FTX, a cryptocurrency futures exchange, claims that its platform is ready to solve problems that currently exist among their rivals.
According to its team, the creation of FTX was driven by the “hours of feedback” given by them to already established exchanges regarding problems with their products, which remained ignored. The aim of the team is to “build the best derivatives exchange and to help move this space toward becoming institutional”. FTX white paper states that:
FTX is designed by people who really know the products. Everything from collateral to maintenance margin to liquidation processes to product listing has been redesigned from the ground up by one of the heaviest users of the products. It is built by traders, for traders.
The company claims that thanks to its three-tiered liquidation model, their platform “reduces the likelihood of clawbacks”, which will tackle the problem of socialized losses seen on other derivatives exchanges. In one of their blog posts, the company explains that they see clawbacks as a “worst-case scenario that we hope never happens”, and further added that they have designed a system “that we think will withstand huge market moves and huge volume without leading to any clawbacks”.
The company claims that they have achieved that through a “backstop liquidity provider system”, where providers who have opted into the system can take over the obligations of an account before it goes bankrupt. In this case, the opted provider can attempt to manage the position, and “inject liquidity from other exchanges”. FTX further explained in their blog post:
In our testing, even market moves of 40% in a 20 minute period were not enough to cause clawbacks; the combination of on-exchange liquidity and backstop liquidity providers were able to provide to all of the nearly bankrupt accounts before they went under. In fact the insurance fund actually gained about $1m in most of these scenarios.
FTX is also backed by Alameda Research, a quantitative cryptocurrency trading firm and liquidity provider. According to their Linkedin profile, Alameda Research has over $70 million worth of assets under its management, and trades around $1 billion per day across thousands of products. This partnership means that FTX exchange gains access to a high level of liquidity, and can tap into Alameda’s tech team, which results in a development cycle that is shorter than other established platforms.
Currently the exchange offers a public sale of their own token, called FTT. According to the exchange, It will offer significant utility to its users. The exchange has said that using FTT as collateral will reduce both margin requirements and trading fees, which in turn will drive up demand for the FTT token. Holders can also use FTT to access lower spreads on OTC trading. The token sale began on April 11, and is expected to finish within a few months.