Cryptocurrency margin trading continues to offer participants a chance to increase their returns while enjoying competitive rates. Although different platforms that offer margin trading do exist, there is no single service that permits a direct way to execute short or long positions. Furthermore, existing margin trading platforms do not fully adhere to the philosophy of decentralization within the crypto sphere. UniMex, is a new decentralized finance project that seeks to solve this problem.
What is UniMex?
UniMex is a DeFi project hosted on the Uniswap platform designed to power on-chain margin-trading. It offers the first framework where shorts and longs are directly executed rather than through an off-chain platform. Margin traders using the Unimex platform are charged fees disbursed to lenders as a reward for supplying liquidity to lending pools.
How does UniMex work?
UniMex’s main goal is to facilitate on-chain margin trading where traders need to stake only Ethereum denominated collateral in a central account. The staking allows the margin trader to borrow ERC20 tokens and ETH from relevant lending pools that permit opening short or long positions. Unlike other margin trading platforms, UniMex creates a decentralized system through solely on-chain trading. UniMex also offers some of the attractive leverage in the market within the range of 1x-5x based on the liquidity of the ERC20-ETH Uniswap trading pair and soundness of the whole platform which the ERC20 token represents. Therefore, UniMex allows margin traders to borrow extra of the value of their ETH collateral.
Worth mentioning is that the UniMex intends to observe and respect the principle of decentralization hence the decision to retain the platform under the Uniswap system. The network’s founders had to reject propositions from centralized oracles like Oraclize and Chainlink. To fight manipulation, the system operates on the Uniswap TWAP (Time Weighted Average Price) Oracle. After the UniMex platform is launched, the admin is removed from the contract, with governance being liberalized to uphold the decentralization philosophy.
UniMex also introduces a new perspective to cryptocurrency lending. The network allows lenders to establish a lending pool automatically deploying a function on the UniMex platform, which checks that the ERC20-ETH pair is trading on Uniswap. The network also has a set of restrictions upon which ERC20 tokens are qualified to create a lending pool. This is a key measure that fights manipulations of low liquidity pools despite going against the decentralization principle to some extent.
UniMex also allows traders to borrow a multiple amount of the value of their security in tokens up to maximum leverage for a unique trading pool. The network permits a 25% fluctuation against the value of a trader’s position before enabling liquidation. Lenders will also be eligible to receive 0.4% of trading fees, the remainder after trading fee discounts distributed proportionally to UMEX and YIELDX stakers. UniMex deploys a central factory smart contract, which uses lending pool contracts. These are smart contracts that enable users to lend the specific Ethereum-based tokens so that margin traders can enter leveraged positions.
Furthermore, lenders for the specific underlying asset being borrowed are allowed to initiate a liquidation function which exchanges directly the asset on Uniswap. It will distribute the underlying swap fees to the lending pool also. Consequently, at the same time, it will lead to an additional penalty of up to 5% upon the trader’s collateral.
To achieve its mandate, UniMex has lined up several product releases in the coming months. By the end of April 2021, UniMex will roll out the UMXStaking feature to liberate the protocol approving the creation of lending pools from an admin’s governance. The UniMex community will contribute to the system’s governance by burning/staking UniMex recognized tokens with the rollout.
UniMex is also set to release the Token Governance feature in line with moving towards decentralization. The token governance will consequently remove the admin from the network’s governance. Users will either stake UMEX or burn YIELD X to affect fundamental protocol changes like approving the creation of new lending pools. YIELDX is the native token to the yieldxfarming.io decentralized application, a sister network meant for incentivizing and rewarding provision of liquidity for Uniswap trading pairs.
Cryptocurrency margin trading, without a doubt, carries significant risks. Traders are always on the lookout to avoid making losses. Despite the risk involved, returns from margin trading continue to be lucrative. The risk with margin trading is further elevated due to the fact that existing margin trading platforms are, to a large extent, centralized. They are, therefore, prone to manipulation as participants do not have control. However, the introduction of UniMex is ideal for solving these shortcomings. By removing the central admin, UniMex users can be sure of transparency in addition to hosting the platform on the decentralized Uniswap DEX. The lined-up products also point to a great future for UniMex.