MUX V1 Trading Protocol
MUX native trading protcol is a decentralized perpetual trading protocol offering zero price impact trading, up to 100x leverage, self-custody, aggregated liquidity and an optimized on-chain trading experience. In addition, MUX is the first multi-chain native protocol unifying pooled liquidity across deployed chains to maximize capital efficiency.
Traders can use MUX to:
Open up to 100x leveraged positions with zero price impact
Trade with optimal cost
Trade with aggregated liquidity
Use multiple types of assets as collateral
Liquidity providers can use MUX to:
Supply liquidity and obtain MUXLP tokens
Stake MUXLP to earn protocol income and MUX token rewards
For income and rewards allocation, please check Incentives.
Community members can use MUX to:
Lock MCB to receive veMUX
Hold veMUX to earn protocol income and MUX token rewards.
MUX Native Trading Protocol is currently deployed on Arbitrum, BNB Chain, Avalanche, Optimism and will expand to more networks in the future
Mechanisms
MUX Naive Trading Protocol core features are supported by three unique mechanisms:
Universal Liquidity
Liquidity pools on trading protocols are usually fragmented from chain to chain, leading to inconsistent liquidity depths. MUX unifies liquidity across networks by using a broker module, which is a bot that monitors total liquidity and the liquidity reserved for margin trading. After a trader places an order, the broker will calculate the available liquidity across deployed networks and fill the order if it can meet position size. The universal liquidity mechanism offers higher capital efficiency on all deployed networks without moving pooled assets around.
Let’s assume the pools on Arbitrum, Avalanche, BSC and Fantom each hold 10 ETH, and 5 ETH are currently reserved for active positions. As the broker observes all deployed networks, it will determine the total universal liquidity as 40 ETH, and the available liquidity as 35 ETH. If a trader places a 20 ETH long order on Arbitrum, the following process will take place:
After the order is submitted on the chain, the broker proceeds to deal with it.
The broker will check if the universal liquidity meets the order size requirements.
Total universal liquidity is 40 ETH (10 + 10 + 10 + 10), and the available universal liquidity is 35 ETH (40 - 5)
35 ETH is greater than the order’s required 20 ETH and as such the broker will proceed to fill the order
The broker will fill the order with the ETH price obtained from the dark oracle. Consequently, the trader will hold a 20 ETH long position.
After opening this long position, the 20 ETH will be reserved until the position is closed. On the LP side, after LPs supply ETH on Avalanche, BSC or Fantom, trading activities on Arbitrum can utilize these ETH without actually moving them.
In the rare cases when the pooled liquidity on a chain can’t fully cover traders’ profits, the traders will receive muxTokens as profits. After receiving muxTokens, users can redeem them into related tokens on other chains. For example, if the pool on Arbitrum only holds 10 ETH while a trader tries to withdraw 20 ETH profits from a related position on this chain, the trader will receive 10 ETH and 10 muxETH. Meanwhile, the pool on Avalanche has 50 ETH, so the trader can bridge the 10 muxETH to Avalanche, then redeem them into 10 ETH.
MUX protocol deploys the broker on the Multiplexing Layer to enable universal liquidity.
Liquidity-related metrics can be seen on the MUX Statistics page.
Multi-Asset Pool
The MUXLP pool, which is the counterparty of traders, is always fully collateralized with a portfolio of blue-chip assets and stablecoins. When traders open leveraged positions, the pool will reserve required assets until the position is closed; meanwhile, the pool will hold positions against traders in the opposite direction. If a trader's position is in profit, upon closure, the trader can withdraw the collateral and profits from the reserved assets. If the trader's position is at a loss, upon closure, traders will pay for the losses with the collateral.
For risk management, long and short positions under each market will have open interest caps. The caps won't exceed pooled liquidity capacity, so the pool is always capable of paying for the trader's profits; therefore, the traders don't have counterparty risks.
Let's assume 1 ETH is priced at $1000, the MUXLP pool has 4 ETH, and a trader uses 1000 USDC as collateral to open a 3x ETH long position. In this trade, the MUXLP pool reserves 3 ETH (worth $3000) for the trader. Meanwhile, the pool holds a 3 ETH (worth $3000) spot position. At this moment, the MUXLP pool's net exposure is 1 ETH.
ETH price then rises to $2000, and the USD value of this position becomes $6000; the unrealized profits are $3000. The trader now closes this position and can withdraw the 1000 USDC collateral and 1.5 ETH (worth $3000) from the reserved ETH as profits. In this example, the pool loses 1.5 ETH from this trade, but the USD value of pooled ETH remains unchanged since 1.5 ETH is now worth $3000. When it comes to long positions, the MUXLP pool can suffer Coin-denominated losses but remains delta neutral.
When traders open short positions, the MUXLP pool will reserve stablecoins for traders. In this case, the pool is exposed to USD-denominated losses. However, since there are open interest caps under each market, the pool will always manage the capacity at a level where all trader's profits can be fully covered. Also, the market is usually skewed; the total open interest of longs is greater than shorts in most circumstances, so the MUXLP pool mostly holds net short positions, which are less than the assets in the pool.
Dark Oracle
MUX uses a dark oracle that aggregates price feeds from multiple exchange sources, including Binance, to ensure pricing accuracy and stability. A dark oracle is a private price oracle which does not publicly display the prices of assets in the pool, and the primary purpose is to prevent front-running. In addition, the dark oracle eliminates nearly all room for toxic arbitrage, further enabling zero price impact trading. When traders place orders, the MUX broker module will obtain prices from the dark oracle and fill the orders with zero price impact.
MUX protocol deploys the dark oracle on the Multiplexing Layer.
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