OD.exchange lets users go long or short on assets using smart contracts on the Ethereum blockchain. For this, conditional payments are created by users and offered to other users on a P2P basis. The details of the conditional payment are fixed in smart contracts and define a payout to each user based on the price development of an asset. All transactions with these smart contracts are made with ETH only, with no utility tokens involved. The smart contracts’ source code is published and the team behind OD.exchange works hard to deliver maximum transparency and security to its users.
OD.exchange separates itself into the smart contract set that is deployed on the Ethereum blockchain and the website interface that gives users easy-to-use access to those smart contracts. The interface is free of charge whereas the usage of the smart contracts involves a fee. A more detailed explanation of the workings of OD.exchange and its conditional payments is given in the following paragraphs.
In order to create a conditional payment and offer it to other users, one has to interact with our master contract (view master contract on Etherscan), which offers a template for conditional payments. Any user can interact with this master contract in order to create their customized user contract. This customized contract represents an offer of a conditional payment to other users which these users can then enter as the respective counterparty (long vs. short or vice versa).
The creator of the contract first sets a price (the strike price), deposits an amount of ETH into the smart contract (the stake), and chooses whether to go long or short on the asset’s price development. The due date of the conditional payment as well as the asset is defined in the master contract. After the user contract is created through the master contract, it is automatically displayed on OD.exchange for other users to enter. Once another user enters the contract as the counterparty, the agreement becomes effective and the deposited funds remain locked until the due date. Note that the counterparty does not need to deposit an amount equal to the creator’s stake. Instead, there can be several counterparties matching parts of the creator’s stake.
On the due date, the strike price is compared to the spot price. Based on their ratio, and considering a leverage factor, the withdrawable funds for the long and the short party are determined. The spot price on the due date is accessed by the contract via an oracle (view oracle contract on Etherscan). The oracle serves as a transparent and permanent storage of the asset’s prices, which are publicly available. At the time of settlement, a hard-coded fee of 0.5% of the counterparties’ stake is transferred to the master contract. Since we have not conducted an ICO of any kind, our servers and maintenance are paid for by collecting this fee. The creator, however, does not have to pay a fee to the master contract.
Finally, the contracting parties can withdraw their funds from the contract, adhering to the following formula:
In the below table an exemplary contract is described that shows the calculation of the withdrawable funds and the fees that will apply. Since not the full stake of the creator is matched by the counterparties, only the matched part of the stake will be used in the above formula. The unmatched part of the stake is just added to the withdrawable amount of the creator.
Right now, there is only one asset and a fixed leverage available. This is done to maximize liquidity in the early stages. In the future, however, a variety of assets and a customizable leverage is planned to be offered.
Note, the master contract creates a basis for exchanging conditional payments on a P2P basis on the Ethereum blockchain. The contracts derived from the master contract represent direct agreements between the long and the short parties. Since the users’ funds are deposited only inside the user contracts, this makes the exchange purely non-custodial.
We try to deliver the best available product to our customers and we are working hard on constantly improving the user experience on OD.exchange. In our opinion, smart contracts and blockchain technology offer the perfect technological environment for creating P2P conditional payments.
If we have caught your attention with this article, pay us a visit under OD.exchange and check it out. We have a mainnet and a Ropsten testnet version ready for you! We will appreciate any feedback regarding the website and, of course, this article. You can reach us under: contact@OD.exchange
PS. The first users creating mainnet contracts on the exchange are eligible to get a freebie of 0.1 ETH if they manage to find a counterparty that enters their contract. Only a limited number of freebies are available.