One of the recurring ironies of the cryptcurrency space has been the topic of decentralized assets traded on centralized exchanges. bZx is not really an exchange in itself but rather it's a protocol that could be integrated into current exchange infrastructure. Exchanges and relays are motivated by fees denominated in the BZRX protocol token (BZRX) to offer decentralized margin lending and margin trading services. Assets are valued and liquidated via competing oracle providers. By decoupling the valuation and liquidation of assets from the protocol, the oracle marketplace approach enables competition to cause the oracle provider fee to its marginal cost while encouraging experimentation and flexibility.
In the wake of the 0x revolution, another age of decentralized trades (DEXs) are flourishing. These decentralized trades address a portion of the current issues with more established DEXs, while still deficient with regards to the abilities of a significant number of the leading centralized exchanges. People hoping to take part in margin loaning or margin trading are still compelled to pipe their liquidity to centralized token and coin exchanges, exposing them to an additional counterparty risk.
Counterparty risk happens when the risk of a third party defaulting jeopardizes the assets of an investor. Margin lending exposes the lender to counterparty risk both from the exchanges and the borrower. The specific type of avoidable counterparty risk incurred by lenders and borrowers using centralized exchanges is termed custodial risk; enabling individuals to maintain control of the private keys to their wallets at all times eliminates this risk. Lenders face more counterparty risk from underwater borrowers who fail to be liquidated promptly.
Decentralized margin comes with substantial technical challenges. The design of a reliable oracle that can match the settlement security of centralized exchanges is one of the most significant challenge. As regards margin lending, the oracle problem is induced because Ethereum contracts are not natively aware of asset prices on or of the blockchain. If smart contracts can’t stay aware of asset prices on the open market, they can’t consistently force-liquidate borrowers on that market to protect lenders from adverse movements. The most serious obstacle to decentralized margin lending is being able to reliably and securely liquidate troubled positions. An on-chain solution to these challenges and problems is the bZx protocol.
The Components of bZx
bZx.js Library
The bZx.js library is a promise-based asynchronous JavaScript library that contains all the functions needed to interact with bZx smart contracts on-chain. Software developers can utilize this library to easily integrate with and develop for the bZx protocol
bZx Portal
The bZx Portal is a web-based decentralized application that serves as a front-end to the bZx protocol, uses the bZx.js library, and works as a one-stop shop for people looking to interact with the protocol for margin lending and trading. Using the bZx Portal for lending or trading on bZx does not require anything, but it gives a convenient access point for users that aren’t otherwise on an exchange or relay.
bZx Smart Contracts
The bZx protocol is a series of smart contracts that provide on-chain margin lending, and the opening, monitoring, and liquidation of ERC20 token trades. The entry point for all state changing transactions with bZx is the bZx.sol smart contract. This serves as a controller of other sub-contracts that make up the various parts of the protocol, including bZxVault.sol, bZxTo0x.sol, and the custom Oracle contracts for trade management.
The BZRX Token
The BZRX token is a utility token with two main uses:
- The incentivization of order book aggregation by relays
- Governance of the bZx protocol
The BZRX token works for the bZx protocol similar to the ZRX token functions for the 0x protocol. Both tokens coordinate networks of rational economic agents around a protocol. Both are used to facilitate continuous, decentralized updates to the protocol.
Token Distribution
Symbol: BZRX
Quantity: 1,000,000,000
Number sold during presale/crowdsale: 500,000,000
Price at crowdsale: 7.3 cents USD
Presale Hardcap: 7.3MM USD
Crowdsale Hardcap: 29.2MM USD
Total Hardcap : 36.5MM USD
The development road-map and the costs associated over the next 5 years were calculated. The total cost of scaling, development, legal, and administrative costs was estimated to be just over 35MM. Inspiration was taken from the 0x project for the token allocation and only just a little deviation from their model.
Allocation of Funds
Roadmap
A more detailed explanation of the bZx protocol can be found in the whitepaper
Bounty0x username: ifeakinola