Edward W. Mandel
Apr 27, 2019

It’s been asked about tokens, but it applies to anything made by the hand, heart or brain of human beings in any endeavor of life:

How does this help?

At BQTX Exchange, we’re committed to curating an array of at least 37 trading pairs that provide benefits to both counterparties — and preferably benefits that go far beyond speculative values. These assets are all supposed to do something.

And the same question that applies to the traded assets also applies to the trading platforms: How does this help?

Put another way, why BQTX?

Let me give you a reason. No, let me give you a good reason. In fact let me give you two.

By the way, this post is, in large part, a distillation of thoughts I collected during an interview with a Japanese vlogger Coin Otaku Ito Kanji during a recent Asia trip.

Good reason No. 1: Hedging

“Let’s say I have a bitcoin and I’m a small trader and I need to use my bitcoin to acquire some other cryptocurrencies, I have to sell bitcoin or trade my pair,” I explained to Kenji. “Instead [BQTX is developing] the mechanism that [enables a trader to] basically announce the premium you’re willing to pay for somebody to give you their ether for, let’s say, 30 days. And during those 30 days, you can practically hold two cryptocurrencies and have the whole audience of P2P traders to be [counterparties].”

Markets demand the capability to hedge digital assets for short intervals in order to acquire more digital assets, and dexes are, we feel, at a technological advantage to deliver this function on a P2P basis. At BQTX, we’re developing a proprietary, built-for-purpose hedge trade system that relies on escrow accounts created via smart contracts. Terms are likely to favor the hedge receiver, as a spectrum of hedge providers would compete for the business.

It is this hedging ability that sets BQTX apart from many, but not all dexes. We’ve also found that hedging is necessary but not sufficient to fully serve the sophisticated clientele we’re seeking to pool into a community.

To do all that’s necessary, we’ve had to extend beyond offering frictionless, disintermediated hedging. We had to provide one more key function to make BQTX work the way our customers have a right to expect.

Good reason No. 2: Leverage

This was a dirty little secret until, one day in 2008, it was made very public: The traditional financial industry was built on a structure of debt.

Of course, there has to be debt. A sense of obligation was what led to the invention of money in the first place. There’s vastly more bond value than share value available to buy and sell on any given trading day.

But a lot of that debt is government-issued and, at least so far, no government has yet issued equity. (I personally think that has less to do with a sense of public service and more to do with debt being cheaper.)

But people have gone into debt to buy equity for a very long time. How long, I don’t know, but brokerage houses lending money to their depositors for the purpose of purchasing financial securities is what makes the financial world go ‘round. And when banks started falling like dominoes in 2008, it was in many ways just a replay of what happened in 1929. You can forgive the world for unlearning a lesson after 79 years, and consider it fortunate that we, the financial sector collectively, retained enough muscle memory that we were able to avoid a decade-long depression and instead endure a sharp but relatively short recession.

But it happened once and happened again, so it’s going to happen a third time — and I doubt it’ll take another 79 years. We just don’t have that kind of attention span anymore. Leverage is baked into the system, so eventually there’ll be another systemic failure.

Unless ...

Unless we disintermediate leverage. Maybe the institution through which you’re making your trade ought not be the institution that’s lending you money to make it. Maybe you could get a better deal broadcasting publicly but pseudonymously that you need a certain amount of funds to execute a trade and that you can offer a assets worth a certain percentage of those needed funds. Conversely, if you have funds to lend, you can broadcast your position to the entire universe of margin traders. And both the loan and the collateral can be denominated in whatever currencies both parties can digest — crypto or fiat.

In legacy finance, one way this could be done via contracts for difference, which stipulate that the seller will pay the buyer the difference between an asset’s current value and its value on the last day of the contract. If the difference is negative, of course, the buyer would pay the seller.

What about the other guys?

A decentralized exchange that offers sophisticated traders the benefits of both hedging and leverage is a brilliant idea. I wish I could say I thought of it.

Rather, I wish I could say I’m the only one who thought of it. You have other options, so it falls to me to explain why the BQTX team has the best solution of this kind.

To that end, we are creating what we believe to be an honest, transparent leveraged trading environment that will support most of the currencies that we’ll be listing. Our starting point is a dynamic, proprietary formula that will enable CFD counterparties to arrange terms based on the holders’ history as well as the token’s liquidity. If you could only get 10x multiples through legacy brokers, the counterparties you secured via BQTX might be in a position to extend you 100x or even greater, providing you’ve demonstrated your solvency and stability.

The next step is to you with how we execute on our solution. And execution has been an issue with other dexes seeking to attract the same participants. I’m not hesitant to bring up BitMEX as there’s no room for playing it coy when there’s a clear comparison to be made.

It’s been well-documented that BitMEX has had issues with liquidity. These issues coincide with its winnowing of U. S. accounts that it had onboarded, possibly illegally because it’s not licensed to operate Stateside. This could be one contributing factor to the exchange’s apparent difficulty maintaining its advertised 100x margins. Maybe 100x leverage requires the participation of players who are legally proscribed from trading on BitMEX. Maybe it can’t be maintained without an in-house market desk that serves as a counterparty, in essence trading against the exchange’s own clients. For a long time, BitMEX denied this desk’s existence, but the rumor mill turned out to be right and CEO Arthur Hays turned out to be, at best, disingenuous.

BitMEX’s infamous history of unscheduled server outages might be just that — random outages. But several frustrated traders whose transactions didn’t go through as a result of this downtime have expressed suspicion that BitMEX hides behind this excuse whenever there’s some question as to whether it can cover its exposure. Nick Chong wrote a great article about all this for NewsBTC, and a Medium blogger known as Hasu came to similar conclusions writing for The Startup.

So those of us on the BQTX team believe we can do this better not just by having a better technological solution, but also by having the right incentives. Learning from BitMEX’s — and others’ — mistakes, we are setting up a trader-friendly dex upon which sophisticated participants can rely because of its sound infrastructure, and which they can trust because of the internal incentives that will promote ethical behavior in our dealings with all concerned.

Edward is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and ICO projects and recently launched his own BQT.IO P2P exchange helping traders connect with each other to leverage their crypto assets.

BQT.IO has been in development since March 2017 and its ICO launched September 18. The information can be found online at BQT.IO, on Telegram @BQTCommunity and on Twitter as @bqt_ico.