After experiencing a series of centralized black swan events, the trading volume and attention of decentralized derivatives exchanges have increased significantly. At the infrastructure level, L2 public chains such as Arbitium, Optimism, and Zksyn have gradually become hot spots, and various Appchain open source architectures have continued to expand. At the same time, various side chains such as BNB Chain and Polygon have also made great progress in performance, stability, and ecological expansion. improvement.
These external conditions have greatly increased the reliability of DEX and the performance of ARM. There is no doubt that Perp DEX (decentralized perpetual contract exchange) has become the product with the best expected returns in the future. With the continuous exploration of the degree of decentralization, such products may become the most important part of the subsequent development of DeFi.
According to statistics, the daily trading volume of CEX exchange will reach more than 100 billion in 2022. At present, the total TVL gap of Perp DEX (decentralized perpetual contract exchange) is 2 billion US dollars, and the total treasury value is approximately more than 1 billion US dollars. The cumulative market value of these solutions is approximately 2 billion, and the 30-day trading volume is close to 7 billion. Obviously this accounts for a part of the contract trading market, but the growing market value and user attention do not indicate that the upcoming blue ocean of Perp DEX has opened, and a market of hundreds of billions is waiting for the rise of new blue chips.
Norway’s decentralized perpetual contracts mainly adopt the following two models: the Orderbook model represented by Dydx, and the GMX Liquidity Pool (Pool and Vault) model. This article will focus on the application prospects of Perp DEX through the new and innovative L7 DEX.
Analysis of L7 DEX innovation mechanism and advantages
L7 DEX is issued on the decentralized perpetual contract exchange on BNB Chain. By using the "point-to-point" innovative "PvP-AMM" protocol and configuring automatically deployed smart contracts, L7 DEX further reduces transaction costs and brings A more concise and easy-to-operate trading model creates a more efficient, fair and secure trading environment for users.
The innovation of L7 DEX is the introduction of new functions, which improves the capital efficiency and security of the protocol, thereby promoting new business increments and valuations. The liquidity limit released under the support of innovation makes L7 DEX more network-friendly and fortunately becomes a new component in the development of Perp DEX.
Unlike most decentralized perpetual contract exchanges, L7 DEX adopts an increasingly innovative "PvP AMM" mechanism. Under this mechanism, user attention can avoid problems caused by weak orders, such as the composition of pending orders, Problems such as transaction difficulties and price lags can also be minimized by minimizing the impact of market conditions. Thanks to the point-to-point mechanism of PVP, users can trade on their own without additional LP as a counterparty, which perfectly solves the problem of unilateral market conditions.
The peer-to-peer mechanism will naturally bring more profit opportunities to the minority parties. Therefore, under the combination of AMM automated contracts and various arbitrage opportunities, the stock game between the long and short parties will become more intense. It is also affected by the market conditions because of the small number of parties on both sides and This is further expanded by the changing identities of most parties.
Convergence Prediction Mechanism
Despite this, major signals and market self-regulation may still have price lag issues, which will seriously affect spot and contract transactions, so L7 DEX will further optimize the price signal.
Delayed preview capture is a huge problem on the DEX platform, and is also one of the reasons for DEX customers’ difficulties. In the past, the price of DEX relied on a single predictor, usually Chainlink. However, the price update of the predictor often changed behind the spot market (especially during periods of large fluctuations), which provided a large number of arbitrage robots. Space also affects highly sensitive spot and leverage transactions. Under L7 DEX's low slippage trading, this disadvantage is likely to be amplified, and both users and the platform will suffer potential losses.
Therefore, L7 DEX will adopt a more powerful neighbor management mechanism. Prices will no longer be fed through a single neighbor machine, but will be provided through an aggregated neighbor system, including the time-weighted average price (TWAP) using Chainlink, Pyth and Uniswap, and docking more ) CEX price interface to achieve a smooth interface between price and spot market.
L7 DEX Product Advantages
In addition to the smoother trading experience brought by PvP AMM and the above-mentioned mechanism aggregation mechanism, L7 DEX also has advantages and highlights in spot and contract transactions.
Compared with the two major second-tier networks in full swing, the advantages of the first BNB Chain will be more obvious, under the premise of being more stable and mature: considering that the performance of BNB Chain has been further optimized, the throughput has been doubled, and the GAS has dropped to 3Gwei, this ensures that L7 DEX can provide users with more, faster, smoother, and lower-priced high-quality spot and contract services. In addition, L7 DEX's liquidity construction and IEO strategy will also rely on BNB Chain's unparalleled rich ecology to provide participation opportunities and possibilities for more high-quality Web3 projects and users. The early entry threshold and higher user awareness are also conducive to the establishment of the L7 DEX global community.
In addition to its advantages, L7 DEX will further optimize and integrate smart contracts through the introduction of new functions, achieve smooth docking and online launch of more trading pairs, and complete most trading needs on the same platform. At the same time, all transactions will be automatically executed on the chain, using third-party and custody access points to better ensure the privacy and transparency of transactions.
Exploration of aggregate income model
The income of the L7 DEX protocol comes from different channels: including fees generated by the perpetual contract and various spot transactions, floating fees of the perpetual contract, liquidity construction and IEO potential fees and other platform asset casting, related fees and expenses, etc. , these fees constitute the revenue source of the L7 DEX protocol, and also form the user aggregation revenue model.
In L7 DEX, users will obtain additional income from different channels according to their participation methods. Early participating users and nodes will directly obtain part of the income from all transaction fees and share the dividends of project development; the holders of the platform tokens Gene Platform will continue to Purchase and enter relevant platform coins to enjoy further deflation benefits. At the same time, token holders will also gain more IEO opportunities based on weight and further participate in the development of the primary market.
Liquidity and farming are one of the most important ways for users to gain income on the platform. Users who build and pledge liquidity will receive transaction fee incentives. In addition, they will also receive high farm APY incentives. Different The farm cooperation between the project party and L7 DEX also allows participating liquidity builders to gain more dividend space and opportunities for projects and ecology.
The IEO strategy is the core element for the asset-based development of the platform and an important channel for users to participate in the primary market. In the IEO strategy of L7 DEX, 500-1000 high-quality Web3 projects will be invested and cooperated to form a platform token LSD. As the core transaction matrix, it promotes the further assetization of platforms including NFT and LSD tokens, minimizes the right to participate in the primary market, and provides users with more participation opportunities.
In the long term, there is huge space for decentralized derivatives trading, and the various innovations made by L7 DEX are an important development and breakthrough for Perp DEX. It has introduced many new features and improvements, which have improved the financial efficiency and security of the protocol, brought a more convenient way to participate in decentralized contracts, greatly improved the comfort of user experience, and attracted more users to participate. Come to L7 DEX. Under the new business growth and valuation prospects, DeFi derivatives will usher in an exciting and more flexible development space, and L7 DEX will also become a unique benchmark for Perp DEX.