DeFi, once a niche sector for only the most adventurous and tech-savvy investors, is now evolving into a wider financial industry for the mainstream. This transition is becoming increasingly less about adopting new technologies, and instead more about a fundamental change in how we approach financial transactions. DeFi’s core ethos is to enable investment accessibility for everyone, regardless of borders or status, in contrast to the bureaucratic procedures that dominate traditional finance today.
Undeniably, the DeFi industry has seen exponential growth over the last decade.
From the early days, when the infamous Bitcoin seller traded his internet coins for a box of pizza, to today, billions of dollars are being traded not just through a variety of centralized institutions but also among smaller players. These players, with a vision to further develop DeFi, have led to the creation of platforms like Uniswap, 1inch, and more.
The integration of perpetual contracts has solidified the potential of DeFi even further, showing that these developments are not just a new chapter but a complete rewrite in challenging traditional financial norms — where there is democratized access even to the more complex financial instruments.
What Are Decentralized Perpetuals?
Decentralized perpetual futures are derivative contracts used to speculate on the future price of an asset, utilizing smart contracts on blockchain platforms that enforce and execute terms autonomously. What sets them apart from traditional futures is their lack of an expiration date, allowing traders to hold their positions indefinitely, as long as desired.
Decentralized perpetuals, combined with the potential for high leverage and increased liquidity compared to the spot cryptocurrency market, make perpetual trading a favored strategy among traders. Despite the higher risk associated with perpetual trading, when planned carefully, they can end up as a profitable tool for many.
The pricing mechanism of decentralized perpetuals contracts also typically involves a mix of spot prices and funding rates to ensure that the contract value remains closely aligned with the underlying asset’s market price.
Also Read: Strategies to Profit From Trading Perpetual Futures Contracts in Cryptocurrency
A Long Way To Go
However, the field of decentralized perpetuals is still in a developmental phase and faces numerous challenges. One such issue is that many decentralized trading platforms today still lack the necessary tools for trading perpetual contracts effectively. They often have confusing interfaces, in addition to the difficulty of on-ramping funds into supported Web3 wallets and transferring across networks.
These issues are further compounded by the problem of high slippage, especially prevalent with small-cap altcoins, which suffer from liquidity issues, making it almost impossible to trade perpetuals without incurring significant slippage. As a matter of fact, decentralized perpetual platforms are currently also limited to the listings of what the team lists, and often, governance processes take extremely long. Additionally, the transaction fees and other associated costs, like gas fees, of trading perpetuals remain prohibitively high, posing a further barrier to entry in this market segment.
From an ethical perspective, the concept of global accessibility in DeFi goes beyond mere fairness; it’s about dismantling economic barriers and bringing even the most sophisticated financial tools to those who have been excluded from such opportunities in the traditional finance industry. This also spells a strategic move into the untapped potential of cryptocurrency markets, where there are many vast assets across the space.
MarginX stands as a prime example of this synergy between accessibility and Web3 innovation
Built on the Function X network, MarginX’s architecture utilizes the Cosmos SDK. The Cosmos SDK’s modular design enables developers to selectively employ components for creating custom blockchains, optimizing them for specific requirements. This feature allows MarginX to support interoperability and high transaction throughput, which are essential for real-time activities, especially during periods of heavy user traffic on decentralized trading platforms.
The latest upgrade to MarginX, version 2.0, introduces the Automated Limit Order Book Market Maker (ALO). This innovation allows users to customize risk preferences and market dynamics, marking a departure from the fixed trading conditions of current platforms. The model further democratizes access by granting liquidity providers the autonomy to list any perpetual pair and determine their trading parameters. Consequently, this leads to an equitable distribution of fees, profits, and losses, tailored to the users’ preferences.
The MarginX team is also focusing on broader ecosystem integrations, enhancing wallet support, and expanding pair listings, demonstrating their commitment to advancing decentralized trading and promoting user autonomy. Follow our Twitter for more information!
Disclaimer: The content provided here is for informational purposes only and is not intended as financial advice. Readers are advised to conduct their own research before making any financial decisions. DYOR!