A Decentralized Cross-Margin Trading Platform Empowering Liquidity Providers and Traders

Introduction

Primex Finance is a decentralized protocol facilitating spot margin trading across decentralized exchanges (DEXs). It connects lenders and traders, allowing traders to use lender liquidity for used trading on various DEXs. The platform offers traders interfaces and tools similar to those found on centralized exchanges (CEXs), enhancing flexibility in trading strategies. Primex Finance is a permissionless, smart-contract-based prime brokerage available on Ethereum, Polygon, and Arbitrum networks.

What is Primex Finance (PMX)?

Primex Finance is a non-custodial prime brokerage protocol that facilitates used trading on decentralized exchanges (DEXs). It connects lenders seeking higher annual percentage yields (APYs) with traders aiming to amplify their positions, enabling cross-DEX margin trading without over-collateralization. This approach allows traders to open used positions across multiple DEXs, enhancing trading flexibility.

The protocol introduces cross-margin portfolios, enabling users to manage multiple positions under a single health factor. This feature allows for combining used liquidity provider (LP) positions with spot margin positions, facilitating the creation of hedged strategies. Automated liquidations, stop-loss, and take-profit orders are integral to this system, maintaining safety features for users.

Primex Finance addresses challenges in decentralized finance (DeFi), such as overcollateralization, limited asset availability, and lack of automation. The platform allows users to trade and yield farm with enhanced capital, utilizing assets like Real-World Assets (RWAs), Liquid Staking Tokens (LSTs), and more. Advanced features like limit orders and portfolio management further enhance the user experience.

The native digital asset of the Primex Finance protocol is the Primex Token (PMX), which functions as both a governance and utility token. Holders can participate in protocol governance decisions, stake PMX to earn yield and increase voting power, and use it to reduce fees and access exclusive strategies, Buckets, and markets. The token also serves to reward Keepers for executing conditional orders and liquidations.

The total supply of PMX is 1,000,000,000 tokens. The token distribution includes public and private sales allocations, and other purposes. For instance, during the seed round in February 2022, 143,000,000 PMX tokens were allocated for $0.04 per token, raising $5.72 million. Subsequent public sales have been conducted with varying allocations and prices.

Founders and Backers

Primex Finance was founded in 2021 by Vlad Kostanda and Dmitry Tolok. Vlad Kostanda serves as the Co-founder and Chief Executive Officer (CEO) of Primex Finance. With over a decade of experience in the software development industry, Vlad has a strong technical background, specializing in areas such as C++, C#, and cryptography. He holds a Master’s in Cryptography from Kharkiv National University of Radioelectronics.

Primex Finance has secured investments from notable backers, including CoinFund, GSR, Hypersphere Ventures, Wintermute, and Morningstar Ventures, these partnerships support the protocol’s development and expansion within the DeFi landscape.

Primex Finance Protocol’s Main Features

Credit Buckets

Primex Finance introduces a unique concept called Credit Buckets, which are liquidity pools designed with specific risk parameters, lenders deposit their assets into these buckets, each of which operates under defined trading conditions and rules. This structure ensures that the funds allocated for trading adhere to the predetermined risk management policies. Buckets can vary based on asset type, trader reputation, and supported strategies. This customization allows lenders to manage their exposure to different levels of risk while maintaining a steady return on their investments.

Each Credit Bucket is associated with specific decentralized exchanges (DEXs), which means the trades executed using that bucket’s funds are limited to certain platforms. This approach mitigates risk and gives lenders control over how their assets are used. Traders must adhere to bucket-specific rules when executing trades, ensuring that all trades comply with the intended use of the funds.

Lending and Borrowing

Lenders play an important part in Primex Finance by providing liquidity for traders; unlike traditional overcollateralized lending in DeFi, Primex Finance operates on an undercollateralized model. Borrowed funds remain within the smart contract until a trade is completed, eliminating the possibility of misappropriation or misuse. This model enhances capital efficiency and enables traders to access greater liquidity without locking excessive collateral.

Borrowers, on the other hand, gain access to trading without relying on centralized intermediaries. Traders can borrow directly from Credit Buckets and execute margin trades on integrated DEXs. This decentralized approach ensures greater transparency and reduces the risk of manipulation.

Decentralized Trade Execution

Primex Finance uses Keeper bots to automate trade execution and management, these bots are responsible for executing actions such as liquidations, stop-loss orders, take-profit targets, and limit orders. This automation enhances trade accuracy and efficiency while removing the reliance on centralized order books.

Keeper bots constantly monitor the network to ensure that all trades adhere to predefined conditions. When specific conditions are met, the bots execute trades on behalf of the traders. This system ensures traders can take advantage of real-time market opportunities without manual intervention.

Risk Management and Liquidation

Risk management is integral to the Primex Finance protocol. The platform uses a set of rules and conditions to ensure that borrowed funds are protected. If a trade falls below a certain collateralization threshold, the Keeper bots automatically trigger liquidation to prevent further losses. This mechanism protects traders and lenders by maintaining the stability of the protocol.

Liquidation events are transparent and occur on-chain, providing clear records of all actions. This transparency ensures that all participants know the risks and outcomes associated with margin trading.

Portfolio-Based Trading

Primex Finance introduces portfolio-based trading, where traders can manage multiple positions under a single account. This feature allows traders to diversify their strategies and minimize risk by spreading exposure across different assets. Traders can also set stop-loss and take-profit levels for individual positions, giving them greater control over their portfolio management.

Spot Trading and Swap Features

Primex Finance supports both margin and spot trading and direct swaps between assets. Traders who prefer standard positions can use the Spot 1X feature to execute trades without borrowing funds. The swap functionality allows users to convert one cryptocurrency to another directly within the platform, this simplifies asset management and provides users with a smooth experience when adjusting their portfolios.

Governance and Community Involvement

The protocol incorporates decentralized governance, enabling PMX token holders to participate in decision-making. Governance topics include adjusting trading rules, modifying risk parameters, and determining the allocation of liquidity incentives. This decentralized approach ensures that the community has a say in the evolution of the protocol, promoting transparency and inclusivity.

Token holders can submit proposals and vote on various aspects of the protocol. The governance model aims to align the interests of all stakeholders, ensuring the long-term sustainability and growth of the Primex Finance ecosystem.

Primex Finance Technical Architecture

Primex Finance’s technical architecture is designed to support decentralized margin trading by integrating multiple layers of technology that ensure efficiency, security, and transparency. The platform uses a modular approach that separates different functionalities, making it easier to manage risk, execute trades, and provide liquidity to participants. Each architecture component plays a specific role in facilitating smooth interactions between lenders, traders, and decentralized exchanges (DEXs).

Smart Contracts Infrastructure

Primex Finance relies heavily on smart contracts to automate and manage important operations. These smart contracts handle lending, borrowing, trade execution, collateral management, and liquidation processes. By automating these actions, the platform removes the need for centralized intermediaries, ensuring that all operations are trustless and transparent.

The smart contracts are deployed on multiple blockchains, providing cross-chain functionality and allowing users to interact with different ecosystems. This multi-chain compatibility ensures that Primex Finance can integrate with various decentralized exchanges, enhancing liquidity and trading opportunities.

Keeper Bots

Keeper bots are an important component of the platform’s architecture. These bots are responsible for automating several tasks, such as executing stop-loss orders, liquidating undercollateralized positions, and monitoring risk parameters. Keeper bots ensure that trades are executed in real time and that deviations from predefined conditions are immediately corrected.

These bots monitor the network constantly and execute commands when certain conditions are met. This automated system reduces human error and guarantees that the platform functions according to its established rules.

Credit Buckets and Risk Management Layer

The Credit Bucket system forms the backbone of Primex Finance’s risk management architecture. Each bucket has a unique set of parameters that defines the associated risk level, supported trading strategies, and compatible decentralized exchanges. Lenders can choose the Credit Buckets that align with their risk preferences, while traders are bound by the conditions set within each bucket.

This layered approach to risk management ensures that funds are allocated responsibly and that trading activities remain within acceptable risk limits. Liquidation mechanisms are built into the architecture to protect the interests of lenders by liquidating positions that exceed risk thresholds.

Portfolio-Based Trading Architecture

Primex Finance’s portfolio-based trading architecture allows traders to manage multiple positions under a single account. This setup provides greater flexibility and simplifies risk management by enabling users to set custom stop-loss and take-profit levels for each position. The architecture also supports advanced order types, such as limit orders and conditional orders, giving traders more control over their strategies.

Cross-Chain Compatibility

The technical architecture of Primex Finance is designed to operate across multiple blockchain networks. This cross-chain compatibility allows users to trade assets from different ecosystems without leaving the platform. By integrating with several blockchains, Primex Finance expands its reach and offers users access to a broader range of assets and liquidity sources.

The multi-chain setup also enhances security by distributing the protocol’s operations across different networks, reducing the impact of potential vulnerabilities or attacks on any single chain.

Primex Finance currently has cross-chain compatibility with various bridge solutions:

• Axelar Integration: Primex has incorporated Axelar’s Squid Widget, enabling users to transfer tokens across over 60 supported EVM and Cosmos chains.
• Swing Partnership: Collaborating with Swing, a cross-chain liquidity and bridge aggregation solution, Primex enhances its cross-chain liquidity capabilities.
• LI.FI Integration: By integrating LI.FI’s widget, Primex enables users to execute cross-chain swaps across over 15 leading chains and Layer 2 solutions. This feature allows users to move assets seamlessly to networks like Arbitrum and Polygon, facilitating immediate trading on the platform.

User and Developer Interface

The platform offers an intuitive user interface for traders and lenders, allowing them to interact with the protocol easily. For developers, Primex Finance provides a set of APIs and software development kits (SDKs) that facilitate integration with external applications. These tools enable developers to build custom solutions on top of the platform, such as trading bots, analytics dashboards, and dApps.

Security and Auditing Framework

Security is a fundamental part of Primex Finance’s technical architecture. The platform undergoes regular security audits conducted by reputable third-party firms to identify and mitigate vulnerabilities. The smart contracts are subjected to rigorous testing to ensure their reliability and resilience, and continuous security monitoring and a bug bounty program are implemented to encourage security researchers to report potential issues, complementing its audit process.

What is the (PMX) Token?

The PMX token is the native utility and governance token of the Primex Finance ecosystem. It plays a central role in facilitating various activities within the platform, including governance, staking, and incentives for protocol participants. PMX holders can influence the protocol’s direction through decentralized governance, ensuring that the community has a say in important decisions related to its development.

The token is designed to align the interests of different stakeholders, including traders, lenders, and liquidity providers. It helps secure the network, encourage active participation, and foster long-term commitment to the ecosystem’s growth.

PMX Token Utility

The PMX token has several distinct utilities within Primex Finance, making it an essential part of the protocol’s operation:

• Governance: PMX holders can participate in governance by proposing and voting on decisions such as updates to the protocol, changes to risk parameters, and allocation of community funds. The governance model ensures that the community controls the protocol’s evolution.
• Staking and Security: Users can stake PMX tokens to secure the protocol and earn rewards. Staking also increases the accountability of participants, reducing the chances of malicious activities.
• Incentives for Participation: PMX rewards users who contribute to the network, such as liquidity providers and active traders. These incentives encourage continuous engagement and help maintain a healthy liquidity pool.
• Fee Discounts and Payment: PMX may be used to pay transaction fees on the platform, offering discounts to users who choose this payment option. This creates additional utility for the token and promotes its circulation within the ecosystem.
• Collateral and Risk Management: PMX can also be used as collateral within certain credit buckets, allowing traders to access additional funds for margin trading activities.

PMX Supply and Allocation

The total supply of the PMX token is capped at 1 billion tokens, distributed across different categories to support the protocol’s development, community incentives, and long-term sustainability. The allocation breakdown is as follows:

• Foundation (19.4%): Reserved for supporting long-term development initiatives and ecosystem growth. These tokens are currently locked.
• Treasury (16%): Used for operational expenses, strategic initiatives, and ecosystem expansion. 3.36% of these tokens are unlocked, while 12.64% remain locked.
• Private 1 (15.6%): Allocated to private investors participating in early fundraising rounds. These tokens are locked, with a structured release schedule.
• Team (11%): Designated for the development team to ensure continuous support and growth. These tokens remain fully locked.
• Liquidity (10%): Allocated to maintain market liquidity, ensuring smooth trading and minimizing price volatility. 5.19% is currently unlocked, with 4.81% still locked.
• Early Community 1 (7.22%): Reserved for early community members to incentivize engagement and growth. 1.80% of these tokens are unlocked, with 5.42% locked for future distribution.

PMX’s Economic Design

The economic design of the PMX token focuses on balancing supply and demand to create a sustainable and healthy ecosystem. Its deflationary mechanisms, staking incentives, and structured vesting schedules ensure the token’s value is maintained over time. By gradually releasing tokens, Primex Finance mitigates the risk of market shocks caused by sudden increases in circulating supply.

The protocol aims to create a self-sustaining model where PMX is consistently in demand due to its multiple utilities and the incentives offered to holders and active participants.

Primex Finance Protocol’s Governance

Primex Finance employs a decentralized governance model, enabling PMX token holders to influence the protocol’s development and operations. Token holders can propose and vote on various matters, including protocol upgrades, parameter adjustments, and other significant decisions affecting the ecosystem.

The governance process is facilitated through the PMX token, which serves both as a utility and governance token within the Primex ecosystem, by staking PMX tokens, holders not only earn rewards but also gain voting power proportional to their staked amount. This mechanism encourages long-term commitment and aligns the interests of participants with the protocol’s objectives.

The PMX tokens can be held in users’ protocol balances to access various benefits, such as reduced fees and exclusive strategies. These incentives are designed to foster active participation and ensure that governance decisions reflect the community’s collective interests.

The decentralized governance framework of Primex Finance is integral to its mission of creating a transparent and community-driven platform. By empowering token holders to have a direct say in the protocol’s evolution, Primex promotes a collaborative environment where decisions are made collectively.

This governance structure democratizes decision-making and enhances the protocol’s adaptability to changing market conditions and user needs. The active involvement of PMX token holders in governance is necessary for the protocol’s sustained growth and success as the ecosystem evolves.

Conclusion

Primex Finance represents an innovative approach to decentralized finance by introducing a permissionless credit protocol for cross-margin trading. The protocol is designed to connect lenders and traders through a decentralized framework while offering unique opportunities for risk management and capital efficiency. Its focus on modularity, risk segmentation, and governance ensures a flexible and secure ecosystem for all participants. Integrating the PMX token as a utility and governance element is significant in the protocol’s long-term sustainability and community involvement. As the protocol continues to evolve, it aims to expand its features and strengthen its governance framework, fostering a decentralized environment that benefits traders, lenders, and developers alike.