"Digitex"- A Revolution To The Futures Exchange Markets
In Futures markets, the benefits of trading prices devoid of high costs and possible risks that could be involved in the transfer, storage and payments for a particular commodity are what is being derived by traders from such platform.
Undoubtedly, they serve as a very crucial tool in the financial market as they assist in the reduction any form of irregularities, especially in trading of prices.
However, despite the benefits derived by traders from these markets in terms of lower costs and elimination of some possible risks, high transaction fees still remain a threat on high volume, low profit margin futures trading strategies. The transaction fees or commissions, in most cases, convert marginally profitable strategies into losing ones. Imagine trading a small amount of Bitcoin, say $35 worth and a transaction fee of $5 is deducted, Isn't that a huge loss considering the amount of Bitcoin traded?
What if there could be solution to the problem of high transaction fees which leverages on the benefits of both centralized and decentralized exchanges? Yes, it is possible through the innovative idea of Digitex.
Digitex is an exchange platform which is based on the Ethereum blockchain aiming at eliminating the associated high transaction fees (commissions) imposed on traders in the current futures markets through the issuance of its own currency instead of charging transaction fees on all contracts.
It exploits the benefits of both centralized and decentralized exchanges to deliver the best to its users; It can be seen as an hybrid of both decentralized and centralized exchanges; It offers security by ensuring users' account balances and other details are held in a decentralized manner via a smart contract on the Ethereum blockchain. Also, it provides speed to enable quick execution of all transactions as in the case of the centralized exchanges.
The Digitex exchange has several components that makes it functional; the DGTX token is an important component in which all profits and loss and many other things associated with trades are denominated. It forms an integral part of the Digitex platform in that; for a trader to benefit from the services offered, he must be in possession of some quantities of the token. The elimination of transaction fee is possible via the creation of new tokens instead of charging fees.
However, there would be no issuance of new tokens for the first-two years after the launch of Digitex exchange and the influx of new users will lead to a corresponding increase in the demand of tokens which influences the value of the token.
Commission-Free Futures Trading
This is actually a great benefit on the side of traders as most exchanges do not offer it.
Undoubtedly, It is the next big thing to happen. Source
You might want to ask "How then is this possible?" The Digitex exchange uses a native token, DGTX token, which is an ERC-223 compatible token on Ethereum Blockchain. This token forms an important part of every trader as all their profits, losses, margin requirements and account balance will be denominated in it. Moreover, this token helps to cover all the operational cost of the exchange through the generation of new token instead of charging transaction fees; this way, transaction fees or commissions are eliminated.
While centralized exchanges exist, the decentralized ones also exist and both have their advantages and shortcomings. In terms of security, decentralized exchanges have an advantage over the centralized ones. Here, traders do not need to trust the exchange with their money but in the case of centralized exchanges, the money is actually trusted with particular set of people which could result in a very big loss. However, in terms of speed, centralized exchanges are great!
Lets take a look at some differences between decentralized and centralized exchanges.
1.Decentralized: Latency of on-chain order book prevents real time trading.
Centralized: Matching engines on dedicated central servers are blazing fast, allowing for real time trading and more sophisticated trading tools and strategies.
2.Decentralized: Lack of privacy on-chain can lead to frontrunning on large orders.
Centralized:Central servers have complete privacy, preventing frontrunning of large orders.
3.Decentralized: On-chain transactions can be expensive
Centralized: Transactions on a proprietary central server are off-chain and effectively free.
4.Decentralized: Reliability and scalability of on-chain transactions is still an unresolved issue.
Centralized: Central servers are very fast, extremely reliable and scale well.
5.Decentralized: Margin trading where the user doesn’t put down the full value of the contract being traded is not yet possible on-chain.
Centralized: Margin trading on a centralized server is possible and allows traders to maximize their trading account balance using leverage.
However, Digitex is a blend between a centralized and decentralized exchange and this makes it exceptionally stand out of the many exchanges out there. It offers both the benefits of decentralized and centralized exchanges as it would be seen later.
Just like using the power of blockchain to create its own cryptocurrency, and also the use of smart contracts to hold traders’ account balances, the issuance of new token is democratic through rules and voting systems that are encoded into smart contracts.
The fact that users are being given the power and control over the issuance of new tokens could have the following impacts;
• This is actually useful where DGTX ownersmight want to act in their own collective self-interest and this will surely lead to the success of the Digitex exchange due to its capability of adapting to any changes in condition.
• Since the attention and time of users are mostly required when voting on new proposals, they can make a decision of delegating their voting power to a trusted individual in case they are unable to actively participate in the voting process.
• Any decisions made by users will surely have influence on the value of the DGTX token. However, users would not want to make any decisions that will influence the token negatively; they would want to make decisions that will guarantee a smooth working of the system.
Features/Benefits Of The Digitex Exchange
Digitex possess and offer combined features/benefits of centralized and decentralized exchanges:
• Zero Trading Fees: Any form of trades carried out by traders on the Digitex exchange does not involve any form of transaction fees, that is; 0% commission is being paid by such users, which is possible through the issuance of DGTX tokens also responsible for the survival of the trading platform.
• Decentralized Account Balances: Digitex ensures that traders' account balances are not held by the exchange but by a decentralized independent smart contract on the Ethereum blockchain. Moreover, Digitex does not have any control over the users' funds; they have no power to freeze, mismanage or lose traders or users' funds since they have no physical access to it, however, in the case whereby the platform is hacked (which is almost not possible), there are no funds for the hackers to steal.
• Highly Liquid Futures Markets: The elimination of transaction fees births highly liquid markets owing to the fact that there will be an increase in the engagement of traders in high volume, single tick trading strategieswhich are impossible on other exchanges. Moreover, this liquidity is further enhanced by the presence of automated market makers funded with 20% of the total supply of DGTX tokens programmed to be kept constant while keeping spreads tight at all times, even in volatile market conditions.
• Complete Privacy: Digitex ensures that the identity of traders trading on the exchange is completely kept private since they wouldn’t be required to fill in their private information for any reason, as in the case of KYC/AML policies which could be intrusive. Digitex understands that requesting for user identities could make the platform serve as a center of attack for scammers to exploit personal details of users.
• Sub-Millisecond Order Matching: Stack forms the basis from which Digitex is built on. It is capable of updating itself in real time, at the same time seamlessly handling spikes in activity with extremely low latency. This however makes Digitex trading interface to update prices in real time. In addition to this, it is completely based on web browser without the need to download. The order matching engine ensures trades are matched in less than one millisecond. In addition to this feature, the Digitex exchange is highly scalable so as to accommodate high number of users.
• High Leverage: A very high leverage of up to 100x is being offered to traders and this allows them to acquire significant gains (and losses) from somewhat small price movements. However, unlike some futures exchanges, the winning trade of traders on the Digitex exchange is not for any reason cancelled to protect it from losing.
• Digitex Native Currency: The native currency of Digitex is called DGTX token. It is the token in which all trading activities are denominated; profits and loses, traders' account balance, withdrawals and deposits implying that all traders must possess a quantity of the tokens so as to be eligible for any trading activities and other benefits on the exchange.
• Decentralized Governance by Blockchain: Digitex does not reserve the right to tell when, if and the number of DGTX token is to be minted, rather, owners collectively decide this so as to cover the costs of operating the futures exchange.
• Off-Chain Price Discovery, On-Chain Settlement: This is possible through the hybrid nature of the exchange. It ensures safety, speed and reliability.
• Bitcoin, Ethereum & Litecoin Futures: It offers three different markets namely; BTC/USD, ETH/USD & LTC/USD with each futures contract having a large tick size which helps in the elimination of noises thereby allowing prices to be displayed on a one click ladder style trading interface irrespective of the market conditions. Tick values of futures contracts are denominated in DGTX tokens.
• One Click Ladder Trading Interface: With this feature, traders are able to trade or place orders easily with a single click since markets are displayed on anintuitive ladder interface.
Also, traders are able to visualize and monitor the market since bids and offers undulate a central price ladder.
• Automated Market Makers: Digitex market makers are trading bots which are not profit-driven. With these, liquid futures markets can be created which have have tight bid and offer spreads no matter the market condition thereby giving traders the confidence to place orders anytime and this further enhances liquidity.
• Token Issuance Revenue Model
• Large Tick Sizes
• High Leverage
• No Auto Deleveraging
These features/benefits of the Digitex exchange will surely change users perception toward future markets by building their confidence since orders can now be placed anytime they feel like.
Use case 1
John loves trading, especially in the real world. His Friend who is a crypto enthusiast and trades in the virtual world persuade him to join him in trading. However, due to the explanation his friend gave him he became so bordered about the safety of his funds. However, his friend has heard about Digitex and the opportunities it gives, so, he told him about it and promises to put him true. He gave the following explanation;
If he buys 2000 BTC/USD futures contracts at $20,000 and the price rises that he is able to sell the 2000 contracts at $22,000. The tick size of the BTC/USD futures contract is $5 meaning that he has made a profit of 200 ticks on a 2000 contract position which is a 400,000 tick profit. 1 tick worths 1 DGTX so the total profit made is of 400,000 DGTX.
He said further that the current market price of 1 DGTX token about USD $0.10. The profit made in dollars is 400,000 DGTX × $0.10 = $40,000. However, his initial margin requirement to open this trade was 2000 × 20 DGTX = 40,000 DGTX ($4,000). Moreover, the account balance is not held by the exchange.
On hearing this, John was wowed and decided to join his friend in trading.
Use Case 2
On hearing about Digitex from his friend, John was so excited and needed not so much words to become convinced. However, he was only bothered about how his profits( in DGTX) could be affected due to the volatile nature of cryptocurrencies if all the values are only denominated in DGTX.
His friend explains the pegging system of Digitex to him and he loves it.
Unlike other future exchanges, either centralized or decentralized which have their advantages and disadvantages, Digitex leverages on their advantages so as to build a perfect platform with easy trading interface for its potential users.
The main disadvantage of both centralized and decentralized exchanges mostly complained by users is the associated high transaction fees which greatly reduce their profits. However, this issue of high transaction fee is what Digitex is tackling and ultimately putting an end to. Not only that, the combined advantages of centralized and decentralized are being utilized here making it far better than them. This will make more users come on board and increases the adoption of cryptocurrencies exponentially.
Obviously, Digitex will contribute largely to the exchange market!