UMA looks to disrupt crypto derivatives with its decentralized alternative BitDEX

BitMEX is one of the largest crytpo exchanges in the world, transacting over a billion dollars per day. This is largely a result of the popularity of its perpetual swap product that enables traders to go long or short up with up to 100x leverage. However, the exchange has come under scrutiny for both geo-blocking and trading against its clients by triggering early liquidations.

Universal Market Access (UMA) protocol released a white paper for a new decentralized alternative that looks to alleviate these problems. The protocol works by creating a single smart contract for each market. Counterparties must be matched off-chain and must post 10% of the position they would like to take, creating up to a 10x leveraged position. As the price fluctuates, one side will be required to post additional collateral to prevent their position from being liquidated.

UMA does not intend to actually create BitDEX but hopes the release of this paper will prompt another team to do so. The efficacy of such a decentralized exchange remains in question given the scaling limitations on Ethereum ($ETH), however, the paper presents a compelling case for a system that removes the need for a centralized party to perform functions such hosting order books, holding custody of assets and settling trades.