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ETH · 10w

bZx (formerly b0x) publishes a critical assessment of dYdX and Lendroid: "Assessment of Developing Solutions". A perfect article to highlight the importance of the bZx launch to the mainnet tomorrow, July 10th.


dY/dX allows for short selling while the bZx protocol allows for both margin trading and short selling. That is, the bZx protocol allows for an individual to leverage their long or short position at a ratio restricted only by market forces.

dY/dX allows the lender to either act as their own oracle or to plug-in a third party solution. However, there is no protocol-level support for integration of oracles beyond alternate addresses being authorized to call the liquidation method by the lender. Most importantly, there is no oracle that must be challenged to protect against premature liquidations. When an order is generated, there is no oracle address nor any oracle fees for makers and takers that is prespecified. This would mean that a user of dY/dX would have trouble replicating the experience of using the bZxOracle.

dY/dX favors a different set of tradeoffs for borrowers and lenders. The section of the dY/dX whitepaper entitled “risks” gives an even-handed overview of the considerations. In contrast to centralized solutions, it can be potentially hazardous for lenders to loan out their money to short sellers using dY/dX in certain circumstances. This is because there is a negotiated “lock out period” wherein there is no mechanism for enforcing margin maintenance requirements. For as long as the lockout period persists, the lender is assuming complete counterparty risk.

Since the lockout period can be negotiated, lenders likely will only accept lockout periods that are negligibly short. Lenders are unlikely to give their money to a margin trader for any period while assuming full counterparty risk without it being reflected in the interest rate. If the equilibrium of the lockout period fell to zero, this would adversely affect the short seller acting as counterparty to the lender. If the lockout period is short, the short seller faces risk of liquidation at any time. dY/dX proposes a reputation system to mitigate the risk th...

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