How USX Empower Perpetual Trading

dForce’s revenue generated from USX perpetual trading already outpaced those from lending and stablecoin seigniorage, USX is the first decentralized stablecoin integrated with perpetual trading and now it’s time for a deep-drive on the implication and feedback loop.

For starters, what the heck is USX? For those not familiar with dForce, USX is the first pool-based, decentralized, over-collateralized USD stablecoin built on top of dForce’s lending pool and other designated pools (permissioned pools, liquid staking assets, real-world-assets etc).

Here is the diagram outlining its relationship with dForce’s other protocols:

Unlike Maker, which is CDP or single-vault-based, USX is a pool-based, bearing several improvements over Maker’s model:

1) high cap efficiency considering all collaterals are yield-carrying;

2) multi-collateral and cross-margin, meaning that collaterals can be borrowed and cross-collateralized;

3) fully compatible to CDP model (so very easy to spring up CDP like isolated-vaults, i.e., to warehouse ibTokens).

So effectively, you are earning yields on all your collaterals in the lending pool, while have negative cost for minting/borrowing USX.

dForce partnered with MCDEX on BSC to launch first USX perpetual trading pool, and marked as a great example for DeFi composability and how USX could be a preferred stablecoin for perpetual trading and to outcompete CEX.

USX-enabled decentralized and permissionless perp trading pool will unlock several key primitives unmatched by CEX.

First, it enables multi-collateral. For a typical perp trading on CEX, a trader deposit USDT into a CEX and start to trade within allowable leverage, most perp trading CEX only accept few collaterals, USDT, USDC or inverse pools which accept BTC, ETH as collateral.

Now, let’s take a look at how USX-empowered DeFi perp trading work. MCDEX is a permissionless, AMM-based perpetual trading protocol, there are mainly two roles in the system, one is the LP in the AMM pool acting as counterparties to traders and traders who deposit funds to market making and trade perpetual contracts.

Instead of few selective collaterals, you could use multi-collateral supported in dForce lending to mint USX, so if you own ETH but want to trade in a USX vanilla pool, you could deposit your ETH into dForce Lending and mint USX and deposit into MCDEX and started trading there.

In addition, it’s yield-carrying. Your ETH sitting in a lending pool still generate saving rate while trading or LPing. So, it turns your ETH into yielding tradable liquidity for perps.

If you have USDT, instead of using that to directly trade USDT vanilla perps where you basically earn 0% on USDT deposit, you could deposit USDT into dForce and earn 12% APY and mint USX and trade on MCDEX, basically funded perp trading with negative 5–7% interest rate.

There are many other ways that you could enhance capital efficiency, i.e., dForce could open up a pool which accepts USX MCDEX LP token as collateral for minting more USX, provides LP more leverage.

In addition to the main lending pool which could mint USX, you could also use major liquid staking token via Liqee (stETH, rETH, rATOM, rDOT etc) to mint USX for perp trading, so to unlock massive liquid staking tokens for perp trading while keeping all your staking yield; and there will be real-world-asset pool, which could be used to mint USX, so you are able to tap into real-world collaterals.

USX is the only decentralized stablecoin that connect to all DeFi’s primitives: lending, synthetic assets (stablecoin, synthetic stocks etc) and perpetual trading (largest revenue source for crypto).

Adding perpetual trading primitive will further fuel the value loop created by dForce’s existing protocol matrix, as it looping through all key DeFi primitives:

It re-enforces this mega loop:

1.increasing lending pool liquidity > 2. cheaper USX minting, more USX adoption (Liqee, RWA, perp liquidity), cheaper for borrowing > 3. more protocol revenue from lending, USX minting, perp trading > 4. higher DF staking and farming APY > 5. lower cost of capital for collateral suppliers in lending pool, and repeat

The next leg-up is DF’s planed tokenomics upgrade, which sets to further automate and supercharge the feedback loop.

Stay tuned for more to come.