20 Jan 2021 · 4 min read

UniMex to Facilitate Onchain Margin Trading of Native Uniswap Assets

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As the cryptocurrency scene matures, Decentralized Finance projects continue to evolve to disrupt traditional finance. Most importantly, innovative Defi projects highlight why it is necessary not to rely on central financial intermediaries such as brokerages, exchanges, or banks. Most existing projects have not fully embraced decentralization leaving a gap in the market. UniMex is a project to solve this challenge.

What is UniMex?

UniMex is a new Defi project launched under the Uniswap protocol to solve several shortcomings by existing cryptocurrency projects. The project seeks to power the onchain margin-trading platform. Despite dozens of cryptocurrency projects existing, none offers a straightforward way to short or long tokens. UniMex wants to revolutionize this approach by enabling the execution of shorts and longs directly on Uniswap, rather than through an off-chain approach. Furthermore, UniMex margin traders' fees are disbursed to lenders as a reward for supplying liquidity to lending pools.

What is the UniMex Main Value Proposition?

The main goal of UniMex is to, by all means, uphold the principle of decentralization and to be contained within the Uniswap system. As a result, UniMex founders have rejected efforts from centralized oracles like Oraclize and Chainlink. The system runs on the Uniswap TWAP (Time Weighted Average Price) Oracle, minimizing manipulative actors' effects on the oracle. After deploying the UniMex platform, the admin is removed from the contract, with governance being liberalized to uphold the decentralization philosophy.

As highlighted, margin trading is one of UniMex's primary offerings. The platform only allows the staking of an Ethereum denominated collateral since no other token is recognized as collateral within the UniMex system. With the staking of enough collateral, UniMex margin traders can borrow ERC20 tokens and ETH from relevant lending pools to open short or long positions respectively.

The margin trading is unique compared to other projects because, by operating on the Uniswap protocol, all trades will be executed entirely on-chain. The outcome is creating a more decentralized system compared to the existing approach of hashed trading parameters delivered via centralized API. This approach leads to uncertainty in the execution of orders compared to an onchain direct-to-exchange system.

UniMex also seeks to revolutionize the lending sector involving cryptocurrencies. The system is a central factory smart contract that deploys lending pool contracts. On the UniMex system, a lender can create a lending pool automatically deploying a function on the UniMex factory, which checks that the ERC20-ETH pair is trading on Uniswap. Notably, with the UniMex platform, restrictions are imposed upon which ERC20 tokens are qualified to create a lending pool. Although it defies the principle of decentralization to some extent, it is a critical preventative measure to curb the high-manipulability of low liquidity pools. The system is designed to denote all collateral from borrowers in ETH, as it might sacrifice flexibility.

Lenders on the platform will also receive fees in the denomination of the asset borrowed. Specifically, lenders will receive 0.4% fees enforced on margin traders upon the borrowing of assets.

Compared to existing cryptocurrency projects, UniMex enables traders to borrow a multiple of the value of their collateral in tokens up to maximum leverage available for a specific trading pool. Notably, UniMex permits a 25% fluctuation against the value of a trader's position before enabling liquidation. Additionally, all lenders for the specific underlying asset being borrowed will be allowed to call a liquidation function that directly exchanges the asset on Uniswap. It will also distribute the underlying swap fees to the lending pool leading to an additional penalty of up to 5% upon the trader's collateral.

UniMex Future Products

By the end of 2021 quarter one, UniMex has lined up several new features to boost its system. The platform will officially roll out UMXStaking, which seeks to liberate the protocol of approving lending pools from an admin's governance. The decision is bestowed upon users who will contribute by burning/staking UniMex recognized governance tokens.
The team has also lined up the Token Governance feature as part of the decentralization principle UniMex seeks to uphold. The token governance will remove the admin from governance. Users will also be able to either stake UMEX or burn YIELD X to affect fundamental protocol changes. YIELDX is the token central to the yieldxfarming.io decentralized application, a sister platform based on incentivizing and rewarding the provision of liquidity for Uniswap pairs.

Bottom Line

Centralization continues to be a significant concern for many cryptocurrency projects. Although most projects launch with decentralization as the underlying philosophy, along the way, they tend to lose this stand. However, for UniMex, the system is designed to adhere to principles of decentralization all the way. The ability to revolutionize margin trading and lending backed by a substantial decentralization principle positions UniMex as the ideal future project.