As centralized exchanges continue to face adversity via hacks and regulation, the incentives to develop decentralized exchange infrastructure continue to increase.
Although several decentralized exchanges already exist to cover spot markets, there has not yet been a viable alternative to futures platforms like BitMEX.
One project which is looking to address this gap in the market is Monte Carlo Decentralized Exchange, or MCDEX, who has released their platform to the public.
MCDEX is a decentralized exchange offering both BTC and ETH futures contracts, with leverage.
Infrastructure
As with most DeFi infrastructure today, MCDEX is based on the Ethereum network.
It runs using a new protocol called “Mai”, which is designed to improve upon issues associated with Market Protocol – an existing protocol on Ethereum.
Market Protocol has various shortcomings when used for derivatives trading, mostly concerning complexity in minting, exchanging, and redeeming “position tokens”, as well as unintuitive implications for pricing.
Mai is designed to take the foundations of Market protocol, but tames its messy inner-workings, leaving the end-user with a much more tolerable user-experience.
Rather than dealing with position tokens and extra calculations, users can simply use “buy” and “sell” operations, as they would on an established exchange like BitMEX.
MCDEX vs dYdX and Fulcrum
Both dYdX and Fulcrum offer margin trading on decentralized infrastructure. What makes MCDEX any different?
There are two key differences between the two:
- MCDEX facilitates the trading of Derivatives, rather than the assets themselves. This is more of a “bet” on the price of an asset, rather than outright purchase or sale of it.
- Both dYdX and Fulcrum require the user to borrow funds to trade with leverage on their spot markets, whereas this is not the case on MCDEX. This means that there isn’t a lending or borrowing market in MCDEX – only trading.
Collateral and connectivity
Unlike BitMEX and similar platforms, users of MCDEX do not have to be exposed to the underlying asset (Bitcoin), while trading Bitcoin Futures.
Being an Ethereum-based exchange, users instead collateralize their accounts and positions using Sai (single-collateral Dai), which is pegged to the US dollar.
Users can simply connect to the trading interface with their Ethereum wallet via Metamask.
Limitations
MCDEX currently only allows leverage of up to 4.8x, which is far below the 100x seen in BitMEX and Binance’s Futures trading platforms.
Liquidity will also be an issue until there is greater adoption of the platform – if this is to pick up at all.
A space to watch
Regardless, the prospect of a decentralized “BitMEX alternative” is a very exciting one, and is a space to keep an eye on for the near future.
With decentralization continuing to become an important theme, it appears that research and development in this area won’t cease anytime soon.
