GAINS Associates
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GAINS Associates

bZx — Telegram AMA — September 16

On Monday September 16, we had the pleasure to welcome to our Telegram chat the co-founders of bZx, Kyle Kistner and Tom Bean. We asked them questions about the development of bZx.

Some sentences have been slightly edited for readability but the meaning has been conserved.

AMA

Introduction:

Q — Alexandre R from GAINS: Can you start by introducing yourselves. What you did before crypto, how you got into crypto and how bZx started?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx:

I got my MSc in Computational and Molecular biology, did vaccine research, and had been following the blockchain space the entire time in parallel. After reading the 0x whitepaper, it became clear to me that margin was now possible in the emerging tech stack. I was friends with Tom, who I knew to be an extremely experienced developer, and we started iterating on different designs.

A — Tom Bean — bZx.network / fulcrum.trade from bZx:

I have a BSc in Computer Engineering from Georgia Tech and also an MBA. I worked in the private sector for 15 years as a developer, dev manager, and software architect, while trading forex and building trading bots in my spare time. I’ve been following crypto since the early days, but really got interested and starting investing about 4–5 years ago. I’ve followed Ethereum and had a strong interest in building on it since I first read the whitepaper.

Q — Telegram user Essie Underwood: How many team members are there in bZx Project?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: We have 7 team members, and we are currently hiring more.

Product:

Q — Alexandre R from GAINS: How would you explain the main feature(s) of bZx network as simply as you can?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx:

(a) Base Protocol: You can build many products on this, the most powerful/flexible in the industry. Examples of things we’ve built or are building: Margin for Augur, an Ethfinex style margin exchange, tokenized positions, etc. It has the ability to do off-chain signaling and on-chain settlement like 0x, but you could also use a fully-onchain version by pushing the order objects on-chain like we do with Fulcrum and Torque.

(b) Fulcrum: Margin loan pools (iTokens) and margin position tokens (pTokens). The lending pools have supply/demand algorithmically balanced. The margin position tokens borrow from the margin loan pools and perform swaps using Kyber (and soon 0x) to get traders into their desired positions (e.g., 4x wBTC).

(c) Torque: Borrow at fixed rates from the iToken lending pools. You borrow against ERC20s as collateral using our web3 interface, or you simply send in your ETH to dai.tokenloan.eth (to borrow DAI), wbtc.tokenloan.eth (to borrow wBTC), etc. from any wallet.

Q — Telegram user Karan: What is the difference between BZRX and Sugar token?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: The sugar token has been scrapped. The whitepaper is outdated at this time. The functions of the Sugar token have been subsumed by BZRX and modified in some ways. Check out this article for the latest token economics.

Q — Telegram user Crypto: Could you give us an overview of your tokenomics? Is the token designed to rise and fall with the success of the platform, and does it include any scarcity paths such as stake, store, or burn?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Check out Governance is Powerfulfor full details. But the long and short is that, it’s a skin-in-the-game governance token like MKR. There are no burning mechanics, but the value of the token will possibly be tied to the insurance fund.

Q — Telegram user Absurde Zeugma.io: Can you clarify the main difference between Dharma protocol and bZx?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: We have an insurance fund. It disperses automatically, taking 10% of interest from lenders to fund it. Dharma is very different, especially as they have pivoted to simply being a Compound relayer.

Here’s a breakdown of some relevant differences between ourselves and some of our most relevant competitors.

None of them are quite as flexible as us, which is why we can natively support margin for Augur and they can’t.

Q — Telegram user Crypto James: Why the delay in releasing the whitepaper for up to 5 months from the concurrent coding development?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: Our original whitepaper was written over 2 years ago and is heavily outdated at this point. We are working on a Whitepaper V2 to be released later this year. Our latest info can be found on Medium.

Q — Telegram user Bhau: In one of your publications, you classify bZx as a degree 5 lending platform. Could you explain what are the criteria for classification and what makes bZx better than other protocols like Maker and Compound?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: We took a very simple approach and enumerated the components of each protocol. We then determined whether each component was centralized or decentralized. Lastly, we tallied up how many decentralized components there were. We got a score of 5 because that’s how many decentralized components we had. The others got a lower score because they had less. The article/system was done in collaboration with the other projects in the space so that everyone felt they were being treated fairly.

Q — Telegram user shinichi kudo: Can you explain the difference between lending and staking on exchange?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: We have lending pools in Fulcrum. Anyone can send their assets (ETH, DAI, USDC, etc) to our smart contracts and start earning interest immediately. You can withdraw your funds anytime.

Q — Telegram user DK 🇰🇷: What are your existing products which users can use today?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: Fulcrum and Torque which is launching this week! We have deployments on Ropsten, Kovan, Rinkeby, and of course Mainnet.

Q — Telegram user Dina Karan: Who can access bZx’s universal liquidity?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: There are many projects building on top of bZx lending pools, not just Fulcrum and Torque. Anyone can use our shared liquidity.

Q — Telegram user S.R.: What is minimal funds requirement for trading on Fulcrum?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: You trade on Fulcrum directly from your wallet. You need a minimal amount of ETH in your wallet to pay Ethereum network fees, but bZx doesn’t impose any minimum requirements. Our volumes are increasing month to month. We have new projects building on us all the time. If you follow our twitter you can see this.

Q — Telegram user CryptoWhale: Can you please highlight more on the decentralization aspect using your technology? Is it possible to quantify the level of decentralization and economic incentivization?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: You can find out more in this article which talks about how decentralized we are compared to other projects.

Q — Telegram user R Fisher: I am a person who likes to hold my crypto. At the same time when the markets/tokens pump I like to have access to them. Margin trading terrifies me because though you can make a lot of money, you can also lose a lot quickly. Knowing this, what use would bZx be for me?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: If you are nervous about taking on too much risk, you can still open lower leveraged positions to get some exposure. For instance, you can 1x short an asset if you feel it will go down. We also support people who want to borrow crypto, rather than margin trade it.

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Apart from margin trading, you can lend to earn interest, and borrow to pay your bills so you can keep your assets in crypto.

Q — Telegram user albatross: How do the margin lending interest rates on decentralized exchanges compare with those of centralized exchanges?

A - Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Decentralized margin exchanges have better rates for DAI. Centralized exchanges have better rates for ETH and ERC20s.

Q — Telegram user shinichi kudo: Do I need to do my KYC verification before using your platform, and do you foresee facing regulatory problems from governments of different countries, if you try to launch your project in those countries?

A - Tom Bean - bZx.network / fulcrum.trade from bZx: There is no KYC required to use our platform, nor do we have user accounts. Anyone can use our platform directly from their wallet. We've had legal reviews in the US and the UK, which are stringent regulation wise. We are confident we can be freely used in most countries.

Q — Telegram user Essie Underwood: How are interest rates of coins or tokens determined on the Fulcrum Lending Platform ?

A - Tom Bean - bZx.network / fulcrum.trade from bZx: Interest rates are generated automatically based on current levels of lending and borrowing activity. There is a demand curve that determines the next rate given to a borrower.

Q — Telegram user Cheryl Ward: Which coins and tokens do bZx support for lending or margin trading in their Fulcrum Trading Platform and what is the maximum limit of margin we can use for trading on bZx Platform ?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: 4x is the maximum leverage. We support ZRX, KNC, REP, wBTC, and ETH. Lending supports those and DAI + USDC.

Q — Telegram user Kuga: How can I continuously know the borrow rates?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Fulcrum is listed on loanscan, right under Compound.

Q — Telegram user Kuga: How does one get statistics for outstanding / origination / repayments in bZx Network ?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Those statistics will be listed once Torque is released.

Q — Telegram user Bụt ra đê ngồi Đừng hỏi @ETHBOLD: With blockchain being such a young industry, partnerships are an integral component of any project’s journey. Which types of partnerships have BZx already attained and what are the plans on this front moving forward?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: We have a vast amount of partnerships. Many are listed on our website, but there’s a lot more we haven’t put up there yet (will be updating soon). You can see announcements of many of our partnerships on our Medium. Some of the more notable ones are: Chainlink, Ethfinex/DiversiFi, and Augur. We are starting new partnerships all the time. We put a lot of importance on this.

Q — Telegram user shinichi kudo: Can you talk a little about your partnerships with DiversiFi, Augur and KyberDefi and how they help support the bZx ecosystem?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Augur needs margin because creating multiple markets for a single asset (e.g., 2x AAPL, 3x AAPL) fragments liquidity. Our contracts hook up directly into Augur, using it as a price feed and liquidity source, allowing us to unify liquidity and offer a native margin trading experience. It will allow you to do cool things like lend out your Augur shares for interest as well.

The Deversifi partnership is (1) Listing iTokens and pTokens so that their DEX can offer margin functionality. (2) Integrating our base protocol so that you can have a hybrid DEX margin trading experience using Bitfinex’s deep pool of centralized liquidity in a non-custodial fashion.

Q — Telegram user Manohar Choudhary: How do you recover a loan if the account is wash?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: There is no risk of a wash. If borrowers don’t pay back their loans, we liquidate their collateral to pay back the lenders.

Q — Telegram user MTN: Can you share some videos on how to trade on your Fulcrum platform?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: You can see our tutorial with Kyber here.

Q — Telegram user shinichi kudo: Governance is Powerful: governance proposal for the bZx protocol drives excitement on the power of governance. How can it be used to capture value without extracting rent ?

A— Kyle KistnΞr | bZx + Fulcrum.gTrade: We align the incentives of the token holders by allowing the tokens to be redeemed by the insurance fund. Because the tokens will almost always be worth more than the redemption value, there will be no incentive to redeem rather than selling on the secondary market. And, if they do redeem, it will actually increase the value of the insurance fund on net. So the token value grows with the insurance fund, and no value is removed from the system at the same time.

Finances:

Q — Telegram user Crypto maximalist: How much cash flow are you guys currently having ? If bear market continues or you are unable to get minimum customers, for how long can you survive on your own ?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: We are one of the few blockchain companies that are post-revenue. We generate revenue by registering our fee wallet with Kyber, and we receive 0.075% on transactions. If we did not register our fee wallet, it would not change the cost to end users. If we continue to grow as we have been, we should be self-sustaining in a few months. We also have plenty of funding, so we are not worried about our continued ability to function.

A — Tom Bean — bZx.network / fulcrum.trade from bZx: We have extensive runway. Cash reserves are strong.

Technology:

Q — Telegram user Karan: Currently, a significant issue that every blockchain faces is scalability. bZx products work on the Ethereum blockchain and Ethereum is not much scalable presently. Do you have any plans to move on other scalable blockchains, or you will stay with the Ethereum ERC-20 blockchain?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: No plans to move to another blockchain. We believe that ETH will scale. Moving imposes a large development overhead, and we don’t believe any current alternative chains have a developed enough financial stack at this time.

Q — Telegram user 💜 Decent Bitcoin 💜: What are the security measures of your platform?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: Security of the system is of utmost importance. Our smart contracts have gone through extensive security audits (notably by ZKLabs). Users trade, borrow, and lend directly from their wallets. They are in control of their private keys and in control of their funds at all times. We are noncustodial.

Business Development

Q — Telegram user Absurde Zeugma.io: How will bZx network protect lenders from fund loss due to liquidation problems? Is there any active insurance fund system?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: We have an insurance fund. It disperses automatically, taking 10% of interest from lenders to fund it.

Q — Telegram user MTN: Are there any specific centralized exchanges bZx connects to for the margin trading?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Our upcoming integration with Deversifi will tap into Bitfinex’s centralized liquidity in the future.

A — Tom Bean — bZx.network / fulcrum.trade from bZx: Our first large centralized exchange partnership was Ethfinex, recently re-branded to DeversiFi. Our Fulcrum margin tokens will be the product that provides margin trading to their users. That is expected to launch sometime next week.

Q — Telegram user pepe: What do you think is the future of decentralized margin trading and lending platforms? Why would people shift from centralized to decentralized lending plattforms?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: People want functionalities they can’t have on centralized exchanges (e.g., margin trading on Augur), a better UX (no deposits, high liquidity, fast execution), or because it composes with other protocols (e.g., asset management for ETFs, structured products, etc.)

Q — Telegram user Ortho: How does bZx Network work and where can your platform be applied knowing that bZx is based on 0x model right and is powered by Ethereum mainnet? Can it be integrated to any DEX especially the ones with their own blockchains like Binance Dex powered by Binance chain or Switcheo powered by NEO?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Yes, the tokenized margin positions (pTokens) and margin loan pools (iTokens) can be listed just as they would any other ERC20. Binance Chain, Binance, Kraken, etc. can all take advantage of these tokens with minimal overhead. The first place that will be integrating them is Deversifi (formerly Ethfinex).

Q — Telegram user Nerte: Will it be possible in the future for an individual to add the tokens he wants to Fulcrum or is there a process review for that like with Compound?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: The team will be conducting community votes for listing tokens. This process will be fully decentralized when we implement governance around Q1 2020.

Q — Telegram user Nerte: Will it be possible to go short on DAI in case I think that it will be losing its peg?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Yes, you can go short on DAI using Torque. Use USDC as collateral, borrow DAI, and sell that DAI for USDC.

Q — Telegram user Anish: How you are going to handle the issue of low liquidity and large spreads?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: For on-chain swaps we are connected to Kyber network. In fact, Fulcrum is the #2 Kyber-connected app by volume. Kyber sources liquidity from their own reserves, as well as Uniswap, Eth2Dai, and others, giving them a large amount of liquidity. We are also soon going to source off-chain liquidity through 0x connected DEXs.

Q — Telegram user Nerte: In all liquidity lending protocols, there’s a spread between lend and borrow. How much are the spreads? Will it be possible to reduce them?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: Yes, this spread is dependent on the utilization (borrows/supplies). The best way to reduce this is to target a high utilization, but not too high, because this would make rates high. We currently target 80% utilization.

Q — Telegram user Lão tử Đi ngủ: Will BZRX Token have staking or lending?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: All BZRX token holders have a vote in the governance of the protocol. If the community wants lending for BZRX they can vote to add it.

Q — Telegram user Lão tử Đi ngủ: Is bZx’s focus on only margin?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: We’re a generic protocol for debt. Right now the major use cases in the market are (a) lending (b) margin trading (c) overcollateralized borrowing. But our base protocol is very flexible and can also handle undercollateralized lending when the infrastructure for it is available (namely decentralized identity and credit scoring). You could build any type of debt instrument on top.

Q — Telegram user R Fisher: What new partnerships are you hoping to get into for the future and in what direction will that take bZx?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: The partnership we are hoping most to form next is with Kraken. We are getting put on cryptowatch which is owned by them. If their users show sufficient interest this will be a gateway to have our tokens listed on Kraken.

Q — Telegram user Vika Leon: Do you plan to integrate ERC-721 into your platform? If yes, then how?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: We don’t have plans for this. It’s something that could be built in theory using 0x’s Dutch Auctions.

Q — Telegram user Crypto — My first Cry 🌊: Do you think that you will survive in the highly competitive sector of the market?

A — Tom Bean — bZx.network / fulcrum.trade from bZx: We are currently one of the fastest growing DeFi projects. Last month (our 3rd month after launching Fulcrum), we grew to be the #2 dApp by volume connected to Kyber. We constantly have new projects building on top of our protocol. The future looks very bright!

Q — Telegram user 💜 Decent Bitcoin 💜: What are your marketing strategies? Do you feel satisfied with the success you have made till now, when you look back to the day you started this project?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: We have just hired a full time marketer after focusing strictly on the technology. Nick from DeFi Prime. We are very happy with our success and especially numbers, but we think that with the release of Torque we will be able to climb even farther up the DeFi Pulse rankings.

Q — Telegram user Roman: ETHLend also provides decentralized lending services, why should new users move on bZx? Which services attract lenders and borrowers to move on bZx?

A — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx: Stani Kulechov (founder of ETHLend) is actually one of our advisors. Right now ETHLend is an OTC clearinghouse for lending/borrowing. We match up lenders and borrowers right away with a pooled model in a single transaction with defined terms. Our products cater to very different customers.

Thanks a lot guys for answering questions. You seem to have one of the richest projects in the space to be honest. Building many different products and it’s already at an advanced stage. With recognition from other high-quality projects in the space like Chainlink, things are looking very promising.

Do join their group to follow them, learn more and ask your questions if they haven’t been answered!

It’s been a pleasure to have you Tom and Kyle. Thank you also to everyone who participated with such fervor 😊

We’ll stay in touch and see what the future holds 😉 — Alexandre R from GAINS

Thanks for asking the questions guys, we appreciate the enthusiasm! It’s been a joy interacting with such an engaged group. — Kyle KistnΞr | bZx + Fulcrum.Trade from bZx

Thanks guys. Really enjoyed answering as many questions as we could get through. Feel free to follow us on twitter and join our telegram :) — Tom Bean — bZx.network / fulcrum.trade from bZx

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