When the bZx network gained massive fame during the initial stages of DeFi’s rise back in 2020, the crypto community referred to the project as a KYC-less BitMex. Previously, decentralized exchanges were known for their limitation and lack of trading tools. However, bZx sought to revolutionize the state of DEXs by bringing everything that a centralized exchange normally has.

After three impressive hacks within the span of a year, bZx’s temporary hype turned into dust as the community lost its trust in the team. But almost six months later, the decentralized trading platform is back on track to achieving its long-lost goals.

Although the project’s premise is clear, many fail to understand what bZx exactly offers. Is it just an ordinary trading and lending platform, or is there more than meets the eye?

What is bZx?

bZx is a DeFi protocol built on Ethereum that focuses on lending and margin trading. The first concept of bZx was created in August 2017 by Kyle Kistner and Tom Bean, the project’s co-founders. A year later, Bean and Kistner finalized a whitepaper and held an initial coin offering that collected $7.8 million in funds.

The origin of bZx finally starts in June 2019 with the official launch of Fulcrum, the protocol’s trading platform. Later in October, the team launched the Torque lending platform as well.

Soon after, bZx attracted a large portion of the crypto community due to its decentralized nature. Rather than participating in centralized exchanges like Binance, Kraken, and Coinbase, users would have the chance to margin trade and apply for loans on a decentralized exchange like bZx.

Regulatory uncertainty and malicious management represent the core reasons as to why a trader would want to trade on a decentralized platform, rather than a centralized one. Combined with a rising wave of exchanges enforcing Know-Your-Customer (KYC) regulations, the new limitations only propelled platforms like bZx to the spotlight of the crypto market.

How does bZx work?

The bZx ecosystem relies on the use of three types of ERC-20 tokens: iTokens, pTokens, and BZRX tokens.

In terms of lending and borrowing, bZx’s system ultimately relies on the use of iTokens and pTokens. Lenders who supply liquidity to the project’s pools receive iTokens in return, which represent a user’s share of the supplied funds.

iTokens also help with generating interest for the funds provided in a pool, which means that anyone can redeem the token to gain the original funds along with the newly gained interest.

On the other hand, traders who borrow funds to open margin positions on crypto markets receive pTokens. This token represents the user’s position, and the type of token received mainly relies on the opened position. pTokens are usually denominated by the position’s trading pair and leverage. For example, a pToken representing a 10x leverage long position on the Bitcoin/USDT trading pair would have the name of ‘uLBTC10x.’

The last token, called BZRX, acts as the protocol’s utility token. Much like on centralized exchanges like Binance and KuCoin, traders can use BZRX to pay for fees, participate in certain events, or unlock more features. However, the project’s decentralized nature also enables BZRX holders to participate in governance and make changes.

bZx products

As we have previously mentioned, there are a total of two main products on bZx: Fulcrum and Torque. Both are part of the overall bZx ecosystem, but they are accessed on separate platforms.

Fulcrum

Fulcrum is a decentralized, non-custodial, and KYC-less margin trading platform operating via bZx’s smart contracts. Both funds that are lent or borrowed are tokenized and represented by iTokens and pTokens. While one is used to back loans, the other is used to track margin positions. Both tokens can be redeemed at any time.

To track prices for crypto trading pairs, Fulcrum uses Chainlink’s decentralized oracle network. Moreover, liquidations only occur when margin maintenance rates reach levels between 15% and 25% for undercollateralized positions.

In the case that an undercollateralized loan is not liquidated, bZx helps lenders by providing them with access to an insurance fund. The fund is perpetually covered by 10% of the interest paid by borrowers.

At the time of writing, Fulcrum supports margin trading for cryptocurrencies based on both the Ethereum network and Binance Smart Chain.

Torque

Torque is a lending platform where users can borrow assets with indefinite-term loans and fixed-interest rates. All loans are provided instantly and require no KYC or credit checks.

Interest rates range between 3% and 19%, depending on the asset. In the case of intense volatility, bZx will keep your loans collateralized by bringing your collateral 10% above margin maintenance.

Since all loans have a fixed interest rate, borrowers can safely take out funds without worrying about unstable interest rates. Moreover, users can now rely on bZx’s secure smart contracts, which were audited by leading blockchain security companies ZK Labs and Certik.

Final Word

Blockchain technology exists for longer than a decade, and despite continuously evolving, the industry’s users have not yet fully migrated to decentralized solutions.

Exchanges represent the core of cryptocurrency markets, and truth be told, a majority of the trading volume traded across crypto is still located on centralized exchanges.

Since DeFi’s debut in 2020, the community looks forward to the industry’s chaotic transformation. With the arrival of solutions like bZx, market participants are more and more interested in switching to decentralized and non-custodial platforms - following the fundamental ethos of what blockchain technology proposes.

However, we have only managed to reach the surface of DeFi trading protocols. Projects like bZx still have to mature and reach a level where they can safely process millions of dollars in trading volume without exposing their customers to risk.

Despite being audited numerous times last year, bZx failed in upholding its status by falling prey to a total of three separate hacks. Being a gigantic security risk, the outcome of these events was that investors flocked to other platforms in hopes of finding a more stable solution.

But despite bZx’s dramatic start, the project's journey is still not over. There is still time for the team not only to build a reputable name in the blockchain industry but to develop a scalable margin trading solution as well. Seeing how bZx is now back on track, it is highly likely that the project will finally continue the road that started less than a year ago.

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