Most centralised exchanges that allow leveraged trading make use of an insurance fund to help manage liquidations on their exchange.
Typically, to trade a certain size requires an initial margin amount in a user’s account. As the price of the instrument varies, the exchange monitors each user’s position and requires that the user maintains a maintenance margin. If an adverse price movement takes the maintenance margin required above the amount of margin in the account, the exchange will liquidate that position.
But what happens if the price moves so quickly that the exchange is unable to liquidate the user’s position before the margin requirement hits or goes below zero? Cryptocurrency markets generally have no recourse to any further monies from a user and are unwilling to backstop those leveraged positions directly themselves. …
At Serenus Coin we have produced a DEX-powered stablecoin. Our decentralised exchange, or DEX, trades only one pair of assets: ether against serenus. Like most stablecoins, serenus is pegged to the US dollar. It is a synthetic dollar.
Consider the following scenario. The creation of synthetic dollars on BitMEX — the world’s most liquid bitcoin derivatives exchange:
Serenus Coin is a DEX that produces a crypto-collateral dollar pegged stablecoin. It does this by allowing issuers to create contracts that users can mint or burn serenus from. Users do this by sending ether or serenus, respectively, into an issuer contract. For more see this introductory article.
Since November last year, liquidity providers on Uniswap have earned fees by providing the ability for users to swap between ether and a variety of ERC-20 tokens. MKR and Dai are the biggest markets sofar. The fees are good but changes in price also affect profitability. …