Hello everyone, today, let’s talk about the blockchain industry that financial professionals know about the development of virtual currency exchange systems.
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So generally, the basic mode of the exchange is generally the following three:
1. OTC transaction
Refers to the transaction between users, using the transaction method of offline transfer between users and online currency transfer.
2. C2C transactions
Refers to the transaction method in which users purchase digital currencies directly through certified merchants on the exchange (holding stable currencies issued by the platform).
3. Currency trading
Refers to the matchmaking transaction between digital currency and digital currency. During the whole process, the platform does not touch legal currency. For example, it is used for transactions between Ethereum and Bitcoin, or transactions between Bitcoin and other currencies.
So what is a perpetual contract?
Perpetual contracts correspond to traditional contracts. Traditional contracts have a fixed delivery period and must be settled and delivered on the delivery date; while perpetual contracts have no delivery period and can hold positions for a long time without being affected by the delivery period, and are more flexible. .
What are the characteristics of perpetual contracts?
1. The protection mechanism of penetrating warehouse
The main protection mechanisms for penetrating positions are divided into two types: insurance fund & ADL (automatic lightening of positions) and benefit sharing. The former is based on the forced liquidation of insurance funds. If there is a break-through, users with the most profitability and aggressive strategies will be selected as the target of lightening.
2. Price balance mechanism (funding expenses)
Funding costs are a mechanism used to anchor index prices and seek counterparties for strong parties in the market. Too long a design cycle will lead to excessive price fluctuations within a period of time, and excessive fluctuations in swap points before and after settlement. Too short a time will cause a large number of short-term investors to be affected by the funding rate and interfere with their strategy.
3. Maximum leverage
The maximum leverage reflects the level of the exchange's risk control strategy, and this level of risk control will also be reflected in the liquidation point (maintenance margin ratio).
4. Margin mechanism
Perpetual contracts do not have regular delivery, so there is no limit to the holding time of perpetual contracts. Investors can decide the holding time based on their own judgments on the market. And because there is no concept of expiration, the "expiration sharing loss" implemented by some exchanges is no longer applicable. The reduction of delivery risk makes it easier for institutional funds to enter this market and strengthen market liquidity. .
However, through my study and many materials, I believe that there is another underlying structure: the encryption layer is also the cornerstone of blockchain technology, which provides the security and anonymity guarantee of the entire blockchain system. However, some encryption technologies in the encryption layer are really brainstorming. In order to facilitate the understanding of non-professionals, the encryption layer is integrated into the data layer with most data for a brief introduction or follow-up articles.
[This article is organized and published by mkz888z, please feel free to communicate! 】