Project Insight: Position Exchange – A Centralized Exchange Killer on BNB

The community-run protocol based on the BNB Chain is attempting to set a standard for the next generation of DEXs with a fully on-chain ecosystem.

Introducing Position Exchange

Position Exchange is a Decentralized Exchange (DEX) with a robust ecosystem that aims to bring cryptocurrency trading to the people through a simplified Decentralized Finance (DeFi) experience. The protocol is completely owned and regulated by the community, and it provides a diverse range of DeFi products for all types of users in an open, transparent, and trustless environment where everything runs on-chain.

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The platform was designed to bring the capabilities and experience of a typical centralized exchange onto DeFi–merging the best of both worlds. The ecosystem is powered by the POSI token–Position Exchange’s BEP20 native utility token. Holders can enjoy several benefits and employ the token in other functionalities developed by the platform. 

Position Token (POSI)

Position Exchange’s POSI token was conceived with a unique approach. It was designed primarily to benefit the community and the stakeholders. All fees and revenues from the protocol will be distributed among all POSI holders through a mechanism called ‘Buy-Back and Burn’ fully on-chain. That makes every POSI owner a stakeholder who will be entitled to a share of the revenue. In addition to being a utility token and providing liquidity, holding, and trading incentives, the POSI token also facilitates the decentralized governance of the protocol. 

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The token is built with a deflationary mechanism. While deflation is a negative term in traditional finance, it is generally viewed positively in the DeFi space plus. Deflation is a term used in crypto finance to describe a drop in the value of an asset due to factors such as over-minting. Burning mechanisms used by platforms usually include Buy-Back and Burn and transaction burning. The buyback mechanism is self-explanatory since it entails the platform purchasing tokens from holders and storing them in an inaccessible address. 

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Following this approach, Positive Exchange has made it a top priority to control the price and the circulating supply of the POSI token. The ecosystem is also implementing several anti-inflation measures for maintaining POSI’s price stability, thereby encouraging longer holdings which will enable users to derive greater value from the ecosystem. Other measures include anti-whale–to prevent price manipulation, setting up harvest lock-up periods–to prevent farming arbitrage bots from constantly harvesting and dumping, in addition to constantly buying back and burning POSI tokens while also reducing block emissions.

POSI token utility  

Token holders can generate passive income by staking their tokens in the staking pools and receiving rewards in return.

They can farm LP tokens and cast Non-Fungible Tokens (NFTs).

They can participate in the platform’s governance programs by proposing and voting for changes. 

Holders will also receive a portion of the 1% transaction fees generated on the platform. 

Tokenomics

The total supply of POSI tokens was limited to 100,000,000 tokens, with an emission rate of 5 POSI per block. 80% of the supply is reserved for the community, which can be used to generate staking and farming rewards. This is one of the highest percentages allocated to the community among existing protocols. 

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Product Exchange’s Product Suite

The platform offers users the ability to trade on-chain derivatives, stake assets for rewards, yield farming, NFTs, and a unique on-chain governance interface for holders to decide the future of the project. It also offers Exchange Pro and Vaults and is one of the first protocols to offer bonds–’Position Bonds’.   

Benefits of trading on Position Exchange:

Highly Intuitive: Seamless transactions on an easy-to-use platform.

Increased Privacy: No sign-ups are required. Users need only connect their wallets.

More Security: Users can trade directly with no intermediaries, which gives them more autonomy in a decentralized environment.

Low fees: Low gas fees on transactions

Easy access: No deposits required. Users can trade directly from their wallets.

Derivatives Trading

Position Exchange Perpetual Protocol (PEPP) is a fully decentralized perpetual futures contract trading protocol operating on Binance Smart Chain (BSC). It is bringing on-chain derivatives to the DeFi ecosystem, powered by an on-chain orderbook. Perpetuals or perpetual futures contracts are derivatives for trading the underlying asset with no future expiration date. It allows users to trade on margin–trade using borrowed funds. 

Users can trade perpetuals by buying (long) or selling (short), which is very important under the current market volatility. Essentially, users are using borrowed funds to bet on the future price of an asset. The prices are automatically set by the orderbook, which is based on an underlying index price. The Index Price is made up of the average price of an asset–according to major spot markets and their relative trading volume–provided by Chainlink Data Feeds. 

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Many DEXs are attempting to implement a large orderbook mechanism. DEX order books were launched in several forms, such as fully-on-chain, state channel, hybrid-orderbook, and Automated Market Maker (AMM). Due to the constraints of the blockchain, few on-chain order books generate considerable volume, with the exception of AMMs. However, while offering liquidity, an AMM still has issues with slippage, limit orders, and temporary loss. Perpetual futures contracts require the use of order books to run an efficient trading system. As a result, Position Exchange has a new orderbook design based on bit mask and PIP (Percentage in Point or Price Interest Point) orders. This design seeks to save as much gas as possible.

The orderbook has a matching engine called ‘Position Manager’ that holds a liquidity bitmap–a map of PIP and liquidity. Each price is represented by a PIP, it is the lowest price move that an exchange rate can make based on market convention. At the time of writing, the orderbook allows users to place limit/stop orders and market orders. To open a limit order, the Position Manager marks the PIP that has liquidity and then inserts orders in the order list and increases the PIP liquidity. To place a market order, the Position Manager will find liquidity in the liquidity bitmap. For either buy or sell orders, it will find the least or most significant bit starting from the current PIP. 

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In summary, the orderbook offers the following benefits:

No liquidity providers required: In conventional AMMs, liquidity is deposited by liquidity providers contributing assets to facilitate trading; the liquidity in a Position Manager Orderbook is derived from the limit order. There is no need for liquidity providers to add liquidity for an orderbook to work–traders provide liquidity to each order.

Reduced slippage: Traders are less exposed to slippage when market orders are able to fill at the desired price.

Funding payment: The Position Manager Orderbook acts as a self-managed cash-settlement market. Position Exchange Manager updates the funding payment and funding rate formula every eight hours, which will allow new derivative markets to trade with applied leverage while closely tracking an underlying index.

No need for constant monitoring: Traders typically have to monitor multiple platforms to keep up to date with market developments and make the right placements, which can be technically impossible. Using Limit Orders across all the connected platforms facilitates automatic swaps at the desired set price.

Making calls at the desired price: In DeFi, asset prices can fluctuate a lot and can move out of the target range very quickly. The limit order mechanism will automatically place the order when the price range is reached. 

Trading Mechanism: On the Position Exchange Protocol, the trader transfers USDT to the PositionHouse and instructs it to utilize that amount as the margin to open a leveraged long/short position. The PositionHouse receives the USDT, and deposits it into the Vault. Following that, Position Exchange Protocol updates the asset price in the orderbook based on the margin amount, position type (long or short), and leverage. The deposited tokens are not stored in Position House or the Position Manager. They are drained to the Position Exchange Vault, which interacts with the Position Manager by supplying the necessary data to value the traded assets. 

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This technique ensures that the tokens are protected in the virtual wallet (Vault) to avoid losses caused by technical faults, outsider attacks, and any system bugs in the Position Manager or Position House. The sum of each trader’s profits equals the sum of each trader’s losses. This is analogous to the traditional peer-to-peer futures trading technique. 

The vault always has enough collateral to pay back every trader because one trader’s gain will cancel out another trader’s loss.

Insurance Fund: It is an essential component of any exchange that allows leveraged trading–both controlled and decentralized cryptocurrency derivatives exchanges. This fund is established to ensure a smooth trading experience even when markets are illiquid or volatile. Liquidation price, bankruptcy price, and closure price are the three factors that are key to determining the use of an insurance fund in leveraged trading. When the closing price exceeds the bankruptcy price, the insurance fund gains capital on liquidated longs. For liquidated shorts, the opposite is true. In the event that the insurance fund does not have enough funds to pay the spread, it will mint POSI tokens and sell them at market price to provide liquidity for traders. The amount maintained in reserve by the insurance fund can be voted on by the community.

Decentralized Exchange

Project Exchange’s native DEX offers several features such as:

Swaps: Position Exchange’s swaps allow users to exchange tokens fully on-chain through a dedicated interface. RFI technology is used for all POSI transactions, 1% transaction fee is charged on all POSI movements (Buy/Sell/Transfer). All fees received are reinvested in the protocol and the community via an innovative system that redistributes all RFI fees directly to holders’ wallets. 

Liquidity Pools: Users can add their token to the liquidity pool and earn rewards in form of liquidity tokens and a portion of the transaction fees. Liquidity provided by investors can be withdrawn without a lockup period. LP token pairs can be converted back to single tokens and will immediately reflect in the user’s wallets. 

Aggregator: The market aggregator works as a search and optimization engine that collects data from several targeted sources to provide the best possible options based on the user’s preference. 

Cross-Chain Swaps: The Cross-Chain Swap is a simplified mechanism that allows users and investors to transfer between blockchains without the need for traditional bridges. With Position Exchange’s Cross-Chain Exchange, users can swap any token/coin from any network directly to another token/coin in the network of their choice. This will allow users to reduce the amount of transactions and costs required to move and swap tokens between blockchains.

Exchange Pro: It is a complex and innovative version of the Classic Swap/Exchange/DEX interface that contains numerous settings and utilities that increase the quality of the user interface, give more data on the dashboard, and maximize the usage of the platform’s capabilities.

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Position Bonds

In traditional finance, a bond is a fixed-income instrument that represents a loan made by an investor to a borrower (typically corporate or government). It is an IOU between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Crypto bonds, with their blockchain-native nature, will potentially revolutionize the traditional bond market in terms of cryptographic security, transparency, and automation. Position Bonds are similar to traditional bonds but run fully on blockchain and are stackable. 

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Users can acquire bonds and stake them in the Bond Pool with a fixed and steady Annual Percentage Rate (APR) for a set period of time, and when the bonds mature, the issuer will repay the investment with interest. The bonds will be collateralized by assets and locked in smart contracts. Position Exchange will secure and guarantee payment to investors when bonds reach maturity. Users can also exchange and launch their own bonds on the intuitive app. Individuals, companies, and projects can lock their assets (tokens, coins, NFT, or other assets) as collateral and issue Position Bonds to borrow funds from investors.

Key features of Position Bonds are listed below:

Instant Cash Back: Position Exchange bonds provide users with a platform in which through can simply trade or cash their investment whenever they want.

Fully on-chain: No intermediaries are required, and the protocol operates on a fully decentralized, trustless, and transparent system that is powered by smart contracts.

High & Stable return: Users can enjoy a high and stable return on their bonds by staking them in the high-yield bonds pool.

Risk-Free: All bonds are collateralized by Position Exchange, and payment with interests is guaranteed to bondholders.

Accessible to everyone: All entities–individuals, projects, or a company seeking financing and investment, can issue bonds easily by just providing collateral.

Staking

Position Exchange also offers users the ability to generate passive income through staking, which is far more straightforward compared to other complex instruments. Users can earn POSI tokens by simply depositing their tokens into the ‘Staking Pool.’ All they need to do is connect their wallets stake as little as one token and start earning daily rewards.

Vaults

Vaults are similar to Staking Pools/Farms with one difference, and they are auto-compounding. Position Exchange’s vaults are unique by allowing users to stake their tokens and generate rewards. By staking tokens into the vaults, users can save on time and network fees while their yields are auto-compounding every seven hours.

NFTs

On Position Exchange, users can mint NFTs with unique characteristics and different rarities by depositing POSI tokens. They can stake these NFTs in dedicated NFT Pools to generate rewards, issue, trade NFTs, and participate in auctions. Users can use any amount of POSI to Cast NFTs on the platform. NFT casting is a random process and is not based on the amount of POSI used in order to guarantee fairness for all users.

NFTs are locked for a random period between 25 and 45 days. During that period, users can benefit from the generated rewards with a Harvest Lock-up period of 12 hours. These rewards can be used to cast new NFTs and increase the staked amount to benefit from even greater rewards.

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The Rewards distribution system is unique for NFTs when compared to staking pools, farms, and vaults, as the generated POSI is not minted in the process. The rewards pool is refilled at the end of every ‘Reward Reset Period’ (weekly with a visible timer in the NFT Pool display) through a weekly vote organized on the on-chain governance interface. The community can vote for the Annual Percentage Yield (APY) to be implemented in every reset.

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Position Exchange offers NFTs in six grades based on productivity and mining efficiencies such as Farmer, Janitor, Accountant, Engineer, Pilot, and Boss. In addition to staking in the NFT pool, users can also trade the NFTs in the marketplace. 

Governance

POSI token holders are empowered with the ability to participate in the decision-making process in Position Exchange. This covers changes to contract specifications, the addition or removal of features and services, and even business choices such as supporting hard forks of tokens, dealing with extreme scenarios, etc. Every token holder has the same rights, but those with more tokens have more clout. The governance of Position Exchange is a gradual process that eventually distributes 100 percent ownership and control to POSI token holders. At the end of the 14-day period, their voting power, which is proportional to their token balance, will be calculated. 

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The governance structure for Position Exchange is entirely on-chain. It is built on three key components such as the POSI token, Governance Module, and Timelock (controls each protocol contract and can adjust system parameters, logic, and contracts in a ‘time-delayed, opt-out’ upgrade pattern. It has a hard-coded minimum delay of a particular number of days, which is the shortest amount of notice for a governance action). These contracts enable the community to propose, vote on and implement changes. Voting rights for POSI token holders can be delegated to themselves or an address of their choice. 

Recent Developments

Certik audited Position Exchange, and the final report was submitted on January 8, 2022. However, the security score dropped from 93 to 81 on May 3 this year. It was one of the top 10 projects on the BNB chain by 7-day TVL gain. 

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Concluding Thoughts

In a highly competitive DeFi ecosystem on the BNB Chain, Position Exchange is attempting to stand out by offering products like crypto bonds and various referral systems that would help the community of its ecosystem to expand quickly. 

However, in Q2 2022, Position Exchange has become a victim of the market-wide slump that has impacted even flagship cryptocurrency tokens like Bitcoin (BTC) and Ethereum (ETH). The total value locked (TVL) on the protocol currently stands at $23.6 million, whereas the protocol hit an all-time high of $85.22 million, as per data from DeFiLlama. What the future holds for protocol could be determined by how the protocol sets itself apart at various points in its development and roadmap, especially considering that it is competing in a market that is dominated by reputed protocols like PancakeSwap, Venus Protocol, and Alpaca Finance.

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Find more about Position Exchange here:

Website | Twitter | Medium | Documentation | Whitepaper | Telegram | Reddit | Github

Source : bsc.news

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