Today, DX.Exchange announced what could be another game-changer for the industry. Previously, the EU-regulated trading platform made waves in the crypto space after becoming the first company to tokenize popular NASDAQ-listed companies like Apple, Tesla, and Netflix, as well as some of the highest volume traded ETFs including SPY and QQQ.
Now, DX.Exchange is presenting the first Smart Leverage Token (SLT) in a bid to facilitate leverage and margin trading on the blockchain.
According to the trading platform, SLT is a decentralized index that allows customers to trade on margin on-chain “without needing to depend on lending, high fees and complicated and confusing products promoted by other exchanges.”
The SLT trading is facilitated through DX.Exchange-powered “Turbo Tokens” — ERC-20 units which provide investors with the opportunity “to own their leverage” by offering the possibility for major gains that go beyond the underlying index. The tokens’ price is determined on a second by second basis and is calculated by “an aggregated feed of several exchanges around the world”, reflecting the perpetually changing value of a given cryptocurrency against USDT and DXCASH (DX.Exchange’s native utility token).
Turbo Tokens can be used to go either long or short (respectively, Turbo Token Longs are used when the market is on the rise, while Turbo Token Shorts are applied in case it is declining), hence allowing traders to amplify their gains regardless of market conditions.
According to the exchange, investors will have a wide variety of SLTs to trade using Turbo Tokens: initially, BTC, ETH, XRP, ADA and BNB are available. The leverage ratio is 5X on all USDT pairs, and 10X on all DXCASH pairs.
Consequently, SLT traders are provided with tools that can extract substantial profits from a volatile market: if BTC/USDT price is $10,000, and Turbo Token’s price is $100, for instance, and BTC/USDT moves up to $10,100 (1%) in one second, the new Turbo Token’s price is $105 (5% gain). Similarly, the gain would be %10 when trading on BTC/DXCASH pair in the same scenario.
DX.Exchange stresses that with Turbo Tokens, traders don’t borrow funds from the exchange, and therefore, “need not worry about annoying margin calls or an exchange mismanaging its own risk exposure to the detriment of its customers”. Further, “due to the unique compounding nature of Turbo Tokens”, their value reportedly can never go below zero, ensuring negative balance protection: if a Turbo Token loses its value by more than 90%, it will be closed (burned), and a new token will be issued at a new price, while all remaining client funds will be credited to their accounts.
Time will tell if SLT will become “the future of leveraged trading in the cryptocurrency market”, as DX.Exchange puts it, but the initiative already seems exciting. At the very least, SLTs and Turbo Tokens could become a good entry point for those who want to explore margin trading, but don’t want to take the risk of borrowing assets from third parties. Moreover, if the concept proves efficient, other exchanges will be tempted to follow suit with SLTs, democratizing cryptocurrency trading at large.