Abstract

How BLEX created?

Crypto take an important place in the financial market

In today's financial markets, cryptocurrencies have become an undeniable force. Over time, the market capitalization of cryptocurrencies has continued to rise, and their influence on the global financial markets has grown.

For example, as of February 2022, the total value of the global cryptocurrency market has exceeded 1.8 trillion US dollars, with the total locked value of DeFi reaching 42.9 billion US dollars. These numbers reflect that cryptocurrency has become an indispensable part of the financial market.

Why do we need a decentralized system?

On the topic of decentralization, we would like to share our understanding: Decentralization is the underlying foundation of a free economy. It redefines production relations.

1. “Not doing evil and unable to being evil are two different things”

Traditional centralized financial systems are typically controlled by large financial institutions and central banks, which have almost absolute dominance in the financial market and strictly regulate financial activities.

Today, we are still subject to the risk of wrongdoing from large institutions and regulatory organizations, as well as the enormous negative effects that occur after such wrongdoing, which can even trigger global financial crises:

• Single-point-of-failure risk: In centralized financial systems, as only a few institutions control the market, once these institutions fail, the entire financial system may face the risk of collapse

• Unfair competition: The centralized financial system may lead to certain financial institutions or individuals gaining unfair competitive advantages, thereby harming market fairness and competitiveness

• Privacy leaks: The fundamental difference between decentralized financial ecosystems and traditional financial ecosystems is that there is no need to trust institutions or bear the risk of malfeasance in decentralized finance. Users have enough information to make judgments about businesses and ecosystems

The fundamental difference between decentralized financial ecosystems and traditional financial ecosystems is that there is no need to trust institutions or bear the risk of malfeasance in decentralized finance. Users have enough information to make judgments about businesses and ecosystems.

2. Decentralization can also prevent many businesses from monopolizing the market

Ordinary users gradually participate in many valuable business models, such as becoming liquidity providers for a certain exchange and sharing the revenue generated from the protocol, becoming supporters of certain NFT ecosystems, and enjoying the benefits after the commercialization.

3. Decentralization provides financial services for third-world countries

In the future, many third-world countries will be able to better utilize financial and network services, which will reduce their governments' or institutions' investments in financial infrastructure construction, and enable them to freely connect with the economic and financial ecosystem of other organizations, companies, and even countries.

CeFi dominates the liquidity of crypto

When we talk about the liquidity of the crypto market, it's hard to ignore the shining moment of DeFi:

• According to data from DeFi Pulse, as of June 2021, the total locked value (TVL) in the DeFi ecosystem exceeded $80 billion, nearly 20 times higher than the end of 2020

• According to data from Dune Analytics, in the second quarter of 2021, the trading volume of DEX reached $34.3 billion, a 157% increase from the previous quarter

But CeFi is still recognized as the mainstream scenario:

• Trading scenario: Throughout the history of crypto development, the top ten exchanges have almost always been centralized exchanges

• Trading volume: Even during the peak of DeFi in 2021, the trading volume was still much smaller than that of CeFi

• Liquidity source: CeFi has better-established connections with traditional financial institutions

The challenges of DeFi

The rise of DeFi provides more sources of liquidity for the crypto market and promotes the development of the market towards decentralization. DeFi uses blockchain technology and smart contracts to enable financial transactions, thereby reducing participation barriers and increasing the decentralization and reliability of liquidity.

At present, large traditional institutions and users still think it is challenging to strike a balance between efficiency, compliance, and expected returns. Despite these concerns, high-quality decentralized ecosystems remain appealing to them.

Of course, in many processes, user operations, and interactions, DeFi is still unable to compete with traditional Web 2 tools, and products still need to be polished. Many DeFi platforms have performance issues when user numbers and transaction volumes grow.

Due to some of the characteristics of decentralized networks, additional Gas Fees (although the emergence of Layer 2 has reduced some costs) and repetitive wallet pop-ups can seriously impact the user experience of on-chain transactions.

DeFi platforms rely on smart contracts, but the security of these contracts is often challenged. Because smart contracts are written in code, there is a possibility of vulnerabilities and errors in their design and implementation. Once a contract is attacked or an error occurs, users' assets may be at risk, making it one of the important security issues that DeFi protocols will face.

BLEX Mission

BLEX hopes to continue exploring the direction of decentralized derivative trading protocols, focusing on optimizing products for both sides of users, and building BLEX into an open and vibrant community that eliminates bad actors.