“Some defi devs are working on front run the Defi orders to make money,” Jihan Wu tweeted, “and they need to work with mining pools. There are tons of new moral and legal questions to address in this new space.”
Some defi devs are working on front run the Defi orders to make money, and they need to work with mining pools. There are tons of new moral and legal questions to address in this new space.
— Jihan Wu (@JihanWu) February 21, 2021
It was a rare take from Wu, who, in recent months, has remained on the sidelines with regard to public crypto debates for the most part. His reemergence might have something to do with being freer these days to pursue one of his well-known passions: bringing peer-to-peer electronic cash to the world.
The man credited with translating the Bitcoin White Paper into Chinese a decade ago, Wu is best known for co-founding mining giant Bitmain, helping to grow the company into a worldwide industry leader.
Not too long ago, he stepped down as CEO with a golden handshake rumored to be somewhere in the neighborhood of $600 million.
Matrixport
While sorting out his formal exit from Bitmain, Wu quietly launched the Singapore-based Matrixport in 2019.
It’s backed by Bitmain, BTC.com, Antpool, Bitdeer, CoinEx, Bitkan, Hashnest, AlCoin, and Tokenview. Investors include IDG Capital, Lightspeed, Standard Crypto, Paradigm, Dragonfly Capital Group, Polychain, Wu himself, and business partner Yuesheng Ge.
Aimed at professional crypto traders, such as miners and mining pools, Matrixport flew largely under the radar the last two years, posting a reported $7 million in revenue during its first year. Experts believe that number at least doubled in 2020, and mostly without much hype or fanfare.
As a Bitmain spinoff, Matrixport positions itself as a “one-stop digital assets financial services platform” for trading, custody, investing, and lending.
Today, it boasts $100 million in daily trading volume, $200 million in outstanding loans, $2 billion in asset custody, and is closing-in on 200 employees.
Though Matrixport is asset agnostic, Wu is hardly a crypto wallflower.
He has often cheered the potential of Bitcoin Cash (BCH), Bitcoin’s most successful fork. Wu appears keen to see BCH master both sides of the cryptocurrency promise: medium of exchange (MoE) and store of value (SoV).
BCH offers comparatively low transaction fees, is incredibly fast, and has a dedicated community burning to make it competitive with the fiat cash experience but in a decentralized digital form.
Even critics of Bitcoin Cash during its more than three year run acknowledge its potential for MoE superiority.
A common bromide against BCH is that it is the coffee-buying coin, which Bitcoin Cash advocates take as a compliment.
If the project has room to improve, then, it is the SoV side by way of speculation.
Getting traders to enter-in to real price discovery has been tricky.
With Wu now more focused than ever on bringing peer-to-peer electronic cash to the masses, his Matrixport spinoff came up with two financial products to possibly help mitigate trading risk: Smart Trend and Dual Currency.
Launched in early February of 2021, Smart Trend and Dual Currency seek to take advantage of BCH’s low fees and solid reputation for functionality while better insulating traders from risk.
Cynthia Wu, Head of Business Development and Sales at Matrixport and its new-ish exchange, Bit.com, explained in an exclusive interview with Coinivore how real user demand was the primary reason for introducing the two new BCH products.
For emphasis, she pointed to recent Bit.com Bitcoin Cash Options demand as proof enough (trading between 7,000 to 15,000 BCH daily).
Matrixport makes its money on a spread instead of charging a fee on the execution of BCH Smart Trend and Dual Currency, and that the spread might vary from time to time, she elaborated.
Smart Trend and Dual Currency have previously proved popular among Matrixport clients using BTC, and so BCH was a natural extension.
BCH Smart Trend
Matrixport’s Smart Trend for BCH is comprised of “high-quality third-party DeFi projects and option portfolios for clients,” hoping to see “stable revenue” and “additional earnings from the price rise (or drop) in digital assets,” along with “compound interest every cycle,” the company insists.
Matrixport lists the DeFi projects under consideration. Those change, of course, with market demand.
Smart Trend is obviously catered to the trader concerned with market trends but who wishes to not sell their underlying asset. Matrixport DeFi projects as of publication are Curve, Uniswap, Swerve, and Flamingo. They’re chosen based on security, liquidity, and yield, Cynthia Wu stressed.
Selecting the BCH Bullish Smart Trend product, for example, if the BCH price on 2021-02-26 <= $500, traders earn 1% APY for the period. If the price > $500, however, traders earn the corresponding APY up to 18.5% APY (up to BCH at $1,000).
Choosing the BCH Bearish Smart Trend product, the process is similar to Bullish but, of course, in reverse. The Matrixport selling point on this product contains a guaranteed interest, and if traders buy the right direction of the market they profit greater-still.
BCH Dual Currency
The Matrixport Dual Currency product is much like it sounds, but matched with a stablecoin, USDC.
For professional traders, BCH Dual Currency basically has a Matrixport counterparty risk, Cynthia Wu was careful to mention.
However, since the platform offers a 100% hedge, that counterparty risk is relatively low. For BCH Smart Trend, risks are similar and rely upon the integrity of the DeFi products chosen (no small matter).
Dual Currency is more like a traditional hedge and might appeal to the mining community. If the cost of production is, for example, $300 and the miner is willing to part with his BCH at an $800 price point, the BCH Dual Currency product is ideal. Assuming BCH hits $800 at expiry, the miner can sell BCH at that price without slippage. Conversely, if BCH is below that $800, the miner can earn more BCH.
The BCH Dual Currency risk is if prices soar beyond that $800 point and, say, rockets to $1,000. There’s nothing quite like the pain of leaving the party too early. In this instance, maybe sticking to the Matrixport Smart Trend product might make more sense.
USDC is regulated and perhaps less volatile compared to USDT, so a more stable (!) stablecoin is chosen to provide a more stable settlement price and less risk.
Indeed, the platform paired BCH with USDC from Circle instead of Tether (USDT) in part to potentially avoiding USDT’s notorious legal troubles, allowing the USDC to include ACH integration for example. While it is primarily home on the Ethereum blockchain, and to a lesser extent on Algorand, USDC recently incorporated a move onto Stellar as well.
Easiest way to buy Bitcoin Cash (ad)
USDC is growing fast, and this year alone more than $900 million of it, according to Glassnode, is being held on exchanges, making it the world’s second leading stablecoin pegged to the US dollar.
Traders can purchase BCH Dual currency in USDC or BCH, both of which are linked to price, APY, and an expiry date. For example, if a trader purchased 1 BCH, the linked price would be $700 and an expiry date. For a 1 day product, the APY is 1,069.45%.
If the BCH price is <$700 on expiry, traders earn 1.0293 BCH; if >=$700, they earn $720.51 USDC.
Traders who purchase USDC, on the other hand, can earn BCH if the settlement price < than the linked price on expiry date.
Bit.com
Adding to the renewed emphasis in making Bitcoin Cash a valued trading asset, Jihan Wu, just a day before listing Matrixport Smart Trend and Dual Currency for BCH, launched the Seychelles-based crypto derivatives exchange, Bit.com, BCH Options product.
As Matrixport COO Daniel Yan explained, options are “one of the very few products where both sides of a trade could make money – thanks to the fact that the takers normally manage it statically while the makers manage dynamically.”
Yan further cheered, “HODLers love it that they can earn great yield on their BCH holding. Traders love it as they can speculate BCH with great leverage, while market makers appraise the product for great profit margin from the bid-offer.”
And with one Matrixport account, traders can get instant access to Bit.com as well.
That combination, BCH Smart Trend, BCH Dual Currency, and BCH Options, might be exactly what traders and peer-to-peer electronic cash advocates are looking for in their quest to match medium of exchange with store of value, leveraging the DeFi craze.
Trading
Professional traders will find Matrixport Bitcoin Cash Smart Trend and Dual Currency products fairly straight forward to interact with.
Downloading the application is easy enough, and funding an account with BCH or stablecoins (or some combination) is also a snap.
For BCH Dual Currency, traders choose the yield linked price and tenor. If at the end of the tenor the settlement price (BCH spot price) is below the chosen linked price, traders will earn more BCH (a return of the principal and interest in BCH). If the settlement equals or is above the linked price, traders get back the principal and interest in USDC.
As for the BCH Smart Trend service, traders choose the trend direction (bull or bear) for the tenor. If their choice is correct, they earn 18.5% annualized yield on the BCH. If the trader is mistaken, they’re able to still earn 1% on their BCH.
Overall, it’s a decidedly new look for Bitcoin Cash, one advocates hope brings about the kind of excitement generated by speculation but with the added benefit of a cryptocurrency actually being useful in everyday commerce.
The Kelso Report is published exclusively at Coinivore.com. Every Sunday, Tuesday, and Thursday, cryptocurrency veteran journalist C. Edward Kelso examines the ecosystem, documenting the ongoing struggle to bring about greater decentralized, peer-to-peer electronic cash and programmable money to the world. The author holds cryptocurrency as part of his financial portfolio.