The Journey to Revolutionary Derivatives – L7 DEX Mechanism Analysis
Satoshi Nakamoto kickstarted the 'Galileo Era' of cryptocurrencies, and later on, Vitalik brought blockchain into the 'Einstein Era'. Blockchain technology has made incredible strides in the past decade, comparable to the expeditions of great explorers and the transformative impact of the industrial revolution while traditional industries took decades or even centuries to reach certain milestones.Today, there is a growing demand for more sophisticated and diverse developments, including DeFi derivatives.
DeFi derivatives play a crucial role in the digital financial market, providing investors with a wider range of income opportunities and the ability to hedge against market risks. Therefore, within the DeFi ecosystem, derivatives are a key area of focus and one of the most promising markets.
DeFi derivatives include a variety of financial instruments such as synthetic assets, options, prediction markets, perpetual contracts, insurance, and interest rate derivatives, among others. In this article, we will explore how the DeFi derivatives landscape will evolve through the decentralized perpetual contract project known as L7 DEX.
L7 DEX is a decentralized contract trading platform based on BNB CHAIN. The platform's major business will focus on derivative contracts and trading, supporting low swap fees and zero price impact trading. Different from other contract trading platforms, L7 DEX will place more emphasis on sharing protocol value with users, thereby further promoting the development of the ecosystem and the community. The following aspects will also explain how L7 DEX drives the dual cycle of intrinsic value and outward expansion through innovation:
1. Introducing a global community that is highly engaged and connected
2. Establishing a solid foundation for platform development through innovative economic models
3. Utilizing the platform's advantages to drive user activity and foster mutual benefits between the platform and users
4. Creating a platform system through assets tokenization, effectively connecting primary and secondary markets with products and users
Users on the platform can use leverage of up to 100 times, which may sound similar to centralized exchanges, but on L7 DEX, all user actions are directly completed through non-custodial wallets. This not only reduces costs (only need to pay BNB CHAIN Gas) but transactions also get settled faster.
At the same time, because L7 DEX is decentralized and fully on-chain, users don't have to worry about common issues with centralized contracts, like price fluctuate drastically, misappropriation of user assets, or sudden internet disconnections. Additionally, the AMM (XY=K) mechanism provides users with a more efficient and interesting interactive experience.
The PVP AMM mechanism used by L7 DEX is very different from Dydx's order book model and GMX's liquidity pool model. The key to PVP lies in the word "relative". If GMX is like a bet between GLP and Trader, then PVP is like a bet between traders.
In the PVP AMM model, users will directly compete against each other. Trading is no longer a relationship between market makers and retail investors, but rather a direct confrontation between users. To put it simply, in the PVP AMM mechanism, any user can be a market maker. This is the essence of this mechanism. As a native DeFi mechanism, in the near future, more users will understand and accept this mechanism.
After understanding the specific principle of PVP AMM, a significant question arises: how to tackle the issue of depth - the more participants involved, the less fluctuation the user can handle; conversely, the fewer participants, the more fluctuation the user can handle. For instance, when only two users participate, the contract behavior turns into a game between the two.
This is a natural drawback of the PVP AMM mechanism: it requires a substantial number of existing users. It's akin to the age-old question of which came first, the chicken or the egg.
Global Community Building
To address the issue mentioned above, L7 DEX has taken some proactive steps: expanding into the global market, creating a more engaged and involved community, which helps retain existing game users and active platform users.
Following the core principle of community development, L7 DEX has established early communities in more than forty countries and regions worldwide, including Europe, America, Asia, Africa, and Oceania. These communities are provided with localized language and cultural services.
The key to quickly establishing communities lies in innovative models and the implementation of a profit-sharing system. Unlike typical Defi products in the market, L7 DEX introduces NFTs and regards them as vital assets and elements for community growth. Users can gain access by holding NFTs, which serve as early PASS cards and are also connected to the economic system for profit-sharing. This connection serves as a crucial link between the community and the project.
During the early stages of the project, NFTs will be created as special cards to verify and reward users. Holding NFTs also comes with perks like lower transaction fees and getting early access to community benefits. In previous projects, early community members might even get unexpected bonuses like freebies or project giveaways.
The economic model is closely tied to NFTs, and users who hold NFTs will have more opportunities to get platform tokens, such as participating in the early token sale (IEO) or receiving incentives from other platforms. Additionally, since these platform tokens have features like voting, staking, governance, and dividends, and the supply is limited in the early stages, these earnings will also bring long-term value due to positive expectations for the project's future and the continuous growth of the platform.
In fact, using NFTs as an early method for proving ownership and generating revenue is quite clever. For the general public, the PVP AMM model itself is a bit hard to understand at first. After getting used to the traditional model of centralized exchanges, users also need some time and opportunities to embrace this more efficient and innovative approach.
Looking at the development process, Defi has only been around for a few years. During these years, there have been ups and downs, but the one thing that remains unchanged is its core - the constant drive for fast innovation. From its humble beginnings to the current widespread recognition, blockchain has become a vital choice for certain regions and even countries. All of this is thanks to the tireless innovation and expansion of all participants in the industry.
In 1844, Alexandre Dumas wrote the famous line "All for one, and one for all" in "The Three Musketeers." Now, it seems like this line perfectly embodies the spirit of Web3. In the realm of Defi derivatives, L7 DEX has paved a new path for innovation, leading to the establishment of a decentralized global community through distributed contracts. A road of hope where "all for one, and one for all" is becoming a reality.
Disclaimer: This press release may contain forward-looking statements. Forward-looking statements describe future expectations, plans, results, or strategies (including product offerings, regulatory plans and business plans) and may change without notice. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements.