What is Margin Trading?
Let’s suppose you have $300 and 1 Ethereum can be bought for $300. You make the prediction that Ethereum will go up in price to $310. If you’d purchased 1 Ethereum for $300 and your prediction came true, then you’ve profited $10 assuming you’ve sold it. Through margin trading, you can take a loan and purchase 5 Ethereum for $300. If your prediction comes true, you’ve made $50 instead of $10. However, if Ethereum has gone down $10, then you’ve lost $50. Centralized exchanges will normally sell the Ethereum for you when the price drops low enough.
Decentralized exchanges are the future. It’s not a secret among top investors and crypto influencers. Some of the most popular decentralized crypto exchanges are lacking in certain areas.
Idex.Market, a popular decentralized crypto exchange, is popular because of the many tokens that it has listed. Many new ICOs are listed through Idex.Market and are traded against Ethereum. However, over half of the tokens listed on the exchange are usually trading at less than 1 ethereum in volume per day.
People would rather keep their private keys due to all of the centralized exchange hackings and other potential problems. However, centralized exchanges do not provide a high volume to trade from usually, while not integrating marginal trading or other implementations.
Meet the bZx protocol
bZx is a protocol designed to bring marginal trading to any decentralized exchange. By allowing users to lend for margin loaning or take loans for margin trading, it benefits all parties involved. It even benefits the exchanges that make the decision to integrate the bZx protocol into their exchange with increased volume, optimized features, and better trading fees.
The bZx.js library contains all of the functions in javascript needed to interact with the on-chain smart contracts. The library will allow for developers to easily integrate the features and capabilities of bZx into their decentralized exchanges. The library will provide all that is needed in order to make a new tab on the decentralized exchange for lending and borrowing similarly to how it is on centralized exchanges.
The bZx portal is a web-based decentralized application, rather than an exchange, that allows users to begin margin trading and lending. The bZx portal is readily available here: https://portal.bzx.network/
If someone has Ethereum or any other cryptocurrency for that matter, they can finally get paid to HODL! Instead of transferring the Ethereum to a centralized exchange, which has inherent risks involved, they can safely find an exchange or use the bZx portal to initiate a loan. They can earn passive income through her loan without having to worry about the security of their funds.
Another example of using the bZx protocol can involve an exchange. Let’s suppose a new or old decentralized exchange notices their volume constantly decreasing. This hurts the exchange and the traders using the exchange. They decide to integrate the bZx protocol. The exchange has increased liquidity movement in the bookings. Which is certainly a downside for most decentralized exchanges compared to centralized exchanges.