Futureswap: 20x Leverage on Ethereum
Futureswap is LIVE on mainnet 🎉
Futureswap is a decentralized exchange that allows traders to enter into perpetual futures with up to 20x leverage while liquidity providers can earn fees and interest. The platform is governed by the community, which is powered by an underlying governance (FST) token that allows anyone to propose new exchanges or changes in the system.
Our goal was to take the best parts of centralized exchanges and the necessary parts of decentralized governance to merge it into a system that is self-governed and aligned on a common goal.
- Zero slippage — By not using an order book Futureswap can achieve zero price slippage using our AMM and bonding curves.
- Any ERC20 — New exchanges can be added through a governance vote.
- Non-custodial — We cannot control your assets.
- 20x leverage — Users can trade with up to 20x leverage.
- On-chain referrals — Trades that have referrals get bonus FST that can be claimed
Unlike Uniswap and other exchanges, Futureswap’s zero slippage model allows traders to go up to 20x long or short any token, at the exact market price. A $10 trade now enters at the same price as a $1 million trade!
Futureswap does not impose artificial time restrictions on trades, so as long as your trade has enough collateral, you can keep it open indefinitely. From this perspective, Futureswap can be viewed as a hybrid between 🦄 Uniswap and a leveraged trading platform that gives you 20x leverage.
To see how trading works examples Link for more details.
Futureswap is powered by liquidity providers. Every Futureswap liquidity exchange holds reserves of a stable token (e.g. DAI) and another ERC20 token (e.g. wrapped ETH). To become a liquidity provider you are required to deposit equal value amounts of both stable and asset tokens.
Automated market-making means that Futureswap’s liquidity providers may initially take the other side of an unmatched futures position. An example of this would be a brand new exchange where there are zero open trades. If a $100 long is open, then there are $100 of longs and $0 of shorts. The liquidity providers are covering the $100 long position effectively making them short the asset temporarily. To mitigate drastic imbalances between long/short volumes, an increasing fee (Dynamic Funding Rate) is charged to the more popular side. As the disparity between longs and shorts grows, the more popular side is disincentivized by paying an increasing dynamic funding fee to the less popular side. In the above example, short positions are strongly incentivized to take the other side of the trade (any amount up to a $100 short which would balance the longs/shorts) because they will be earning the Dynamic Funding Rate (the time fee paid by the more popular side to the less in-demand side, longs to shorts).
Liquidity Provider Returns
An issue with Uniswap’s system that requires significantly more liquidity than trade volumes means that capital is not optimally utilized. Futureswap improves on this by allowing up to 100% of the pools to be utilized by trades. This allows not only for more efficient use of capital but also helps keep liquidity pools balanced during volatile times. Liquidity providers earn trade commissions and borrowing fees on up to 100% of their funds.
Liquidity providers (LPs) do take on added risk to receive these rewards. The worst-case for liquidity providers returns is a scenario where 100% of the traders are short while the price is dropping. In this case, LPs have the same exposure (plus earned fees) as if they were holding 100% of the underlying asset instead of 50% of the asset and 50% of the stable token. While this is extremely unlikely (due to the Dynamic Funding Rate), it is still a risk. The shorts would be paying upwards of 10% per 8 hours to the liquidity providers or longs, so an arbitrager could go 20x long and earn 200% (10% * 20x) in 8 hours while hedging elsewhere. For this to happen, arbitrageurs would need to forgo incredible returns.
Futureswap has mechanisms such as the Dynamic Funding Rate to maintain relative volume balance between longs and shorts. When a long position is profiting, the shorts are losing and thus the risk is transferred from LPs to traders while LPs are earning 100% of the fees.
Similar to Maker’s Keeper system, we allow anyone to send a liquidation transaction to the contract to close bad trades. No funds are needed to liquidate and the trade is not taken over by the liquidator. If the specific trade violates collateralization rules, it will be closed. A liquidation fee is charged to the remaining collateral and paid to the liquidator (at the start it will be 30% but can be lowered as the platform matures). 5% is added to the liquidity pool as a type of liquid insurance fund and the remaining funds are returned to the trade initiator (65%).
Futureswap Token (FST) is earned by interacting with the platform. Traders, liquidity providers, and referrers all earn FST based on their weekly volumes. An example of how incentives are earned is, if a trader is 1% of the platform’s trade volume, they will earn 1% of that week’s trader rewards. FST is used as a discount token for cheaper trading commissions. The contracts give a discount for how many tokens the trader has in their wallet and are not burnt. The starting maximum discount is 30% of trade fees. FST goes beyond a discount token and is actually the governance token for all of Futureswap.
Being decentralized and community governed is at the core of why we built Futureswap. This vision permeates the code. FST holders can create proposals to extend or modify core functionality of the system, such as adding new asset pairs, update exchange parameters and even launch brand new types of exchanges. This enables Futureswap to always stay current as the ecosystem progresses and reflect the needs of our users.
We have decided to integrate with Chainlink oracles to provide asset prices for functionality such as trade open and close prices and logic checks on margin collateralization. Every trade’s open and close price will be based on the community-selected oracle address for that exchange and plays an integral part of the system.
We will be leveraging Chainlink’s Price Reference Data Contracts, a collection of decentralized oracle networks currently live on mainnet that secure 30 different DeFi price feeds. Each Price Reference Contract is backed by numerous independent, security reviewed, and Sybil-resistant nodes, which are run by leading blockchain DevOps and security teams. Each node sources market data from high-quality data aggregator APIs, with at least seven on each Reference Contract. Price updates occur based on price deviation such as every .5% change in price, as well as linear time cycles such as every hour.
These reference contracts provide Futureswap’s oracle mechanism with extensive market coverage of assets trading on our platform and are redundantly secured via decentralized computation at the oracle and data source level.
Futureswap’s goal is to fully decentralize an efficient and flexible futures exchange that has zero slippage, lower fees, limitless token pairs, and significant returns for liquidity providers.
We are a team of engineers with a background in finance, trading, governance, and blockchain. We are backed by the top tier investors and founders. Currently, our code is being audited by Open Zeppelin.
Futureswap’s Alpha is live on mainnet with full functionality. This is a brand new type of system that has never been attempted before, we encourage users to give us as much feedback as possible. Please use at your own risk. After 30 days, we will pause the exchange to push the latest version of the audited code and add any suggested feedback to the UX.
We are excited to be launching Futureswap with such a great DeFi community! Futureswap has complicated aspects, if you have any questions or just want to participate in the community, join our Discord.
Check out www.futureswap.com and let us know what you think.
Note: chainlinkecosystem.com does not claim any ownership of this content, all credit to Futureswap, view official announcement.