Component Breakdown and Definitions

In the evolving landscape of decentralized finance, the distinction between various components of this ecosystem is crucial for understanding its decentralized nature and functionality. The recent failures of centralized exchanges due to mismanagement and fraudulent activities underscore the need for a decentralized approach. This approach ensures transparency and a democratic, consensus-driven platform progression, allowing for community input and transparent assessable risk.

CVEX Protocol

CVEX Protocol is essentially a smart contract on the Arbitrum chain that enables all fundamental operations of the product. The protocol embodies innovative methods for collateral management, clearing, and settlement, and it governs the interaction of all participants within the system. A critical aspect of the CVEX Protocol is its role in managing Collateral Pools, Operational Funds, and Default Funds. Additionally, the protocol collects and distributes transaction fees, adhering to a predefined token model. The protocol forms the backbone of the CVEX ecosystem, guaranteeing efficient and secure functionality.

CVEX Platforms

CVEX Platforms, integral components of the CVEX Protocol, are ensembles of data structures within a smart contract, that enable a decentralized approach to derivatives trading, operated by the Protocol. These components can be instantiated by anyone in a permissionless manner, enabling a community-driven approach. Each platform is independently configured and maintained, and has separate Platform Operator. This setup includes defining a set of tradable contracts and their underlying assets, determining risk parameters, establishing fees, and selecting appropriate Price and Risk Oracles. Each CVEX Platform created it's own Collateral Pool, Operational Fund, and Default Fund on the protocol to mitigate platform-specific risks. Nevertheless, each platform contributes a portion of the collected fees to a single Protocol Fund. Margin offsets across multiple platforms are not feasible or to be desired, ensuring each platform's integrity and individual risk profile.

Platform Operators and Market Configurators

Platform operators, serving as market configurators on their respective platforms, have the continuous duty to provide and update contract-related data, ensuring market integrity. In return for their services, they earn a portion of the transaction fees generated from protocol activities using their platform's data. They are data providers rather than market operators. The protocol's separate risk process implementation prevents platforms from creating skewed short-term risk scenarios. The existence of multiple platforms fosters competition among various configurations, allowing users to choose preferred setups for different instruments based on their comprehensive structure. It also allows and encourages markets that want to create their own market for their community to have a cost effective way to do so without having to build a whole market from scratch.

CVEX Frontends

CVEX Frontends represent the user interface of the ecosystem, providing a critical link between end users and the protocol. Initially, CVEX offers a customizable web frontend engineered to enhance the user experience by offering access to real-time and historical data for effective interaction with various financial instruments. The initial frontend is provided as the basis for white-label solutions, enabling anyone to create and adapt their version of a trading terminal in a permission-less manner. The first version to operate will not be part of the protocol but will be operated by an unrelated entity. The ecosystem is designed to support a variety of frontends, each potentially offering unique features and interfaces.

CVEX Frontends are not confined to traditional web interfaces or trading terminal formats. Across the derivatives landscape, there exists a myriad of front-ends, order routing interfaces, brokerage platforms, and traditional derivatives Independent Software Vendors (ISVs) such as Trading Technologies and Actant. CVEX encourages builders to innovate, emphasizing the importance of diversity in frontend designs. This openness extends the ecosystem's flexibility, allowing a variety of frontends to contribute liquidity and order flow. Users are not limited to a specific frontend for interacting with the protocol. This approach allows for a diverse range of user experiences within the CVEX ecosystem, catering to the varied requirements and preferences of derivatives trading space.

We will develop tooling to support the easy connection of these front ends and assist ISVs in connections.

Frontend operators have a clear incentive to enhance and innovate the experience for end users. Acting as a middleware between traders and the protocol, they earn a portion of the operational fees from the trades they facilitate. Frontends can offer a range of services and features, including gas-less trading, cost-efficient execution modes, spread trading, and order-routing, thereby enriching the trading experience within the CVEX ecosystem. As brokers, they provide account management, structured product access, pricing, and advice. Builders enhance system aspects, innovating in trading components, data, and information. They generate protocols that augment the CVEX protocol, enabling new functionalities and pricing mechanics, automated market makers, and risk analysis tools.

Crypto Valley Exchange

Finally, Crypto Valley Exchange is the first platform to operate on the CVEX Protocol. As a flagship project, it offers futures and options trading across major cryptocurrencies and will launch some commodities.

This exchange is not a singular, centralized entity but a collaborative assembly of distinct components, with distinct entities operating components including protocol, platforms, frontends, and oracles. These components, each with its unique function, collectively form the decentralized marketplace known as Crypto Valley Exchange. Combined they represents a convenient, unified construct for users, blending multiple functionalities into a cohesive trading environment, truly embracing the power of decentralised blockchains.