Onchain Trade: Analysis from the User Perspective
Amendment: November 29, 2023
Today, I learned through the project's Discord channel that the funders of Onchain Trade (OT) have rugged the project. They drained all the pools and dumped OT tokens, leading to a sudden and unexpected collapse of the platform. This event is both shocking and disheartening, as there were no prior indications or warnings that such a drastic action might occur.
This incident serves as a stark reminder of the inherent risks associated with cryptocurrency and DeFi projects. It underscores the importance of cautious investment, emphasizing that one should never invest more than one can afford to lose in such volatile and unpredictable ventures.
In light of these recent developments, the following article should be viewed as a historical perspective on a project that, unfortunately, no longer exists. Personally, I strongly advise against any involvement with Onchain Trade under these circumstances. The information below reflects the state of the project before its abrupt end and should be read with the understanding that the platform is no longer operational.
Onchain Trade (OT) is a pioneering project in the decentralized finance (DeFi) space, leveraging the power of zkSync, a Layer-2 protocol designed to scale Ethereum using cutting-edge zero-knowledge proof (ZKP) technology. The OT platform, built on this advanced technology, offers a unique blend of features, including spot swap, lending/borrowing, and perpetual swap.
As an active platform user, I've found it to be an intriguing proposition in the DeFi landscape. The continuous development of the platform is a promising sign of OT's commitment to staying at the forefront of DeFi innovation. This text provides an analysis of the project, focusing on its earning opportunities and perpetual trading. Let's define some of the key elements of the platform.
Onchain Stable Dollar (OSD)
The Onchain Stable Dollar (OSD) is a crucial component of the Onchain Trade ecosystem. It serves as the native stablecoin of the platform and plays a vital role in facilitating transactions and maintaining the system's stability. OSD is designed to be pegged to the value of the US dollar, providing a stable medium of exchange for platform users.
OSD is not just a simple stablecoin; it's an integral part of OT's earning opportunities. Users can earn OSD by providing liquidity to the platform's pools or by participating in the platform's lending and borrowing services. This makes OSD a versatile asset within the OT ecosystem, serving both as a stable medium of exchange and a source of potential earnings for users.
Moreover, OSD is deeply intertwined with the platform's tokenomics. The introduction of zkSync has created a more efficient and scalable OT platform, and OSD plays a key role in this. The stablecoin is used in various transactions and operations, contributing to the overall efficiency and functionality of the platform.
OSD is more than just a stablecoin. It's a fundamental part of the Onchain Trade platform, contributing to its stability, efficiency, and earning opportunities.
In the context of OT, spot swap refers to the direct exchange of one cryptocurrency for another at a specific rate. This type of transaction is facilitated by the Onchain Trade platform, which utilizes the zkSync Layer 2 solution for scalability, efficiency, and security.
Spot swaps are executed instantly at the current market price, ensuring that traders receive the exact value of the asset they are trading for. This differs from futures or options trading, where the transaction is based on the asset's future price.
In the Swap Protocol, for instance, a peer-to-peer methodology for trading ERC20 tokens on the Ethereum blockchain is presented. Parties signal their intent to trade tokens, negotiate prices off-chain, and settle on-chain. This process can involve third-party price verification from an independent oracle. The protocol uses smart contracts to fill orders, providing a secure and efficient mechanism for spot swaps.
Spot swaps are a key feature of the Onchain Trade platform, enabling users to quickly and efficiently trade their digital assets without the need for a traditional exchange. This functionality, combined with the security and transparency of the blockchain, makes Onchain Trade a powerful tool for digital asset trading.
The lending/borrowing feature is a key component of the platform, providing users with the opportunity to lend their assets and earn interest or borrow assets for various purposes. This feature is designed to be secure, efficient, and transparent, with the platform acting as a decentralized intermediary between lenders and borrowers.
When lending onOnchain Trade, users provide their assets to a liquidity pool. These assets can then be borrowed by other users. As a lender, you earn interest on the assets you lend, which the borrowers pay. The interest rate is dynamically determined by the supply and demand dynamics within the platform. This means that the more demand there is for a particular asset, the higher the interest rate, providing an opportunity for lenders to earn a passive income on their idle assets.
On the other side of the equation, borrowing allows users to take out a loan for a specific asset. Borrowers can use these assets for trading or other purposes. To secure a loan, borrowers are required to provide collateral. The collateral ensures that lenders are protected in case the borrower fails to repay the loan. The amount of collateral required is based on the platform's loan-to-value (LTV) ratio.
The entire lending and borrowing process on Onchain Trade is automated through smart contracts. This automation ensures high transparency and efficiency, as all transactions are recorded on the blockchain and can be audited by anyone. Furthermore, using smart contracts eliminates the need for a central authority or intermediary, reducing the risk of fraud or manipulation.
The perpetual swap feature is one of the key offerings of the OT platform. It allows users to trade derivatives with high leverage, providing opportunities for significant profits. The perpetual swap feature is driven by an oracle price feed for perpetual trading, PnL calculation, and forced liquidation.
Perpetual swaps are a type of futures contract, but unlike traditional futures, they do not have an expiry date. This means that traders can hold their positions indefinitely as long as they have enough margin to cover their potential losses. This feature is handy for traders who want to take advantage of long-term price movements without rolling over their contracts regularly.
The perpetual swap feature is a testament to the technical prowess of the OT team, as it involves complex financial instruments and requires a high level of security and precision. The use of an oracle price feed ensures that the prices used for trading, profit, and loss calculation, and forced liquidation are accurate and up-to-date, providing a fair and transparent trading environment for all users.
OT provides several ways for users to earn. Users can stake OT and selected LP tokens to earn fees. The vision of Onchain Trade is to build a protocol that brings LPs and OT holders real yield in a sustainable way.
Staking is a significant part of the earning opportunities in the OT ecosystem. Users can stake the Onchain Stable Dollar (OSD) to earn fee distribution and vOT rewards. 50% of perps trading fees are distributed to OSD stakers. Users must stake for at least 15 days to be eligible for fee distribution. Unstaking will reset the staked position's staking time to zero. The purpose of distributing fees to OSD is to encourage long-term liquidity provision.
In addition to staking OSD, users can also stake vOT to earn fee distribution and vOT rewards. Onchain Trade gradually distributes a large percentage of its revenue to vOT stakers. vOT, or virtual OT, is a synthetic asset that represents the value of the OT token within the Onchain Trade platform. It's used within the platform for various purposes, including as collateral for loans and as a means to earn additional income. Users can earn vOT by participating in the platform's liquidity pools or by staking their OT tokens.
vOT is rewarded to OT and OSD stakers as well as borrowers, traders, and liquidity providers. vOT is non-transferable and cannot be sold directly on the market, but users can convert vOT to OT. This mechanism provides an additional layer of earning potential for users, further enhancing the platform's value proposition.
Onchain Trade is a comprehensive DeFi platform that offers a variety of features designed to cater to the diverse needs of its users. From spot swaps to lending/borrowing and perpetual swaps, OT has created a robust and secure environment for trading and earning. The introduction of the Onchain Stable Dollar (OSD) and the vOT rewards system further enhances the platform's appeal by providing stable trading options and incentivizing user participation.
As an active user, I am particularly impressed by the on-chain nature of all transactions and their flexibility. However, like any other platform, there are areas for improvement. From my perspective, the addition of Stop Loss and Take Profit orders, which are currently missing, would significantly enhance the trading experience on the platform. The absence of these features is a noticeable gap in the platform's offerings. However, it's worth mentioning that the developers are responsive to user feedback and have indicated on their Discord channel that these features will be available in about three weeks.
Overall, Onchain Trade is a promising project that is worth keeping an eye on. Its unique blend of features, continuous development, and commitment to user experience make it a standout in the DeFi space. As indicated by the developers, the upcoming enhancements further underscore the platform's commitment to continuous improvement and user satisfaction.
Thank you for reading