The bZx Network is creating a decentralized margin-lending protocol. Any Decentralized Exchange (DEX) can integrate with bZx and enjoy additional liquidity within their platform.
Although the projectâs ICO is still in presale, their MainNet DApp is already live. Feel free to visit the bZx Portal if youâd like to give it a spin.
In a previous bZx Network article, we discussed how you can put your ERC20 tokens to work. Your bags neednât sit idle in your Ethereum walletâââmake them get out there and earn their keep.
And in this article, weâre taking a look at the projectâs blockchain-powered insurance. The bZx platform baked a parachute fund into their tokenomics.
Be sure to keep this in your thoughts as youâre reading alongâŚ
Disclaimer: This is not investment or financial advice. Iâm not a financial expert by any stretch of the imagination. Most information within this article is speculative and merely my own personal opinion. Always conduct your own research before contributing to any startup projects.
Always remember that what you do with your funds is your decision to make. And if that decision proves too difficult for you alone, seek guidance from a financial professional.
I may receive a small allocation of tokens for creating this content. That said, I will do my best to remain unbiased and fair. I try to avoid all FOMO and FUD and never wish to impart those emotions on my fellow crypto-heads.
A Tough Choice
Any swap of any cryptocurrency occurs on one of two types of exchanges: Centralized or decentralized. Each style carries its own pros and cons.
Centralized exchanges offer convenience, speed, and liquidity. At least for now, centralized exchanges have much higher trade volumes than their decentralized counterparts.
But those comfortable amenities come with risk. Itâs no secret that exchanges are hacked on a regular basis. Most attempts fail, but 2018 has seen more than its share of high-profile, multi-million-dollar hacks.
When youâre transacting millions and billions of dollars in crypto every day, your operation is super attractive to thieving thugs.
Now, the reputable exchanges tend to reimburse their customers for any hacked funds. Still, you wouldnât want to go through that hassle.
Not keeping large amounts of crypto on a centralized exchange is a common practice. Holding just a little for trading purposes is fine but itâs best to keep your tokens inside wallets you own the private keys toâŚ
Being Your Own Bank
Maintaining possession of your keys is arguably the best part of using a DEX. Youâre always in control of your tokensâ destiny.
But now that weâve gained security, weâll need to deal with low volume and slower trade times.
In addition to losing quickness and liquidity, DEX users are faced with the profit-stealing drawback of being unable to trade on margin.
No matter if youâre running long or stopping short, youâll have to use a centralized exchange because DEX-based margin trading doesnât exist just yet.
And thatâs the whole point of project bZx.
When Platform Users Become Losers
Troubled positions are a major component of the margin-lending system. Itâs where the dollars are made.
You see, by betting that an asset will increase or decrease in value, youâre taking a risk that the market wonât agree with your assumption.
If thereâs a violent swing against you, your entire account gets liquidated and you can change your name to Rekt.
Just like lotto, all the losers feed the winners and system operators.
But sometimes, positions arenât liquidated in time. In those instances, unlike lotto, the loser can withdraw remaining funds. They gambled and lost, but get to partially skip out on their bet.
Plus, the volatile crypto market is prone to FOMO and FUDâââoften irrationallyâââand may encounter an overall price-disrupting event at any given moment. The entire platform can suffer during those occurrences.
Now, the bZx project has already laid plans to attack the potential for loss of funds. Forced liquidationâââbacked by Ethereum smart contracts, blockchain oracles, and even bounty huntersâââis the main method of defense.
But the team added yet another safety net to the mixâŚ
Lenders fund the bZx networkâs decentralized insurance program
Safeguarding Your Tokens
Lenders on the bZx network are the ones realizing the most gains.
Borrowers do, too. But theyâre the ones taking the most risk and thus the ones that lose more often than they win.
The same concept applies to casinos. They remain profitable operations because they run games with a high probability of a victory for the house.
Blackjack, anyone?
To maintain and protect gains from loss, the project created a DIFâââDecentralized Exchange Fund. The fund is denominated in Ether as well as the networkâs BZRX token.
Itâs important to note that governance plays a big role here.
You see, as the network collect fees, some are returned to lenders and borrowers in the form of SUGR tokens. And those tokens give their holder the power to vote on how the overall network operates.
If something major disrupts the crypto market, SUGR holders would need to agree upon terms before the DIF is activated to restore principle balances.
And thereâs another little wrinkle to point outâŚ
Token holders have the authority to enforce eligibility requirements. It could very well turn out that those using lots of leverage on their positions wonât be able to use insurance should the need arise.
However, there are a lot of âifsâ in the equation. I donât feel itâs anything to be overly concerned about. If nothing else, borrowers could use leverage only to the maximum insurable amount.
Final thoughtsâŚ
The bZx project aims to provide a best-of-both-worldsâââcentralized and decentralizedâââcrypto exchange solution.
Users get the security of keeping their private keys private, while gaining access to high liquidity and margin trading.
And by creating the networkâs Decentralized Insurance Fund, the project is giving even more incentive for ERC20 HODLers to lend their tokens out to borrowers.
Not only is bZx adding token functionality to those holding an âunBankâ account, the projectâs also providing a service thatâs found within traditional banking markets: Deposit insurance.
As a user of any exchangeâââcentralized or notâââyou need to feel comfortable about the safety of your funds. You need to be confident that your funds will be there waiting for you the next time you log in.
And by allowing margin trading within any DEXâââand backing it up with a bespoke, community-governed insurance policyâââbZx allows traders to always keep funds under their own control.
So, my question to the operator of any decentralized exchange is: Why wouldnât you want to integrate the bZx protocol into your network?
DYOR
Looking to dive deeper into the project? Visit the bZx Website to discover more.
And hereâs a link to the bZx Whitepaper if youâre looking for some additional reading.
Finally, here are even more project resources to investigate:
Telegram: https://t.me/b0xNet
Twitter: https://twitter.com/b0xNet
GitHub: https://github.com/b0xNetwork
Email: [email protected]
Mainnet dApp: https://portal.bzx.network
BZRX Token Pre-sale Application: https://b0x.network/tokensale/
By the wayâŚ
If you like what you see here and need help getting your crypto message to the masses, Iâd love to hear about your project.
You can find me here: blockchainauthor at gmail
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