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For almost 2 years we have been one of the biggest players in the derivatives market. We ran into a lot of problems using exchanges – this is blocking the way for the crypto market to mature enough to meet institutional requirements. In the hope of improving the ecosystem, we wrote countless whitepapers, spent hundreds of hours advising these exchanges, but to no avail.
In the end, we decided to roll up our sleeves, solve the problem ourselves, and build FTX.”
In January 2018, Sam Bankman-Fried, then just a 26-year-old who had just left the glitter of Wall Street to try his hand at cryptocurrencies, discovered a deal. great arbitrage: due to extremely low interest rates in the Japanese market, Bitcoin here is priced up to 10% higher than in the US. At the time, however, much of the cryptocurrency market’s attention is being turned to another open-pit gold mine: the 30% price difference between Korean and American bitcoin, known as the kimchi premium. But South Korea has a tightly controlled currency that is difficult to convert to USD.
Bankman-Fried put it all on the table, calculating whether flying directly to Seoul to buy Bitcoin was worth it. In the end, this guy moved to Japan, accepting to go through a “relatively cumbersome” process (verbally Sam’s words) if he wanted to do it on a large scale, but Bankman-Fried and some friends, who later founded a company called Alameda Research, built a system of intermediaries, consisting of obscure banks in rural Japan, to capitalize on the disparity prices for a whole month.
But grappling with an outdated financial system is the biggest challenge. “The hardest part of arbitrage trading, the slowest and hardest part, the most expensive and the most frustrating part is fiat money.” Sam shared with Cointelegraph in an interview where he talked about the difficulty of opening an account that can then be closed at any time, the archaic procedures and bureaucratic apparatus. Very slow transaction.
“We spent five working hours a day going to the bank branches for five months straight, because that was the only way to get our money done.”
That’s one of the reasons Sam is so passionate about DeFi – with a vision that it will one day be the tool to replace the current sluggish financial system.
“The current bank payment system is not efficient at all. Trillion dollar companies are built in an attempt to overcomplicate that, and users have to grapple with extremely complex websites to get the little things done. We are using very outdated systems and the people who design them don’t even bother to integrate the internet into their products.”
But, why does CHK tell the above rambling stories?
Because today, we want to tell the story of the FTX exchange from a different angle, a side from which readers can understand why this exchange has only been launched for 2 years. conceived during the intense downtrend of the cryptocurrency market, when the piece of “secondary trading” that seemed to have been divided by the big giants from the US and China, could bounce back and become one of the most popular cryptocurrency derivatives trading platforms in the world.
The biggest advantage of FTX is that this exchange is backed by a professional trading company “Alameda Research” – Quantum trading companies sometimes hold up to 30% of derivatives trading volume on major exchanges.
The exchange celebrated its two-year anniversary on May 8. Last month alone, FTX hit $14 billion in average daily trading volume and Open Interest peaked at over $10 billion, representing an increase of ~25x compared to a year ago. Just two years later, FTX has established itself as a leading cryptocurrency exchange offering innovative products and leading the way in the ever-changing crypto market.
To understand why we say FTX is the most innovative “hard-working” exchange in the cryptocurrency market since its inception, we have to take a look at their products – things that if not used before. , you missed a very interesting part of the crypto market.
If you’ve just opened an account and looked through FTX’s ever-expanding list of trading products, you’re sure to find it confusing. Because from the very beginning, FTX has actively targeted customers who are professional traders with quick minds about financial instruments, “Build by Traders, for Traders”.
FTX’s flagship product is crypto derivatives trading like Bitcoin Perpetual Futures. These are financial instruments that create value from the underlying product – in this case cryptocurrencies like Bitcoin, Ethereum. The FTX exchange trades contracts against the underlying asset rather than the asset itself – this allows for higher leverage and a wider range of products. FTX allows maximum leverage up to 101X on derivatives. This means that a 1% change in the Bitcoin price can lead to a 100% change in the order amount – potentially allowing traders to gain more or, of course, lose more.
Derivatives products were originally created for institutional investors, companies, miners and professional traders to gain an edge regardless of market conditions. For example, Bitcoin miners who know they will receive Bitcoin in the future may choose to sell Bitcoin at the current price to protect themselves from future price fluctuations.
FTX offered innovative products almost exclusively at the time of their launch, which have since become the standard for derivatives trading in the cryptocurrency market, such as the MOVE index that tracks the movements of a currency. property type.
One of FTX’s most innovative derivative products is the exchange’s Leveraged Token. Have you ever heard of BTCBULL, BTCBEAR, or is there currently BTCUP and BTCDOWN on Binance? This is the product invented by FTX. These tokens are essentially a representation of a user’s leverage, usually with a value of x3. For example, you want to long BTC? Instead of long x3, you can buy BTCBULL. When BTC goes up 1%, you will gain 3% similar to long BTC x3. Even when the CHK team first approached the platform’s BULL & BEAR products, it took us a while of experience and analysis to fully grasp the development team’s vision. develop. Especially at that time, CHK was the first unit to produce analytical content about the FTX exchange in Vietnamese.
And it is these products that have led us to one of the most buzzing dramas of the crypto market in 2020.
On December 20, 2019, Binance, the world’s leading exchange, announced that it will make a strategic investment in derivatives exchange FTX. Up to that point, it was also the first outside investment that FTX had agreed to accept, in the hope of making FTX move faster in the crypto market.
On January 17, 2020, FTX Leveraged Tokens (BULL, BEAR, ETHBULL & ETHBEAR) were listed on Binance. Opening a new playing field for users on this platform, FTX’s products are immediately accessible to millions of users.
However, just 3 months later, on March 31, Binance removed these tokens, citing that “users lack understanding of how leveraged tokens work.”
This is probably the fastest listing and delisting record in the history of Binance and possibly the crypto industry.
Just a few weeks later, on May 12, 2020, Binance launched its own leveraged token product, citing “excessive user demand”. Even so, the crypto exchange emphasizes that its leveraged tokens will be very different from those currently on the market, and are designed to be able to overcome the limitations that leveraged tokens have. as FTX’s are experiencing.
Since then, Sam and CZ have not taken any pictures together.
Of course, the story behind only those inside will understand. As for us, small traders in the market, we should probably be happy because since that breakup, both platforms have grown tremendously, and have provided a lot of money market opportunities to a lot of people. encode.
To attract users, FTX has introduced derivative indexes or very strange leverage pairs. May be mentioned as:
– Leveraged tokens: Derivatives have a profit / loss x times the volatility of the underlying asset, which is a huge opportunity as well as a great risk for those who want to “risk” trading them.
– Composite index products – SHIT index, MID index, ALT index, to DeFi Index: the asset baskets are constantly updated to make the game more novel,
– Prediction market: “Betting” contracts that fluctuate in value from $0 to $1 based on a real-life event. The most interesting is definitely to mention “Bet on US President 2020”, which surely many Vietnamese investors participate enthusiastically.
– Pioneer in listing properties “tokenized securities” – a step that expands the frontiers of cryptocurrency to intersect with the wider world of traditional finance, allowing users to trade popular stocks like Tesla (TSLA), Apple (APPL), Coinbase ( COIN),… right on FTX.
I must confess to the reader that the writer was very ambitious in mentioning the money game of FTX in this article, of course, talking about FTX and ignoring the FTT token is a big omission. However, the brief story about this exchange alone is too long, and CHK also has a detailed article analyzing this issue.
In addition, with the heads behind FTX, not only Sam, but also Gary Wang – a seasoned engineer forged from the “Google furnace” or Nishad Singh, an excellent graduate of the University of California Berkeley, and many more, the plans of FTX will be a very interesting topic for us to explore in the next articles.
Of course, in the future picture of FTX, DeFi is a piece that cannot be ignored. According to the leaders, Ethereum, including Eth2, cannot scale enough to allow cryptocurrency and DeFi to replace the current financial system. DeFi can currently process around 10 transactions per second, with layered solutions allowing for upgrades to several thousand TPS.
Sam once shared: “This is an absolute, immutable barrier to growth. DeFi really can’t grow as an ecosystem until this problem is solved. And so any long-term plan that doesn’t deal with it is out of the question. […] It was a fatal weakness. “Even Eth2’s 100,000 TPS goal is not enough for what SBF has in mind.
“If your goal is to scale to 100 million or a billion users, […] If you want an app that can scale to the biggest apps in the world, it needs to be able to scale to about a million transactions per second. And so ignore immediately, and without even considering any other factor, any scaling solution that doesn’t get there, if that’s your goal.”
That’s why he’s become one of the biggest advocates for Solana, a blockchain that can currently handle 65,000 TPS and claims that the project can scale to an incredible 710,000: TPS on 1 gigabit link or 28.4 million TPS on 40 gigabit links.
With a solid “shield” of FTT, “spear” of Solana and “spear” of Project Serum, it is not too difficult to understand that FTX is the most “battle” player in the DeFi kingdom, competing fairly with Binance Smart Chains. or Ethereum. It will be difficult to predict what FTX can achieve in the near term, but it will certainly be one of the flagships, taking the crypto market to new highs.
Until then, keep enjoying FTX.
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