Crypto has been struggling to get accepted into formal financial markets recently, Bitcoin ETF proposals have been rejected by the SEC
one after the other. The SEC argues that its main concerns are market price manipulation, security issues on the crypto exchanges, low liquidity and mall relative size of the crypto market.
While it might get some more time to develop more reliable tools on the crypto ecosystem and have SEC approves bitcoin ETF. It is well known that strong future markets help to stabilize volatile prices of many assets such as commodities. Futures markets have to be incentivized to grow further and bring more overall reliability to the crypto ecosystem.
Foreseeing this opportunity, a experimented pit-trader from the London International Financial & Options Exchange (LIFFE)
has inspired a crafty team to create the perfect opportunity for crypto futures markets ultimate expansion an growth. They create a concept that will change the current paradigm of crypto futures market. They have created Digitex
, the first commission-free futures exchange.
Why futures markets are such a big deal?
Futures markets are one of the most important tools for stabilizing volatile markets. Its relevance for the crypto ecosystem lies in three factors:
- Futures markets give traders the opportunity to trade prices without the risk of transferring, storing, and paying in full for the underlying instrument on whose price they are trading.
- The crypto market size is roughly $200 billion at the time of writing this article while the derivatives market size is estimated to be $1.2 quadrillion on the high end... those are just to many zeros at the right end of the figure. Since futures are part of the derivatives market, it is quite straightforward why we all should be praying for solid, secure, and growing crypto futures platforms.
- The higher the capital vested on crypto, the more guarantees investors will want to have within the ecosystem. A fully-fledged traditional-like financial platform such as futures markets will increase the trust of the investor on the crypto ecosystem.
But despite its great benefits and low costs, futures market's fees are still too much of a burden for high volume, low profit, margin futures trading strategies. This situation hinders futures market liquidity and turns possible profitable strategies into losing ones after commissions are charged.
Digitex gamechanger commission-free scheme
will create an Ethereum based token, it will be called DGTX. It will be used to denominate all profits, losses, margin requirements and account balances. Therefore, any trader that wants to participate in the commission-free trading environment of Digitex
should own DGTX, thus a great demand is expected from the traders willing to join this unique opportunity.
Having read this much a question yet remain unanswered, how is it possible for an exchange to operate without charging fees? How does it sustain itself?
At this point is when the genie came out of the lamp. Instead of charging fees on traders that bring liquidity to the futures market, Digitex
revenue model imposes a small inflationary cost on all token holders that will be widely outweighed with the high demand that the DGTX token will have. Even better, Digitex Futures Exchange
will leverage onto the trustless security system of the Ethereum Blockchain to guard account balances. An Ethereum smart contract will hold all account balances, Digitex
will inform the Smart Contract about each trader outstanding margin liabilities
and profit/losses balance.
In a nutshell, Digitex Futures Exchange
will not hold any physical data about traders balance nor it will hold any private key from users. Thus, malicious actors have little to no incentives to attack the Digitex
The icing on the cake. DGTX holders will be the ones who decide DGTX minting rates
DGTX token issuance will be democratically decided by the DGTX holders through a mechanism leveraged on the Blockchain, this will readily enforce a healthy DGTX token inflation rate, aligning the interest of the DGTX holders with the interest of the Digitex Futures Exchange.
Futures traders' commission-free Utopia, a dream that became true
By creating an ERC-223 token on the Ethereum Blockchain, and by using it as the native currency of the Digitex Futures Exchange
, traders will be to enjoy more freedom than ever with a operating scheme that allows them to implement whatever trading strategy they desire without fees-related limitations.
This new high liquid market will attract many traders that must buy DGTX token to cover the margin requirements to open trades. Thus, the inflationary pressure will be more than matched with the high demand for DGTX tokens. Besides, the first two years there will be no issuance of DGTX tokens since all operative cost will be covered through the DGTX ICO. Skeptical traders will have more than plenty time to watch the performance of the Digitex Futures Exchange
, but traders will have to keep in mind that the early bird gets the worm.
According to Digitex Futures Exchange
projections, in early 2021 the first issuance of DGTX tokens will occur. Traders will vote to decide how many tokens will be minted to cover for software development, servers, staff, premises, marketing, support, and other related costs to keep the platform fully operational. They will do so through a Blockchain-based, Decentralized, Governance Mechanism that will allow DGTX holders to vote with a 1-DGTX/1-vote ratio.
If you have had enough and don't want to waste more time to join this project, go here and get early access. If not keep reading that it just gets better
DGTX token details
Since all profits and losses are denominated in DGTX tokens, each trader have to own enough DGTX to cover his potential losses because the tick value
of each Digitex
futures contract is one DGTX token.
The owner of DGTX tokens can engage in the buying and selling of liquid futures on the price of the Bitcoin against the USD, Ethereum against the USD, and Litecoin against the USD. Due to the commission-free framework of Digitex
, the more active the trader is, the higher the intrinsic value of each DGTX token he has because he is saving the commissions than any other platform would have charged on him for doing the exact same trade.
Let's summarize the key aspects of the DGTX token
|DGTX will be the native currency of Digitex ||The tick value of each Digitex futures is one DGTX |
|Traders' margin requirements will be covered with their DGTX ||Account balances are denominated in DGTX tokens |
|DGTX minting will cover for Digitex operational costs ||The initial supply will be 1 billion of DGTX tokens. The funds risen in the ICO will cover the costs of Digitex for the first 2 years of operation. |
|Integration with swap.tech ,0xproject, and bancor.com enables free tradeability of DGTX with BTC, ETH, and other major Cryptocurrencies ||Traders can eliminate DGTX price risk thanks to DGTX peg system. |
Price risk is no longer a burden for traders thanks to DGTX peg system Hedging
is a basic strategy in stock markets to protect portfolios and reduce the negative effects that negative market movements may have on traders investments. Traders that hedge risk on their physical holdings of the underlying instrument (Bitcoin, Ethereum, or any other cryptocurrency) cannot tolerate DGTX token's price affecting their positions.
To protect traders from DGTX price volatility, Digitex Futures Exchange
has futures contracts on the price of DGTX that allows traders to lock in their tokens and sell them at current market prices. This great tool allows traders to keep possession of their DGTX tokens to cover their margins and keep trading on the Digitex
futures market. The downside of this strategy is that traders will not earn the profit if the DGTX rises because of the tokens being locked at a lower price.
As with any other future contract, the trader has to deposit a margin payment in the currency to which he is pegging the value of DGTX to cover his potential loses on the trade. Because the trader is protecting himself against DGTX price risk, another currency has to be employed to cover margin payments. ETH deposits are handled into an independent account balance smart contract and BTC deposits are converted into RSK
and deposited into a separated Account Balance Smart Contract (RSK is a Turing complete sidechain of the bitcoin network).
DGTX token availability
If DGTX token will be the fuel of a high volume and very liquid futures market, it has to be readily available and as frictionless as possible. Some traders may be happy to hold DGTX for the long term, but most traders will buy DGTX tokens only when needed and convert them back to other cryptocurrencies as soon as their positions are closed.
To properly address this situation, Digitex Futures Exchange
will integrate 0xproject
into its platform. Besides, 20% of the proceeds from token sales will be used to create a liquid market of DGTX tokens to ensure that a enough offers can sustain the expected high bid levels.
Traders on the Digitex Futures Exchange
are expected to buy DGTX at the start of each trading session, use the DGTX peg-system to lock in their sale price and convert them into the original cryptocurrency a few hours later when the trading session ends. This workflow will ensure a massive volume of DGTX traffic that will benefit greatly in the long term.
DGTX token supply and distribution
- 650M (65%) DGTX tokens were sold in January 2018: THEY SOLD ALL THE SUPPLY IN JUST 17 MINUTES
- Digitex market makers have 200M (20%) DGTX are bots that uses sophisticated algorithms to create liquid futures markets with tigh offer and bid spreads, even in volatile market conditions.
- 100M (10%) DGTX will be paid to the founding team. These tokens will be vested until 1 year past the first revenue generation token creation event (2021).This will incentivize the team to create a solid and ever-growing business model that creates demand for DGTX tokens.
- 50M (5%) DGTX will be allocated into a referrals program.
DGTX token issuance model and price projections
DGTX token creation events will occur via a fully auditable Smart Contract, a transparent review of DGTX token supply and event creations will be always available. Digitex
team build price projections over these basic assumptions:
Source: Digitex white paper page 8
Quotation source: Digitex white paper page 7-8
- 2% of traders are whales who buy a total of $150,000 USD worth of DGTX tokens over a 2 year period.
- 10% of traders are medium-sized traders who buy a total of $15,000 uSD worth od DGTX tokens over a 2 year period
- 88% of traders are small traders who buy a total of $1,500 USD worth od DGTX tokens over a 2 year period
This is an oversimplified model that doesn't take into account the overall trend in the crypto market. If the market turns bullish the rise in DGTX prices will be more than expected, but if the market is too bearish, the expectations may not be fulfilled even if the right number of traders is reached. Despite all that, the general trend can be depicted in this chart. Moreover, taking into account that BTC has lost more than 60%
of his value in 2018, DGTX stands as the 3rd bigger gainer according to coinmarketcap. You can tell from the graph below that investors are excited about the approaching kickstart date. Source: Coinmarketcap
DGTX token inflation projections
After January 2021, the next 12 months of the operational cost will be covered through the minting of new DGTX tokens. Here we can see a table with the expected effect of the inflation on the value of each DGTX token: Source: Digitex white paper page 9
The worst case scenario guarantees that if only 1,000 new trader registers during the first 2 years and DGTX price remain stagnant, only 5% of inflation is required to maintain the operational costs for the next 12 months. The effect of 5% inflation over the 0.02% price is negligible. Also, if the best case scenario is met, only 2.3% of inflation will be required to sustain the platform and its effect on the project price will be only of 1 cent per DGTX token. If the project reaches this stage, securing 12 months of development and more marketing will attract thousands more of traders that will increase the demand for DGTX outweighing the inflationary cost of creating that demand. You can tell that their projections might have been too conservative, in September 2018 we got an announcement about their waitlist reaching 100K signups
...no wonder why their CEO seems so happy.
Digitex hybrid trustless futures trade platform
have adopted a smart combination of the best features obtained with centralized matching engines and trustless, decentralized Smart Contracts to held account balances. In the wild future trading pits, each second matters, thus its mandatory to have a system with the smallest latency levels. Also, privacy is required to prevent frontrunners to exploit big orders. Many other desirable characteristics aren't yet available onto on-chain platforms and are only reached on centralized dedicated servers such as margin trading tools, scalability, and high privacy. Therefore, a hybrid model that covers current on-chain shortcomings and have none of the centralized ill-practicing is the smartest approach to leverage this new business model.
Digitex. The oracle for the account balance smart contract Digitex
acts as an Oracle that updates the decentralized Smart Contract that holds traders' account balances. When a trader requests a withdrawal of DGTX tokens, the Smart Contract requests an update to Digitex
about the trader's profit and losses, as well as his current margin liabilities on his current matched and unmatched orders. Thus, the Smart Contract can update its available withdraw balance for that trader.
The potential attack vector from the communication of the exchange with the Smart Contract will be prevented by calculating from scratch traders' profit and loss from their matched trades whenever the smart contract asks for an update to a trader's account balance. Thus, a hacker who has somehow gained access to the exchange, will not be able to create the fake matched trades (which needs a counter-party and timestamps) and alter the account's balance of any trader.
How is this hybrid model more beneficial for traders activity Digitex
is unable to freeze or to seize any trader's fund for whatever reason. Pressure from outside authorities, KYC/AML regulators cannot enforce any legal action against the exchange since it actually can't reach trader's funds. Also, Digitex
doesn't have access to the private keys of any trader, thus trader's funds cannot be accessed or mismanaged for the exchange.
Final Thoughts Digitex
benefits are of great significance for everyday traders, a commission-free platform will be a substantial improvement on the profit earned in many portfolios. Also, decentralized account balances and the centralized matching engine provides the best of the decentralized blockchain security and the centralized services reliability. The expected latency time for order matching is within the millisecond's scale, also, full privacy and no front-running is expected.
From the traders business perspective, Digitex
single tick trading strategies are available for the first time within the crypto ecosystem, this parallel with the market makers will greatly boost market liquidity.
A Steemit blogger use case
From the starting date of the Steemit platform, some bloggers have earned $100K worth of crypto. They have been really excited about crypto for two years, and they think it is time to jump in the futures market. They search for traditional options like BitMEX, GDAX, CryptoFacilities, and some others, but they discourage themselves when they discover that the high volume low margin strategy they have been carefully studied for the last two years is unpracticable on the traditional platforms.
They are frustrated and return to read some posts on Steemit while scrolling the trending page they read about a new futures market platform on a post of the well-known @originalworks account, they read some of the best entries of the weekly contest and they can't stop the big smile that is printed on their faces. Right from the very same source of their first crypto assets, also they get the tool that will provide them the opportunity for testing all the knowledge gathered for the last 2 years. With Digitex
they will enter the world of derivatives and start their venture as crypto traders.
Additional Information about the project
Here is Digitex Roadmap
Watch the Digitex exchange on action with their CEO Adam Todd https://youtu.be/qxqyspMiPGg
Are you excited with the project and want even more information? Visit their social media channels
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A Super Simple Cryptocurrency Arbitrage Spreadsheet for Finding Mismatched Prices
Crazy stat of the day: You can trade cryptocurrencies on over 170+ different exchanges
throughout the world.
Compare this to the stock markets in the United States which have a whopping…2. You know them very well by now (NYSE and Nasdaq), but these markets have had decades of consolidation and mergers.
While this is not an apples-to-apples comparison, cryptocurrency exchange consolidation is a natural market force that will happen eventually.
However, we do not know if this will take months, years…or even decades.
The abundance of choices in exchanges presents a multitude of problems, one of which is a large distribution of prices across all platforms
Many Exchanges Breeds Many Problems
New markets such as cryptocurrencies all experience the following problems:
- Transactional inefficiency
- Differences in prices
- Changing spreads
These problems exist due to imbalances in supply and demand. If there is a lack of sellers or buyers, the problems mentioned above are enhanced.
Complicating the matter even further, each pricing discovery process is silo’d within each different exchange
Smart arbitragers recognize this as an opportunity, and they specifically hone in on #2: Differences in prices.
When buyers are able to capitalize on differences in prices between markets, this is known as arbitrage
The ELI5 Version of Crypto Arbitrage ELI5 Version of Crypto Arbitrage
You have been following the price of a certain coin (we will just call it “coin” for this example) for a while.
One day while looking at prices, you noticed that on exchange #1 the price of “coin” was trading at $95. Simultaneously at exchange #2, “coin” was trading at $100.
Being that you are a smart cookie, you decided to do the following:
- Buy 1 coin @ $95 on exchange #1
- Sell 1 coin @ $100 on exchange #2
- Profit $5 from the difference in price
The crazy thing is, these market inefficiencies in this super new industry are available every day
. Wouldn’t it be nice if we had a tool that could spot these price differences easily?
The Solution Screenshot of the arbitrage spreadsheet
I created a spreadsheet that aggregates coin prices across multiple exchanges for all of the top cryptocurrencies. The spreadsheet uses the following services:
- Spreadstreet Google Sheets Add-in
- Cryptonator API
- Google Sheets
How to Use the Spreadsheet Quick gif on how the tool works First time install
The tool is nice and simple to use. It requires about 2 minutes to setup, then after that you are good to go.
Changing the primary currency
- Make of copy of the worksheet: Click here
- Install the Spreadstreet Google Sheets Add-in
- Follow the instructions and log-in to the add-in
- Formulas in the sheet should update
Cell B7 houses the primary currency (aka, the BTC in BTC/USD). Cryptonator has a massive list of currencies, but some of the more popular ones include BTC (Bitcoin), ETH (Ethereum) and LTC (Litecoin). Changing the secondary currency
Cell C7 houses the secondary currency (aka, the USD in BTC/USD). Once again, Cryptonator has a massive list of secondary currencies, with the most popular being USD (United States Dollar) and EUR (Euro).
How to Read the Graph
The graph will list all the exchanges that Cryptonator currently has trade volume, based on the user’s pairing choice. Spreadsheet graph
In this example, we are using the Ethereum vs. United States Dollar (ETH/USD) pairing.
Cryptonator currently tracks 10 different exchanges, all of which have their own price and volume statistics for ETH/USD. Using this graph, a savvy investor (AKA you) could:
- Purchase ETH/USD at the Kraken exchange for $463.17
- Sell ETH/USD at the Cex.io exchange for $479.99
- For a potential profit of $16.82
The Pitfalls of Crypto Arbitrage
Of course you, being a savvy investor, know that nothing in life is this simple. This form of trading comes with it’s own pitfalls, and it would be irresponsible of me not to point them out.
- Fees can eat into profits from arbitrage quite substantially. These include maker fees, taker fees, deposit/withdrawal fees, etc.
- Crypto is volatile. In the time it takes to move a currency from one exchange to the next, the price could have rapidly moved against you. It is better to have amounts of the currency already available at each exchange
- This tool does not show the Bid/Ask spread. For example, if the Bid is $19, and the Ask is $20, that gives us a spread of $1. For your own models, it is best to consider the Ask at exchange #1, and the bid at exchange #2
- Volume is key. If a cryptocurrency has barely any volume, you will not be able to sell easily, or at a reasonable price.
Arbitrage is a classic technique in profiting off of assets, and cryptocurrency is no exception.
The large amount of exchanges present in the market creates unprecedented arbitrage opportunity, as each exchange carries it’s own pricing discovery mechanisms.
Take some time and download the cryptocurrency arbitrage tool I created, and see if you can uncover any inefficiencies currently in the market.
Cheers, and happy hunting
Original article found at: https://medium.com/@spreadstreet/a-super-simple-cryptocurrency-arbitrage-spreadsheet-for-finding-mismatched-prices-a6e8b12dd8b0
Download Now Click here to download the spreadsheet
Download the add-in: https://spreadstreet.io/tools/google-sheets-add-in
First time install and login: https://www.youtube.com/watch?v=aLjtPR4T2bg
Cryptonator Ticker endpoint help: https://spreadstreet.io/knowledge-base/cryptonator-api-complete-ticker-endpoint/
Related Posts 10 Statistical Price Predictions for 10 Cryptocurrencies High-Flyers and Shitcoins: What I Learned from Analyzing CoinMarketCap Data in Google Sheets 7 Smart Ethereum Price Prediction Methods for HODL’ers
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