Pin Insert、Customer Loss、Downtime、Hacker Attack、Prophet Control Attack……
Neither centralized exchanges nor decentralized derivatives seem unable to create a secure contractual environment for users.
In order to change this situation, there is a decentralized derivative is working on it……
1. Regression of Centralized Contract Exchange
On March 12th, 2020, cryptocurrency contract exchange BitMex had one hour downtime; Six months later, BitMex was under investigation by CFTC, and all of their top leaders fled.
Although after this, there are more people pay attention on contract exchanges, we often can hear the scandal that some exchanges insert a pin or some traders united for customer loss.
People have been hurt by centralized exchanges for a long time.
In September 2020, a sudden “Cryptocurrency Withdrawal “ shocked the entire industry.
This is not only an emotional vent for a long-term surrender of exchange “Pressure” but also a “Civilian War” raised by DeFi currency to against “Data Crash” of Exchanges.
However, “Cryptocurrency Withdrawal “ did not last too long, and its heat dissipated quickly in this area.
Although it failed, this movement had practical significance: If a centralized exchange is doing something bad, the general users can select DeFi.
But, is it really safe to choose DeFi and decentralized derivatives?
2. Decentralized Derivatives Suffer from Oracle Manipulation
On November 26th, 2020, a large number of DeFi mortgage lending platforms were liquidated. Among them, the largest liquidation was from Compound. According to Loanscan, a total of $110 million was liquidated on November 26th . There are a total of $100 million were liquidated by Compound Protocol, with the largest liquidation valued at $47 million.
Julien Bouteloup, founder of Stakecapital, and Sam Priestley, a professional arbitrage trader, both believe that someone took advantage of the Flash Loan lack to carry out Prophet Control Attack, and arbitraged $3.55 million through the rapid price fluctuations of DAI’s Prophet.
In fact, in DeFi area, the attacks of the Flash Loan are numerous.
In the same month that Compound was attacked, other DeFi projects such as Value DeFi, Origin Protocol, Akropolis, and Cheese Bank were also attacked by Flash Loan, with total losses of more than $10 million.
Minako Kojima, a blockchain developer, believes that the reason why hackers can easily manipulate prices is that DeFi protocol did not adopt a secure prophet strategy, which makes it easy to occur attack when the data of prophet communicates distortion.
Since last year, the occurrence of many flash attack accident has shown that the Flash Loan attack is like a time bomb, which has become a huge security hidden danger of DeFi.
However, although decentralized derivatives have been plagued by Flash loan attacks, one thing is certain: while centralized derivatives cannot avoid the bad habit of exchanges acting both as judges and athletes, decentralized derivatives is an important direction in the future development of derivatives track and has great potential undoubtedly.
Decentralized derivatives need to do is how to solve the shortcomings of prophet and avoid the potential attack risk of Flash Loan.
For these reasons, a decentralized leveraged contract exchange called 0xCFD has come up with its own solution.
3. 0xCFD and His New Solution of Contract
0xCFD is a decentralized leveraged contract exchange, supports leveraged trading, non-spot delivery, and balances user experience and trading performance on a decentralized basis, is positioned as “UniSwap” of derivatives trading to helping users take back control of their assets and pursue decentralization, automated market making, non-permissive, composability.
Compared to other DeFi projects, 0xCFD’s Automated Mark Making (AMM) model takes a single asset liquidity and combines a risk control model to support undercapitalized collateral, making it easier for Liquidity Providers (LP) to deal with risk exposure and control volatile losses.
In addition, it is different from ordinary contract products, 0xCFD adopt Hybrid Price Feeds (HPF) mechanism of on-chain Oracle and off-chain authoritative market provider to deal with the problems of feeding delay and manipulation.
Besides, 0xCFD reduces the side effects of Flash Loan by charging a high frequency transaction fee of 0.5% transaction value.
Compared to centralized exchanges and other DeFi derivatives, 0xCFD has features of automatic market making, external price feeds, and fixed slip points.
Currently, 0xCFD supports leveraged trades up to 200 times.
Leveraged trading magnifies profit as well as loss. However, all positions in the 0xCFD contract are monitored by the operator’s risk control system. If the margin balance of a position falls below the maintenance margin, either operator can send a trade to the contract to trigger a forced liquidation, thereby protecting the user’s assets effectively.
On January 14th, 2021, 0xCFD decentralized leveraged contract trading protocol completed version 0.5 smart contract upgrade, which has been deployed to Kovan testnet and HECO testnet successfully, and its test data on HECO are great.
At present, a new round of “Testing as Mining” activities has started on test client. A new round of “Test as Mining” has launched 500,000 ZCFD tokens HECO rewards, and users have received nearly 100,000 rewards so far. In the future, it can be mapped and converted into real ZXCT project tokens after the mainnet is launched.
There are various problems for both centralized exchanges and most decentralized contracts; However, 0xCFD seems to have found a new solution for contracts.