Tuesday, 4 September 2018

Digitex: A commission-free cryptocurrency futures exchange (my review)


NJ Bridgewater

[NOTE: This article should not be construed as investment advice. For advice on investing, purchasing/selling Bitcoin and other cryptocurrencies, and buying/selling futures contracts, please contact a licensed financial advisor. The reader is responsible for his own investments. Disclaimer: this article contains referral links].

What is Digitex?


One of the most exciting projects in the crypto-sphere at the moment is the Digitex Futures Exchange, which is due to launch in Q4 of this year, by December 2018. What makes this project so unique and so exciting? First of all, Digitex is the first commission-free cryptocurrency future exchange, which will allow futures trading on Bitcoin, Litecoin and Ethereum. Bitcoin futures trading is a huge deal, as you have no doubt seen in the news. It is a multi-billion-dollar business. Secondly, it will use its own native token, which means that trading and holding the token itself could potentially be profitable, as the token’s value will increase as more and more people use the exchange. Thirdly, it gives power to the users because, whenever new tokens are issued, Digitex token-holders will be able to vote on the amount of new tokens to be created, thus ensuring that the rate of inflation is not too high and that the profitability of the token continues to increase. Fourthly, the supply of tokens is quite limited when compared with other popular currencies such as Cardano (ADA) and TRON (TRX), both of which have a total number of tokens in the tens of billions—not to mention Ripple (XRP), which has a maximum supply of 99,991,852,985 XRP.[1] Digitex, in contrast, sits comfortably at a current maximum supply of 1 billion DGTX, with a circulating supply of only 700 million DGTX.[2] Finally, Digitex is not only the new kid on the block when it comes to futures trading, but it is building an innovative platform utilizing a ‘DGTX-peg system’, whereby the DGTX sale price can be locked in without having to actually exchange possession of the DGTX tokens, which is great for traders who want to lock-in the value of their tokens while doing a futures trade during periods of market uncertainty.[3] If you are interested in getting early access to the Digitex Futures Exchange platform when it launches in Q4 (December 2018), you can sign up here (just click on ‘GET EARLY ACCESS’ and then input your e-mail address and click SUBMIT).

Bitcoin Futures Trading 


Before we get into more details, what is Bitcoin futures trading? First of all, what is futures trading? According to Investopedia, a futures contract is an agreement between a buyer and a seller to buy or sell an asset or commodity for a specified price at a specified date.[4] A futures contract is thus an agreement to buy and sell the asset/commodity/security. In many cases, this does not mean that the actual commodity is exchanged. A futures contract may represent 27 metric tons of corn, for example, but the corn does not necessarily exchange hands. Originally, futures contracts were used by farmers to hedge against changes in the price of their crops. Now, futures contracts are often used by investors to speculate on the price of commodities and profit by betting on whether its value will go up or down.[5] In other words, it is a means for investors to bet on the price of Bitcoin or other assets/commodities. In one sense, it is similar to gambling, as in when one bets on whether a specified horse is going to win a race, for example. In both futures contracts and gambling, the eventual outcome of the bet is unknown. In this sense, a Bitcoin futures contract can be seen as pure speculation, which is akin to gambling.

A futures contract can also be used to hedge against potential losses or gains in the value of an asset in order to reduce volatility associated with the price of the asset.[6] In other words, one may be a Bitcoin holder/investor who wishes to hedge against the volatility of the price of Bitcoin. The Bitcoin investor can reduce the risk of their investment by taking an opposite position in the market to what they are trying to hedge, with one effect cancelling out the other.[7] The goal of hedgers is to reduce risk by protecting themselves against any future drops in the price of the asset.[8] Hedging also allows the Bitcoin trader who is averse to volatility to lock in the price that he/she wishes to trade Bitcoin for. Speculators, in contrast, are assuming the risk, often borrowing money in order to buy a contract in the hope that the price of the asset will increase in the future. If the market price drops, they will end up losing their original investment, and more.[9] If one is selling at a certain price (i.e. the hedger), then one is guaranteed to receive that price at the end of the contract. One may benefit or lose from this transaction, based on whether the actual market price is higher or lower than the price determined in the futures contract. Many people who invest in Bitcoin are interested in reducing the volatility of transactions and want the ability to sell at a determined price. There are also many people in the crypto-sphere who are interested in pure speculation on price movements. Bitcoin futures trading allows them to do just that.

CBOE/CME Futures Trading, BitMEX & Digitex (DGTX)


Bitcoin futures trading became mainstream when the Chicago Board of Exchange (CBOE) became the first major derivate exchange to launch Bitcoin futures late last year on 10th December 2017.[10] Such a mania was created by this news that trading had to be halted twice due to CBOE speed breakers, which can pause or slow down trading if price movements are excessive.[11] This was followed by the launch of Bitcoin futures on the Chicago Mercantile Exchange (CME), which is the world’s largest futures exchange, with about 1,049 contracts being made in January alone, representing some 5,245 BTC, whereas CBOE’s contracts for the same time frame represented 3,860 BTC.[12] As of July 2018, the world’s largest exchange-traded fund (ETF) provider, BlackRock, has announced that they assessing their potential involvement in Bitcoin investment, including whether they should invest in Bitcoin futures.[13] Bitcoin futures trading is a growing phenomenon, with Bitcoin futures contracts in Q2 of 2018 93% higher than the previous quarter, almost doubling the total amount of contracts, according to CME Group. The increasing involvement of Wall Street and other institutional investors in Bitcoin futures trading and Bitcoin investment can only be a good thing in the long run, as it means more demand for an extremely limited asset. But how can the ordinary investor get involved in Bitcoin futures trading?

Various Bitcoin futures exchanges already exist with easy access for individuals. Digitex Futures Exchange is going to be launched in Q4 of 2018, and you can sign up for their waiting list for early access here. As a zero-commission exchange, Digitex will allow you to buy and sell futures contracts with ease and with zero fees. It is currently (or will be soon) the only Bitcoin futures exchange to offer such fluidity and low-cost access to the Bitcoin futures market. “Simply put,” Adam Todd, the founder of Digitex, says, “it’s a commission-free futures exchange” which “sustains itself indefinitely by using its own native currency instead of charging transaction fees” by using “the DGTX token.”[14] This is possible because a small number of new tokens will be created each year to cover costs (from 2021), allowing a small inflation rate in the total number of tokens while also ensuring that the exchange maintains zero transaction fees. This benefits all users of the platform, as well as DGTX token holders, who can be sure that there is only a small annual increase in the number of tokens, while an increasing number of investors flock to the platform, driving up demand for the native token. This makes Digitex stand out from its chief competitor at the moment, BitMEX.

BitMEX (Bitcoin Mercantile Exchange) is a trading platform which offers investors access to global financial markets using Bitcoin; in particular, it allows investors to make several different types of contracts, including perpetual contracts, in which one can hold a position for as long as one likes, futures contracts (which we have discussed above), and two other unique contracts: a BitMEX UP Contract and a BitMEX DOWN contract.[15] A BitMEX UP (Upside Profit) Contract lets buyers participate in the potential upside of the investment instrument, paying a premium on a trade date, which entitles him/her to receive the difference between the settlement price and strike price on the maturity date, if positive. If not positive, no payment occurs. All payments being settled in Bitcoin. A BitMEX DOWN (Downside Profit) Contract is similar, except that if the underlying asset (e.g. Bitcoin) falls below the KO barrier price during the life of the contract, it expires, settling early using the KO barrier price. Again, all transactions are settled in Bitcoin, with the possible loss being limited to the initial investment. To sign up with BitMEX for a 10% fee discount for 6 months, use the following referral link. If you are interested in buying a futures contract straightaway and cannot wait for the launch of the Digitex platform, then this is one of the best options.

The DGTX token and how it works



What are some of the key features of Digitex which make it unique, and how does the Digitex token work? Many initial coin offerings (ICOs) provide coins that are of little real-world utility, or which have no real use case. Even those which do have a use-case are often of such fringe use that they have no long-term prospects. Do I really need an ICO for Refrigerator Coin, for instance (this doesn’t exist, but it could)? This is something I address in more detail in my article on 5 Questions You Should Ask Yourself Before Investing in an ICO.[16] So, what makes Digitex unique? The answer to that lies in the DGTX token itself. DGTX is the native token of the Digitex Futures Exchange, which was created by businessman and trader Adam Todd in 2017 as an ERC-223 token (i.e. an Ethereum-based token). ERC-223 tokens are more modern Ethereum-based tokens with additional features, such as not being able to be transferred to contracts which won’t allow the token to be released, which helps to prevent human error.[17] According to Adam Todd (2018), the Digitex Futures Exchange is the first exchange of its kind to develop and use its own token, which allows it to eliminate all trading fees.[18] In order to use the futures trading platform, traders must have a balance of DGTX tokens, as all ticker prices are denominated in DGTX.[19] In other words, if you want to use the Digitex Futures Exchange, you don’t have to buy and transfer Bitcoin or USD. Rather, you have to purchase a number of DGTX tokens equivalent to the value of the futures contract you wish to purchase. The constant use of the DGTX token, according to the law of supply and demand, should lead to an increase in its value, thus benefiting long-term DGTX token-holders. 

So, how does the platform work and what other unique features are there? In addition to having its own native token, the Digitex Futures Exchange maintains liquidity through what are called ‘Digitex Market Makers’. These are basically trading robots which are programmed to break even while placing bids and offers, increasing liquidity on the platform.[20] This is made possible by the fact that the trading bots have a large amount of DGTX at their disposal—some 200 million DGTX, which is 20% of the total number of DGTX tokens.[21] According to the Digitex whitepaper, “Digitex market makers… help create liquid futures markets that have tight bid and offer spreads, even in volatile market conditions.”[22] The whitepaper goes on to argue that “not being driven by profit, the market makers do not exist to extract value from traders”.[23] Rather, they ensure that “a large number of DGTX tokens are actually being used actively for the purpose of trading, with all the beneficial network effects that brings, rather than those tokens sitting dormant in a speculator’s wallet”, helping “to create very liquid futures markets from day one, which combined with zero transaction fees will attract a large number of traders to the Digitex Futures Exchange.”[24]

Adam Todd, creator of Digitex

Being a businessman and trader himself, rather than a techie, Todd knows the importance of creating value for the tokens and the need for the price of DGTX to increase for DGTX token-holders. While providing the means to create a fee-free trading platform, the DGTX token also exists to reward token-holders. Thus, the whitepaper states that “large numbers of traders will create a surge in demand for DGTX tokens and a price bump that will convince speculators to take an early profit by selling their DGTX tokens to those traders, thus transferring more tokens from dormancy in wallets to active use on the futures markets.”[25] “In this way,” Todd argues, “the Digitex market makers are a catalyst to a highly efficient trading environment where the majority of the ecosystem’s protocol tokens are in active use.”[26] Thus, the key principles behind the DGTX token and the Digitex market makers are liquidity, profitability and increasing interest in the project. This is important, as a futures exchange can only flourish if it continually attracts new investors, new speculators and a loyal base of users. This is also the reason why DGTX token-holders have an active role in deciding on the creation of new tokens, which cannot take place before the start of 2021, when the first new DGTX tokens will be minted to cover the ongoing costs of maintaining the Digitex Futures Exchange.[27] Token-holders will be able to participate in the decision-making process by voting on proposals for the creation of new tokens, determining the exact rate of inflation. This will be done on the basis of 1 DGTX = 1 vote.[28] Thus Digitex is not only a platform created in the interests and profitability of users, but it is also democratic in the way that it functions. This unique aspect instantly distinguishes it from BitMEX and other rivals.



As we near Q4, excitement is already building for the eventual launch of the Digitex futures trading platform. Thousands of people are now signing up for the Digitex Early Access Waitlist. For the last several months, Digitex has been focused on developing their platform, putting everything into hiring programmers, setting up their offices, and launching their new blog. However, Digitex is now in full-gear marketing mode, offering an amazing new promotion which is guaranteed to increase the number of people signing up for their waitlist. As more hype is generated, the number of potential Digitex investors increases, which will eventually drive up the value of the DGTX token itself. The initial launch will be small, with a select group of 5,000 friendly testers who will be given free money to play with and will thus be very active in the early usage of the platform.[29] These 5,000 initial testers will each be given 1,000 DGTX to play with. When people join the waitlist, they will initially be at the back of the queue. However, by referring friends, people can skip ahead of the crowd and move ahead in the rankings, until they eventually reach the top 5,000, thus gaining access to this initial 1,000 free DGTX.[30] And it gets even better: the top 10 referrers will actually receive a share of 1 million DGTX tokens, equally divided.[31] They will thus each receive 100,000 DGTX, as well as being among the first 5,000 testers of the platform.[32] While testers will not be able to withdraw their free 1,000 DGTX, they will be able to withdraw any profits that they earn from the platform.[33] This is thus FREE money to play with. Who could pass up on such an opportunity? For more, and to sign up, CLICK HERE.

Conclusion

If you’re interested in futures trading, particularly in trading the top three cryptocurrencies: Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH), then you’ll definitely be interested in the Digitex Futures Exchange. It is, by far, the most innovative, democratic and exciting futures exchange, which will allow newbies and experienced traders alike to take a dive into the world of cryptocurrency investment, hedging and speculation. For too long, investment portfolios and futures trading has been limited to the rich and elite, the bankers and financiers. Now, with the advent of cryptocurrencies, it is possible for ordinary people to get involved and try to make their own fortune in the cryptocurrency space. This is made possible through a number of trading platforms, including cryptocurrency exchanges and futures exchanges. Digitex Futures Exchange and BitMEX are two of the most prominent examples of these platforms. Each have their own merits and BitMEX is definitely the crowned king of Bitcoin futures trading at the moment. Digitex Futures Exchange, however, offers a transaction-free trading platform that which innovative, creative and has great potential. Moreover, the DGTX token itself has great potential. The original Digitex token sale raised $5.2 million USD in only 17 minutes,[34] demonstrating the hype surrounding the platform. It was initially offered for $0.01 USD per token, while the current price sits at $0.019918,[35] which is nearly twice the value. While I cannot offer financial advice, this is a remarkable gain in less than eight months and before the platform has even launched. If you want to get in on this platform, you can sign up here. Remember to always do your own research and keep on learning.

NJ Bridgewater

Sources

Gaurav Agarwal (2018) Futures trading with Digitex, Medium, March 8, 2018. URL: https://medium.com/coinmonks/futures-trading-with-digitex-d8d521a21278 (accessed 03/09/2018)
Nafis Alam (2017) How Bitcoin futures trading could burst the cryptocurrency’s bubble, The Conversation, December 14, 2017 3.14am AEDT. URL: http://theconversation.com/how-bitcoin-futures-trading-could-burst-the-cryptocurrencys-bubble-88971 (accessed 03/09/2018)

The BitFeed (2018) Digitex Futures Review, The BitFeed, 21 June 2018. URL: https://www.thebitfeed.com/digitex-futures-review/ (accessed 03/09/2018)

BitMEX (2018) FAQ: What is BitMEX, BitMEX.com. URL: https://www.bitmex.com/app/faq#What-is-BitMEX (accessed 03/09/2018)

Nicholas Bridgewater (2018) 5 Questions You Should Ask Yourself Before Investing in an ICO, Digitex Futures Exchange Blog, May 30, 2018. URL: https://blog.digitexfutures.com/cryptocurrency/5-questions-you-should-ask-yourself-before-investing-in-an-ico/ (accessed 03/09/2018)

Evelyn Cheng (2017) Bitcoin debuts on the world's largest futures exchange, and prices fall slightly, CNBC, Published 5:06 PM ET Sun, 17 Dec 2017; Updated 5:44 PM ET Mon, 18 Dec 2017. URL: https://www.cnbc.com/2017/12/17/worlds-largest-futures-exchange-set-to-launch-bitcoin-futures-sunday-night.html (accessed 03/09/2018)

Digitex Futures (DGTX), CoinMarketCap, 2018. URL: https://coinmarketcap.com/currencies/digitex-futures/ (accessed 03/09/2018 10:48 AM AST)

Brian Perry (2017) Beginner's Guide To Trading Futures, Investopedia, Updated December 12, 2017 — 12:53 PM EST. URL: https://www.investopedia.com/university/beginners-guide-to-trading-futures/ (accessed 03/09/2018)

Nicola Sargeant (2018) What is the difference between hedging and speculation? Investopedia, Updated June 12, 2018 — 2:57 PM EDT. URL: https://www.investopedia.com/ask/answers/difference-between-hedging-and-speculation/ (accessed 03/09/2018)

William Suberg (2018) BlackRock Eyes Bitcoin Futures, Market Reacts to Increased Institutional Interest, Coin Telegraph, JUL 16, 2018. URL: https://cointelegraph.com/news/fn-blackrock-eyes-bitcoin-futures-market-reacts-to-increased-institutional-interest (accessed 03/09/2018)

Adam Todd (2017) Digitex:​ ​A​ ​commission-free,​ ​trustless​ ​future exchange​ ​for​ ​trading​ ​digital​ ​currency​ ​prices (white paper), December 5th, 2017. URL: https://www.digitexfutures.com/wp-content/uploads/2017/12/Digitex-Whitepaper-11.0.pdf (accessed 03/09/2018)

Adam Todd (2018) Why Trade Bitcoin Futures Instead of Bitcoin? Digitex Futures Exchange Blog, Jul 30, 2018. URL: https://blog.digitexfutures.com/trading/why-trade-bitcoin-futures-instead-of-bitcoin/ (accessed 03/09/2018)

Adam Todd (2018b) DGTX Token Sale Raises $5.2 Million in 17 Minutes, Digitex Futures Exchange Blog, January 17, 2018. URL: https://digitexfutures.com/dgtx-ico-token-sale-sells-out-in-17-minutes/ (accessed 03/09/2018)

Adam Todd (2018c) 5 Million DGTX Airdrop to the First 5000 on Our Waitlist, Digitex Futures Exchange Blog, August 20, 2018. URL: https://blog.digitexfutures.com/digitex-futures/5-million-token-airdrop-to-the-first-5000-on-our-waitlist/ (accessed 03/09/2018). 

XRP (XRP), CoinMarketCap, 2018. URL: https://coinmarketcap.com/currencies/ripple/ (accessed 03/09/2018 10:47 AM AST)

Links for More Information

The 1 Million DGTX Giveaway

BitMEX sign-up link

Buy Bitcoin on Coinbase

Start trading cryptocurrencies on Binance

Nicholas Bridgewater (2018) What is Bitcoin? Digitex Futures Exchange Blog, May 14, 2018. URL: https://blog.digitexfutures.com/cryptocurrency/what-is-bitcoin/

Nicholas Bridgewater (2018) What is Ethereum? Digitex Futures Exchange Blog, May 14, 2018. URL: https://blog.digitexfutures.com/cryptocurrency/what-is-ethereum/

Nicholas Bridgewater (2018) Where to Buy and Sell Bitcoin. Digitex Futures Exchange Blog, May 14, 2018. URL: https://blog.digitexfutures.com/cryptocurrency/where-to-buy-and-sell-bitcoin/

Nicholas Bridgewater (2018) Where to Buy and Sell Ether. Digitex Futures Exchange Blog, May 14, 2018. URL: https://blog.digitexfutures.com/cryptocurrency/how-to-get-ether-and-where-to-buy-and-sell-it/



[1] See: XRP (XRP), CoinMarketCap, 2018. URL: https://coinmarketcap.com/currencies/ripple/ (accessed 03/09/2018 10:47 AM AST).
[2] See: Digitex Futures (DGTX), CoinMarketCap, 2018. URL: https://coinmarketcap.com/currencies/digitex-futures/ (accessed 03/09/2018 10:48 AM AST).
[3] See: The BitFeed (2018) Digitex Futures Review, The BitFeed, 21 June 2018. URL: https://www.thebitfeed.com/digitex-futures-review/ (accessed 03/09/2018).
[4] See: Brian Perry (2017) Beginner's Guide To Trading Futures, Investopedia, Updated December 12, 2017 — 12:53 PM EST. URL: https://www.investopedia.com/university/beginners-guide-to-trading-futures/ (accessed 03/09/2018).
[5] See: Perry (2017).
[6] See: Nicola Sargeant (2018) What is the difference between hedging and speculation? Investopedia, Updated June 12, 2018 — 2:57 PM EDT. URL: https://www.investopedia.com/ask/answers/difference-between-hedging-and-speculation/ (accessed 03/09/2018).
[7] See: Sargeant (2018).
[8] See: Nafis Alam (2017) How Bitcoin futures trading could burst the cryptocurrency’s bubble, The Conversation, December 14, 2017 3.14am AEDT. URL: http://theconversation.com/how-bitcoin-futures-trading-could-burst-the-cryptocurrencys-bubble-88971 (accessed 03/09/2018).
[9] See: Alam (2017).
[10] See: Alam (2017).
[11] See: Alam (2017).
[12] See: Evelyn Cheng (2017) Bitcoin debuts on the world's largest futures exchange, and prices fall slightly, CNBC, Published 5:06 PM ET Sun, 17 Dec 2017; Updated 5:44 PM ET Mon, 18 Dec 2017. URL: https://www.cnbc.com/2017/12/17/worlds-largest-futures-exchange-set-to-launch-bitcoin-futures-sunday-night.html (accessed 03/09/2018).
[13] See: William Suberg (2018) BlackRock Eyes Bitcoin Futures, Market Reacts to Increased Institutional Interest, Coin Telegraph, JUL 16, 2018. URL: https://cointelegraph.com/news/fn-blackrock-eyes-bitcoin-futures-market-reacts-to-increased-institutional-interest (accessed 03/09/2018).
[14] See: Gaurav Agarwal (2018) Futures trading with Digitex, Medium, March 8, 2018. URL: https://medium.com/coinmonks/futures-trading-with-digitex-d8d521a21278 (accessed 03/09/2018).
[15] BitMEX (2018) FAQ: What is BitMEX, BitMEX.com. URL: https://www.bitmex.com/app/faq#What-is-BitMEX (accessed 03/09/2018).
[16] See: Nicholas Bridgewater (2018) 5 Questions You Should Ask Yourself Before Investing in an ICO, Digitex Futures Exchange Blog, May 30, 2018. URL: https://blog.digitexfutures.com/cryptocurrency/5-questions-you-should-ask-yourself-before-investing-in-an-ico/ (accessed 03/09/2018).
[17] See: The BitFeed (2018).
[18] See: Adam Todd (2018) Why Trade Bitcoin Futures Instead of Bitcoin? Digitex Futures Exchange Blog, Jul 30, 2018. URL: https://blog.digitexfutures.com/trading/why-trade-bitcoin-futures-instead-of-bitcoin/ (accessed 03/09/2018).
[19] See: Todd (2018).
[20] See: Todd (2018).
[21] See: Todd (2018).
[22] See: Adam Todd (2017) Digitex:​ ​A​ ​commission-free,​ ​trustless​ ​future exchange​ ​for​ ​trading​ ​digital​ ​currency​ ​prices (white paper), December 5th, 2017. URL: https://www.digitexfutures.com/wp-content/uploads/2017/12/Digitex-Whitepaper-11.0.pdf (accessed 03/09/2018).
[23] See: Todd (2017), p. 16.
[24] See: Todd (2017), p. 16.
[25] See: Todd (2017), p. 16.
[26] See: Todd (2017), p. 16.
[27] See: Todd (2017), p. 4.
[28] See: Todd (2017), p. 4.
[29] See: Adam Todd (2018c) 5 Million DGTX Airdrop to the First 5000 on Our Waitlist, Digitex Futures Exchange Blog, August 20, 2018. URL: https://blog.digitexfutures.com/digitex-futures/5-million-token-airdrop-to-the-first-5000-on-our-waitlist/ (accessed 03/09/2018).
[30] See: Todd (2018c).
[31] See: Todd (2018c).
[32] See: Todd (2018c).
[33] See: Todd (2018c).
[34] See: Adam Todd (2018b) DGTX Token Sale Raises $5.2 Million in 17 Minutes, Digitex Futures Exchange Blog, January 17, 2018. URL: https://digitexfutures.com/dgtx-ico-token-sale-sells-out-in-17-minutes/ (accessed 03/09/2018). 
[35] See: CoinMarketCap (2018) Digitex Futures (DGTX), CoinMarketCap. URL: https://coinmarketcap.com/currencies/digitex-futures/ (accessed 03/09/2018 19:18 AST).