What is bZx protocol (BZRX)?

The bZx protocol (BZRX) is a set of smart contracts, enhanced on the basis of Ethereum. The protocol focuses on lending and margin trading and is similar to another popular DeFi product called dYdX. The biggest difference between the two margin trading protocols is the use of tokens inherent in the bZx protocol. There are three main tokens in the bZx system: iTokens, pTokens and BZRX tokens. All three are ERC20 tokens, and each plays an important role in how bZx works.

What can you do with bZx?

The best way to use bZx is through user interfaces: Fulcrum and Torque.

Fulcrum

Fulcrum allows you to trade escrow or lend crypto assets using the bZx smart contract. When you use Fulcrum, you get iTokens lending and pTokens for margin trading. There is no fee and no registration is required; you just need to use MetaMask or another Ethereum wallet to connect to the dapp.

Torque

While Fulcrum is limited in borrowing money to trade, Torque allows users to borrow money for whatever purpose they like. While other popular DeFi loan protocols like Compound use a variable interest rate, Torque offers borrowers a fixed rate so that loans are more predictable.

How does bZx (BZRX) work?

bZx uses 2 main layers to provide margin trading, including:

Protocol Layer

The protocol layer is responsible for creating and executing orders, keeping the lenders’ sum, and paying interest to the lenders.

As follows:

  • Order will be created by the maker and the taker will perform the execution according to the bZx contract.
  • The escrow contract will hold the lender’s money.
  • The smart contract will disburse interest for Lenders.

Oracle Layer

This Oracle layer has the role:

  • Update prices and create on-chain liquidity on DEX decentralized exchanges.
  • The bounty hunters will monitor the liquidity of the margin trading accounts in the off-chain state.
  • Gatekeeper uses prices on the DEX and allows only the most honest and accurate bounty hunter to liquidate orders exceeding the limit of loss (a.k.a fire orders).
  • bZx also has a guarantee fund that compensates lenders in case they lose money.

iTokens and pTokens

iTokens and pTokens are powerful financial tools. iTokens are tokens that continually increase in value from making profits, while pTokens are tokens representing short-term and leveraged positions. These iTokens and pTokens can be made into new financial products, used as collateral for loans, or listed on any exchange to enable trading and margin lending.

Benefits of bZx

Minimized Risk

Whether you are a lender or a borrower, you always have control of your keys. Never worry about obscure centralized exchanges getting hacked or stealing your money.

Passive income

Make money with assets you have in your wallet without giving up control over them. The interest rates on margin loans are often much higher than on traditional loans while much safer.

Lower fees

Traders on centralized exchanges pay higher interest rates to compensate the lender for the risk of the exchange being hacked. Decentralized margin lending makes transactions more reasonable.

What is bZx protocol token (BZRX)?

vBZRX tokens are ERC20 tokens, making each token interchangeable and homogeneous. Basic BZRX in the contract can be deposited. However, there are limits to the amount of vBZRX that can be wagered at any given time. This limit will be set by the betting contract itself. As currently suggested, it will be possible to participate in fee-sharing with BZRX staked inside the vBZRX contract; however, the fees will not change until the token changes. Furthermore, the voting power of BZRX placed from within the election contract possesses half the voting power of the typical BZRX token. This is done to prevent the team from having a majority of votes on the DAO.

BZRX tokens are used by the relays to collect transaction fees. The token holder decides how to upgrade the bZx protocol.

When you bet your BZRX on an agent, BZRX shows you four different value capture mechanisms.

Fee-sharing: BZRX tokens are staked that grants proportional ownership over any Balancer LP shares generated during the betting period. For example, if a person places 1% of the BZRX supply but includes 10% of the BZRX deposited, then they are entitled to 10% of all Balancer LP shares minted while they make a deposit.

Balancer Fees: Fees held in a Balancer pool can provide liquidity for both the trader and the protocol. Those fees are accrued for all participants who hold shares of the fee pool. Pools are optimized to minimize erratic losses and maximize profits.

BAL reward: Since the fee pool will generate volume, it will also generate the BAL token. These BAL tokens are reinvested in Balancer pools, allowing BZRX founders to benefit seamlessly.

Insurance fund: each BZRX token can be redeemed for a corresponding amount of insurance fund not yet calculated with BZRX. This gives the BZRX token a fundamental value by being backed by both current assets as well as future cash flows. The insurance fund receives half of the initiation fee, the interest fee, and the fee arising through the transaction. The transfer fee rate for the insurance fund may be determined by the DAO in a future governance vote.

Team

Tom Bean
He has spent over 15 years developing and leading teams. He was Lead Developer at HERE, a multibillion-dollar consortium of German car companies (BMW, Audi, Daimler) specializing in GPS technology, before co-founding bZx. Tom graduated from Georgia Tech with a degree in Computer Engineering before receiving an MBA.

Kyle Kistner
He is the lead author and architect of the whitepaper. He has been following blockchain with an academic interest since 2011 and is very important to project initiation and implementation. He directs his strengths in analysis and synthesis towards decentralized system design.

Nick Sawinyh
A growth-focused product manager with over ten years of experience in the software industry and a proven passion for developing innovative solutions that combine cutting-edge technology with a deep understanding of the needs demand of customers. Nick has a deep background in both digital marketing and rapid development of customer-oriented web applications.

Conclusion

bZx is a protocol for lending and encrypted margin trading. It is a financial primitive for short selling, leveraging, borrowing, and lending to empower free, efficient, and decentralized blockchain applications. The bZx protocol allows anyone to build applications that empower lenders, borrowers, and transactors using the most flexible decentralized financial protocol on Ethereum.

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