bzx is a protocol that can be integrated into the current exchange infrastructure.Exchanges and relays are incentivized by fees dominated in the {BZRX} to offer decentralized margin lending and margin trading services.assets are valued and liquidated via competing oracle providers.By dicoupling the valuation and liquidation of assets from the protocol,the oracle marketplace approach allows competition to drive the oracle provider fee to its marginal cost while encouraging experimentation and flexibility.
Motivation
One of the persistent contradictions of the cryptocurrency space has been the theme of decentralized assets traded on centralized exchanges.
In the wake of Ox resolution,a new generation of decentralized exchanges{DEXs}are taking root.this decentralized exchanges address some of the existing problems with older DEXs,while still lacking the capabilities of many of the leading centralized exchanges.individuas looking to engage in margin lending or margin trading are still forced to funnel their liquidity to centralized token and coin exchanges,exposing them to an additional form of counterparty risks.
Counterparty risk is encountered when the risk ot a third party defaulting jeopardizes the assets of an investor.margin lending exposes the lender to counterparty risk both from the exchanges and the borrower.the specific type if the avoidable counterparty risk incured by lenders and borrowers using centralized exchanges is called custodial risk;allowing individuals to maintain control of private keys to their wallet at all times obviates the risk.Lenders fce additional counterparty risk from underwater borrowers who fail to be liquidated in time.
Decentralized margin comes with significant technical challenges.The most significant challenge is the design of a reliable oracle that can match the settlement security of centralized exchanges.In the context of margin lending,the oracle problem is caused because ethereum contracts are not natively aware of asset prices on or off the blockchain.if smart contracts can't stay aware of asset prices on the open market,they can't consistently force-liquidate borrowers on that market to protect lenders from adverse movements.The most serious obstacle to decentralized margin lending is being able to reliably and securely liquidate troubled positions.The bzx protocol serves as an on-chain solution to these challenges.
In conclusion the bzx contract verifies the maker's ECDSA signature,the order parameters,and the order expiration,before moving the loan token and required collateral token to escrow in bzxvault.if the loan is canceled early,the remaining interest and collateral tokens revert back to the trader.Multipe traders can fill a loan order,until all ''loan TokenAmount'' is taken.This means that bzx protocol allows for partial fills.
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