Crypto Derivatives Platform Vows to Tackle Socialized Losses Seen on Other Exchanges
A crypto futures exchange says its features mean it is well-positioned to solve current problems that exist among rivals.
The team behind FTX claims they were driven to act after “hours of feedback” to established exchanges about the problems with their products went ignored.
As a result, the company claims that its platform “reduces the likelihood of clawbacks” through a three-tiered liquidation model — tackling the problem represented by “significant amount of customer funds on other derivatives exchanges that have been claimed by socialized losses.”
In a blog post, the exchange explained: “FTX really does see clawbacks as a worst-case scenario that we hope never happens. We designed a system that we think will withstand huge market moves and huge volume without leading to any clawbacks.”
This is achieved through a “backstop liquidity provider system” in which providers that have opted into the system have the opportunity to take over an account’s obligation before it goes bankrupt, meaning they can attempt to manage the position and “instantly inject liquidity from other exchanges.”
FTX claims that testing showed that “even market moves of 40 percent in a 20-minute period were not enough to cause clawbacks.”
FTX says that its backstop liquidity provider system is coupled with universal margin wallets via TrueUSD or USDCoin that enable users to trade all derivatives in one place. In addition, the company claims traders can “instantly” put on short or long positions with up to triple leverage without maintaining any collateral in margin.
In addition, FTX offers noninverted futures. Specially, its USDT/USD and BNB/USD futures provide easy and effective hedging opportunities for USDT and BNB positions. The exchange has also launched leveraged tokens on USDT, BTC, ETH, EOS, XRP with -1, +3 and -3 leverage, allowing users to put on positions that would typically require posting collateral without doing so.
When it comes to over-the-counter trading, FTX says that it offers “some of the tightest spreads in the industry” despite the recent bear market and a competitive landscape thanks to an automated request-for-quote system.
The crypto exchange adds that it is backed by Alameda Research, which it claims has become “one of the largest liquidity providers and market makers in the space,” trading anywhere between $200 million and $1 billion a day, depending on market volatility.
FTX argues that its offering is hard to replicate because of how many of its unique selling points depend on Alameda’s expertise. A summary of its white paper adds: “FTX is designed by people who really know the products. Everything from collateral to maintenance margin to liquidation processes to product listing has been redesigned from the ground up by one of the heaviest users of the products. It is built by traders, for traders.”
When it comes to developing new features, the exchange says that it is able to tap into Alameda’s tech team — and claims they are able to build “complex crypto trading systems under time pressure,” resulting in a development cycle that is much shorter than those of other established platforms.
A token with purpose
FTX has issued a token called FTT, which the exchange says offers significant utility to users. It can be used as collateral for futures positions, while simultaneously reducing fees and margin trading requirements. The startup also says that holders can benefit from lower spreads for over-the-counter trading, and that FTT “will become even more useful when we add other derivative products to the platform.”
The exchange says its team has a rich background, drawing from Wall Street firms and major tech companies such as Facebook and Google. The first round of FTX’s public token sale began on April 11, and the company says it hopes to conclude the fundraising drive within a few months.
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