 |
July 19, 2019, 01:39:27 PM |
|
Speaking of contract trading of cryptocurrency, which seems to be a controversial topic for a lot of experienced crypto investors. So today we will briefly discuss the issue of contract trading.
There is a couple of mainstream centralized crypto exchange which offers contract trading, such as Huobi, OKEX and etc. Contract trading is similar to margin trading in the traditional stock exchange, In the traditional stock exchange, margin trading allows investors to buy the stocks from the exchange with paying a portion of required amount as collateral, which means stock exchange is lending money to the investor to invest. In that case, investors can use the leverage to expand the trading chips. Such trading characteristic matches with the investors with higher risk appetite. For institutional investors, margin trading provides institutional investors with more dynamic space to leverage to achieve their investment objectives.
In traditional finance, every aspect of contract trading is strictly monitored and reviewed by third-party regulators, which greatly reduces the possibility of cheating in the exchange. On the other hand, the cryptocurrency exchange is completely different. The whole process of the trading operates in a black box. Exchange is not only the data source of the cryptocurrency’s price; but also it is the counterparty when an investor initiates a contract trading at the exchange. In such a game, exchange played roles of a player and a referee, how can investors have any chance to win? When a potential grand reward appears in a so-called fair game, retail investors often choose to ignore the huge risks proportional to returns. There is no way that institutional investors will be part of this black box operation.
So is there any solution?
The answer is yes. Use a blockchain system instead of a centralized server; let the data capture and transaction execution be handled by the smart contract.
The former decentralized exchanges are on the right track. They solved the cheating problem by writing a trading algorithm into the smart contract. However, DEXs are still struggled due to the poor performance of the public blockchain and the effect of no cross-chain mechanism, resulting in the poor user experience of the decentralized exchange. The new generation of decentralized exchanges represented by the ContractLand has made more improvement and optimization on the previous generation of decentralized exchanges. ContractLand is a high-performance public chain system built on Terra-Chain. It will be able to support 3000TPS, which is comparable to the ability of medium-sized centralized exchange. More importantly, it has a unique cross-chain mechanism Terra-Bridge. It recently launched Bitcoin cross-chain bridge, which allows for DEX who has built on Terra-Chain to have trading pairs and deeper trading depths.
In the foreseeable future, decentralized exchanges will become more and more mainstream. It is believed that more institutional investors will enter the market; they will bring a large number of funds and considerable liquidity support to the market. There will be more financial derivatives on the decentralized exchange.
|
