MCDEX (MCB): perpetual contracts

Gepubliceerd op 23 juli 2023 om 10:30

If you have some money left in your savings account and you would like to invest, you have several options. For example, you can invest in commodities, stocks or bonds. Investing in cryptocurrencies is becoming more widely known and more and more people own cryptocurrencies. There are many more investment products that run on the blockchain where you can invest in. For example, NFTs or perpetual contracts.

Perpetual contracts can be traded on the decentralized exchange MCDEX. You can earn passive income by providing liquidity.

What is MCDEX?

MCDEX is a decentralized exchange (DEX). This DEX runs on the Binance Smart Chain and Arbitrum, which is a layer 2 scaling solution for Ethereum. This means that MCDEX does not suffer from Ethereum's scalability problems. You can perform a transaction over Arbitrum at low cost and users pay low fees when you use MCDEX on the Binance Smart Chain.

This decentralized exchange is built specifically for trading perpetual contracts (futures). MCDEX has its own liquidity pool from which any user can provide liquidity. As a user, you can also set up your own perpetual contract market. The liquidity can be provided by each user, but it is also possible to have other users provide liquidity. Everyone who provides liquidity receives a reward. This makes it possible to earn a passive income with MCDEX.

Perpetual contracts?
Perpetual contracts are futures without an expiration date. Normally a future does have an end date. A future is a derivative, or a financial commodity, between two different parties. These parties agree that the holder of the futures can trade the underlying product (in this case a cryptocurrency) at a predetermined price on a predetermined date. But in the case of perpetual contracts, there is no expiration date, and the possessor of the contract may always trade the underlying product at this price.

If you expect the price of a cryptocurrency to rise further, you could buy a future that gives you the right to buy the cryptocurrency at a lower price. Eventually, this will increase the value of the future. This makes it interesting to invest in this type of product.

Security of the MDCEX platform

Bg bounty program: this is a program to encourage people to report vulnerabilities and potential hacks. When you report a hack or vulnerability, you will be rewarded. This reward can be as high as $100,000. It is therefore more attractive to report a vulnerability than to abuse it.

Of course, MCDEX also takes advantage of the security Ethereum has to offer. This blockchain has been using Proof-of-Stake (PoS) since The Merge. The network is maintained by validators who validate blocks by placing a stake in a staking wallet. Transactions conducted over MCDEX are not processed on the Ethereum blockchain. They are processed on Arbitrum. This is an "external blockchain" that controls and processes transactions off-chain. Transactions are bundled after which one hash rolls out, instead of hundreds if you were to verify all those transactions separately. Storing this one hash takes up much less space than storing the hashes of all transactions. The cryptographic solution (hash) is then sent back to the Ethereum blockchain. Here the validators see that the solution (hash) is correct, after which it is verified in a block.

Benefits of MCDEX?

  • It can be difficult to trade perpetual contracts or set up markets for perpetual contracts. MCDEX, however, ensures that there are no restrictions and anyone can set up such a market (user friendly).
  • If you want to earn passive income, you can provide liquidity to MCDEX's protocol. Because MCDEX runs on Binance Smart Chain and Arbitrum, users pay low fees and transaction processing time is short.
  • You can use many features normally available only on central exchanges. These include stop-loss and limit orders; this is unique for a decentralized exchange.

Disadvantages of MCDEX?

  • MCDEX runs on smart contracts. Everything is programmed in advance and executed automatically. When something goes wrong, it is impossible to reverse it. Therefore, using MCDEX is always risky and you can lose your deposit.
  • There are no bodies that take care of the regulation of MCDEX, which is why you can't be sure that the team behind the platform is following the rules. In fact, there are not even clear rules. This makes an investment in MCDEX always risky.
  • The Markets in Crypto assets Regulation (MiCa) does not include DeFi applications and protocols. That means that these kind of products are not yet regulated within the EU. The expectation is that MiCa will include DeFi in the future.

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