Of the $1.47B TVL in Derivates protocols, 72% is in GMX & DyDx.
The remaining 28% is shared across 86 perp dex protocols.
Let's explore the fragmented liquidity issue and the benefits of a perp dex Aggregator
🧵👇
Aggregated perp dex liquidity provides massive potential for high leverage, low slippage trades.
Here's the gist of the thread:
1️⃣ Problem with fragmented perp dex liquidity
2️⃣ Introducing mux.network
3️⃣ MUX Aggregator Mechanics
4️⃣ MUXLP
Let's surf in 🏄♂️
1️⃣ Problem with fragmented perp dex liquidity
Let's first quickly understand how perp dex leverage works (e.g. on GMX)
Users deposit collateral and take a leverage position against GMX's native LP.
LPers supply assets to the pool, earning fees and emissions.
28% or just $411M in liquidity is fragmented across 86 perp dexes. Low liquidity leads to:
- Slippage, especially on high leverage, large orders
- Poor trade execution
- Price Impact
2️⃣ Introducing @muxprotocol
MUX Protocol is a perpetual DEX deployed on ARB, BSC, AVAX, OP & FTM providing traders with optimized trading costs, deep liquidity, and up to 100x leverage.
The 2 main products are:
• Leveraged trading
• Perp DEX Aggregator.
MUX allows traders to open up leveraged positions with
• Zero price impact
• Optimal cost of a 0.08% position fee
• and multiple types of assets as collateral.
When trading against the native LP, MUX charges the following fees:
1. Position Fee: Fixed 0.08% position fee when opening and closing positions.
2. Funding Payments: Determined based on utilization, limit rate, and base rate.
3. Liquidation Fee: A maintenance margin (MM) of 0.5%, a 0.1% liquidation fee is charged if a position is liquidated.
4. Spread: MUX offers 0% spreads for the ETH and BTC markets, while other markets have different fixed spreads.
3️⃣ MUX Aggregator Mechanics
it aims to solve liquidity underutilization, lack of cross-chain liquidity, and difficulty in accessing optimal pricing & trading experiences through:
• Liquidity routing/aggregation
• Boosting
• Position container
• Cross-chain liquidity
1. Liquidity routing/aggregation
The Aggregator selects the most suitable liquidity route to minimize trading costs.
It compares trading prices and liquidity depth across various perp dex protocols.
Currently, Gains and GMX are supported.
This is also subjected to the trading pair.
Currently, the aggregator routes positions to an underlying protocol entirely, based on market, position size, composite trading cost and user preferences.
However MUX is working on a scattered liquidity system where it can combine liquidity from different protocols into 1 position.
For example:
a $100M position can be aggregated by $50M on protocol A, $30M on protocol B, and $20M on protocol C.
Each of these positions are represented by something called a "Position Container"
A Position Container holds traders' positions, with each position being isolated, thus isolating risks among users and ensuring safety.
To offer cross-chain aggregation, MUX uses a Universal Liquidity mechanism.
When a trader uses chain A to open a position, MUX automatically opens the actual position on an underlying protocol of chain B.
Users don't need to directly access chain B to use its liquidity.
Leverage boosting is another feature that allows traders to access higher leverage options and lower maintenance margin requirements.
Aggregated positions across different perp dexes have different maintenance margins
For example,
If I use $UNI as collateral to 20x leverage ETH, it gets routed through GMX.
The leverage boost is calculated as [Lev. Pos size] ([Maintenance Margin of GMX] - [Maintenance Margin of MUX])
= $6,000 * (1% - 0.5%) = $30
4️⃣ MUXLP
MUXLP works like GLP.
It holds a diverse portfolio of assets used for margin trading and third-party DEX mining to earn fees.
Users can LP by buying MUXLP with portfolio assets.
30% of protocol income will go to protocol-owned liquidity (POL) to ensure stable liquidity.
39.61% of MUXLP is POL.
When POL is sufficient enough, the proportion of the income distributed might be reduced.
MUX has 2 native tokens: A transferrable $MCB token, and a non-transferrable $MUX token.
These 2 can be locked from 2 weeks to 4 years to obtain vote-escrowed MUX (veMUX)
This thread was done in collaboration with @muxprotocol to spread awareness of their upcoming aggregator product. I believe this solves a huge problem within the perp dex ecosystem - too many dexes, too little liquidity.
Surf
@0xsurferboy
Analyst | Deep Dive Threadooor Covering Untapped and Overlooked Projects and Narratives Twitter 👇