AnnouncementDear customers,
In an ongoing effort to provide our customers with the best possible trading experience, we are pleased to announce several enhancements to our swaps system. As the swaps market continues to grow, we continue to be extremely focused on ensuring that it operates as fairly and efficiently as possible, while mitigating systematic risks to the greatest extent possible.
Self Funding: To the extent that a trading wallet’s collateral is the correct currency, it will now be automatically used to offset the position’s swap requirements. For example, if a trading wallet contains USD, and the position is long BTCUSD, the USD borrowing requirement will be reduced by the amount of USD collateral. We believe that this change will result in significant cost savings to traders and help make the closely watched aggregate swap statistics more meaningful. This new feature essentially allows traders to pay no swap interest when the positions size is less than their collateral, i.e., “unlevered” (provided, of course that the collateral is held in the correct currency), and avoids the clumsy process of claiming unlevered position as this feature effectively enables traders to perform the economic equivalent of a “partial claim” when the position is reduced in size of more of the correct collateral is deposited in the trading wallet.
Daily Settlement: Up until now, swap interest to liquidity providers has always been paid daily, but swap interest from traders is only collected when the positions is closed. While this makes sense from a certain perspective, it has the unintended consequence of effectively putting Bitfinex in the position of making 0% loans to cover the payments imbalance created by large “unrealized swap” balances, which really should be serviced by the P2P facility that we already have in place. Moreover, from a balance sheet perspective, we feel that it simply makes more sense to match the frequency of the collection and payment process. In order to implement this change, traders will need to select how they wish these daily payment to be made. The system will support a new variable for each position, “Swap Type”, which can have one of two values:
Daily (default): Swap interest will be automatically deducted from the collateral in trading wallet of a daily basis. If the correct currency is not present, an appropriate conversion will be performed to satisfy the payment.
Term: Swap interest will be capitalized in to position every night by automatically accessing swap offers to cover the required payment.
Existing positions will be phased into this process, with daily “catch-up” payments of no more than 10,000 USD.
Leverage calculation: The currency that is used as collateral for your open position(s) does impact your risk of default in case of a forced liquidation. If you have 3 BTC and take a 6 BTC position, your true leverage, regarding exposure to BTCUSD price, is 3:1, not 2:1. We thus will include the collateral that is not in the last currency of a traded pair as part of the position cost (ie all non-USD collateral for BTCUSD and LTCUSD positions, and all non-BTC collateral for LTCBTC positions).
Your tradable balance is equal to:
( Your leverage * your margin balance (in USD) + your unrealized profit + your unrealized swap) - your position(s) cost (in USD)
Today, your position cost is equal to:
( your position base price * your position size )
After this change, your position cost will be equal to:
(your position base price * your position size + (your margin balance in USD - your USD trading balance)
These first three changes will be active on the 21st of July, 2014.
Real-time Autorenew: In the past, the “autorenew” feature for offering swap liquidity was only processed once every 15 minutes, which could sometimes create an offer “vacuum” if large positions were being opened and closed quickly during periods of heightened volatility. We have reduced that interval to less than one minute as we approach a true real-time solution to this important feature.
Swap “Bot”: We will soon be offering traders the ability to automatically replace the swaps that fund their positions with cheaper ones should they be available at the same or better terms, eliminating the rather laborious manual process that is available today. There are many nuances to making this work efficiently and it will be offered on an “opt in” basis, but we anticipate that this feature will make the swap market much more efficient and reduce volatility in the average swap rates. We will provide further updates on the specific functionality by the end of July.
Once again, we wish to thank all of our customers for their continued loyalty, which, in recent months, has made Bitfinex the number one platform for BTCUSD liquidity as measure by trailing 30 day volume. We look forward to serving the community’s ongoing trading needs as we continue to update and improve our trading platform. As always, we welcome your feedback.
Best regards,
The Bitfinex team
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Hello everyone,
As our project has matured after 7 months of existence, I think it's time to open an official support trade out of the "Project development" section.
What is Bitfinex?
Bitfinex offers 3 main functions, working together. There is 3 different types of wallet, each one having a dedicated function.
The three main functions of BitfinexBitcoins exchangeThe exchange part works like any regular bitcoins exchanges: you put your offer to buy or sell bitcoins. When an order is matched against another, it is executed.
The exchange wallet type is used for this feature.
Margin tradingOur margin trading feature is unique in the Bitcoin world. Basically, it allows you to borrow funds from lenders (see next feature) to trade bitcoins. If you make a profit, you get the profit and pay the depositor interests. If you make a loss, you reimburse the depositors the whole borrowed amount + interests.
For example, let's say you want to open a long position for 100 bitcoins. That means you want to buy 100 bitcoins hoping to the price will go up. The system will automatically borrow for you 100 * the bitcoin price US dollars (let's say 1300 USD) from lenders, at the best rates available. Your position will have a maximum period (defined by lenders), after which you will have to reimburse the 1300 USD (close the position). Each hour you will be charged an interests rate going to your(s) lender(s). If later you want to increase your position, you can borrow more funds, which will have ther own maximum period.
At any time before the expiration date, you can close your position. This will reimburse your lender, and you will keep the profit.
The same goes for short position (selling bitcoins), where you borrow bitcoins instead of dollars.
If there is no lender available, you will not be able to open your position.
The trading wallet is used for margin trading. It does not serve the purpose of buying or selling bitcoins, it serves only as margin requirements; that is, even if you have 1000 US dollars in this wallet, if you open a 10 BTC long position, you will borrow the needed USD. Funds in this wallet are to cover for eventual losses that may occurs. When the maturated loss equals almost all your wallet balances, you may get a margin call and have your position force-closed to avoid further losses.
LendingOur lending feature goes hand to hand with the margin trading feature described above. If you don't feel like a trader and/or prefer safer investments, this feature is for you. Bitfinex allows you, using your deposit wallets, to lend bitcoins and/or dollars to traders. You can put offers with your chosen terms (which rates, for how long, and how much). When an offer is taken by a trader, the money in your wallet will be used to buy or sell bitcoins, and a loan will be opened. When the loan expires (the trader closes his position), bitcoins are bought or sold back and money is reimbursed to your wallet.
SecurityWhen it comes to security, we're always paranoid. We have unique security features in the bitcoin world, which are:
- A watch-only wallet (cold wallet) on the production server, to monitor bitcoins transactions without giving keys to spend them
- API keys
- Automatic backup of the database once a day
- Duplication of backup data automatically across 3 servers
- Paper backup of wallet and exchanges keys and passwords
- Incorporated in a business-friendly place
Cold wallet:Your bitcoins are stored in a cold wallet, and the servers use a watch-only wallet, powered by Armory, to monitor incoming deposits. The wallet is handled by the Mav Armory Server script (open-source, you can find it here:
https://github.com/thedawnrider/BitcoinArmory-Daemon).
On a dedicated and isolated box a hot wallet is running with a low balance for instant withdrawals purpose.
API Keys:Neither the API keys (like currently the Bitstamp API credentials) are stored on the database nor the code anywhere on our servers.
Automatic backup of the databaseOnce a day, the database of the platform is backed up, encrypted and compressed as an archive. The passwords of users it contains are hashed.
Paper backup of wallet and exchanges keysThese crucial informations are printed on paper, which is kept with us in a physical wallet in bitfinex office. As well, the cold wallet is printed on paper, and Armory (the bitcoin client we use) allows to restore wallet from paper if needed.
Incorporated in a business-friendly placeTo protect your funds as much as possible, we chose to incorporate our company in a business-friendly place. Thus, Bitfinex Limited has its office in Hong-Kong, with one of our associate living there. We have establish a good relationship with our bank to ensure the necessary legal protection for your funds.
Questions?If you have others questions or suggestions to make, it will be a pleasure to receive them on contact@bitfinex.com!
