted in USDT)
Discount
Bronze
0 - 5%
20.0%
Silver
5% - 10%
30.0%
Gold
10% or more
50.0%
7. Staking Incentives
$CDZ is the governance, staking, rewards and discount token designed to give users an edge in decentralized trading.
INCENTIVIZED STAKING
The longer you stake $CDZ, the higher the reward multiplier, ranging from 2x - 4x
LIQUIDITY POOL STAKING
Up to 2x rewards for AMM liquidity pools ($CDZ/BNB)
FEE SHARING
More than 50% of all transaction fees are distributed back to $CDZ holders
TRADING FEE DISCOUNT
Up to 50% discount on trading fees. Frequent traders pay less.
8. Token Allocation
Total $CDZ Cap in 2 Years
925,870,430
$CDZ Allocation
%
Growth & Referral Programs
5%
General Partners & Community
5%
Technology and Ops
8%
Future Engineers
12%
Core Development Team
8%
Liquidity Providers
40%
Private Sale
5.3%
Public Sale
1.0%
Treasury: AMM & Liquidity
8.1%
Listing: CeX
2%
Marketing & Advisory
5%
9. Community Governance System
CDzExchange’s open governance model allows the community to define the future direction of the platform. The governance proposal framework follows a 3 step process:
Proposal
Voting
Result
>>
>>
Anyone with 1000 $CDZ in their delegated address can vote on any governance plan
These can be simple or complex, such as: proposing fees structure, changing priorities on integrations, or other functions that LP deems suitable for DEX direction.
All proposals are subject to a 72 hour voting period
Any address with voting power can vote for or against the proposal.
If majority votes are cast for the proposal, it is queued for 48 hours for the developers to execute the proposed changes.
Voting is done on Snapshot.page.
Proposals are passed if it receives a majority (>51%) of the votes with participation by at least 20% of all token holders
Which means that 20% of the staked $CDZ needs to vote on a proposal for it to pass, or else it will be rejected.
After voting concludes, the proposal is queued for a minimum of 48 hours or when the proposed changes have been modified in the codebase, whichever is earlier. The queue allows developers to execute on the proposal changes, and may be delayed beyond 48 hours given the complexity of the required modifications.
10. Roadmap
2021 Q2:
- Strategic investors & public sale IDO
- Listing on PancakeSwap, Uniswap and more
- v1 DEX: Binance Smart Chain
- Liquidity Mining
- Staking
- Cross-chain bridge: Ethereum<>BSC
- Liquidity Mining and Staking incentives
2021 Q3
- v2 DEX: Advanced
- Limit orders,
- More swap pairs
- More liquidity mining pairs
- “Wrapped crypto”
- New transaction and trading fee model for lower fees
- Integrations with multiple Web3 wallets
2021 Q4:
- v3 DEX: Crypto Derivatives (CDs)
- Perpetuals Swaps
- Margin Trading
- Liquidation Smart Contract
- Insurance Staking Pool
- Protocol Insurance Fund
- Cross-chain integration with EVM-compatible chains
- Polygon (previously MATIC)
- HECO
- Polkadot
- v1 Governance Module
11. Reference:
12. DISCLAIMER
Last modified 4mo ago
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Contents
1. Executive Summary
2. Opportunities in the DeFi Market
2.1 Disrupting Traditional Finance
2.2 Problems in DeFi
2.3 Slow Transactions
2.4 High Fees and Cost
2.5 Poor User Experience
3. Solutions with CDzExchange
3.1 Balance is Key
3.2 Cross-chain
3.3 Decentralized Perpetual Contract Trading
3.4 Unified Trading Experience
4. Cross-chain Interoperability
5. Perpetual Contracts
5.1 Why Perpetual Contracts?
5.2 Spot, Margin and Leverage
5.3 Funding Rate
5.4 Liquidation
5.5 Protocol Insurance Fund
6. Trading Fee Discount
7. Staking Incentives
8. Token Allocation
9. Community Governance System
10. Roadmap
11. Reference:
12. DISCLAIMER