In May 2020, Switcheo announced the development of its second trading platform, Demex, which aims to be a fully non-custodial platform that focuses on margin and derivatives trading.
In a conversation with Neo News Today, Switcheo founder and CEO, Ivan Poon, explained that Demex was conceived after it was determined that the user needs of derivatives and margin traders was significantly different to existing Switcheo users.
As we made initial plans for derivative trading, we found the design of our spot-focused exchange and high-security requirements of Switcheo to be a mismatch for derivatives traders, who are much more concerned about other things. For example, since trading on margin typically already incurs market risk far higher than counter-party risk, it did not make sense to constrain ourselves within the existing [Switcheo Exchange] platform. All the features developed are solely trading focused, as opposed to being beginner-friendly or having extensive third-party support.
As a result, Switcheo Exchange will continue to focus on spot trading and supporting direct wallet-to-blockchain integration through clients like O3, MetaMask, Ledger, and Switcheo Account, while Demex will have features features more suited to margin and derivative trading.
Demex will be powered by Switcheo’s upcoming standalone chain, Switcheo TradeHub, an open-source, delegated Proof of Stake order matching engine built on top of the Tendermint Core byzantine fault tolerant consensus mechanism. It is claimed that Switcheo TradeHub can handle more than 1,000 transactions per second (TPS) and a peak load of 10,000 TPS.
Demex aims to compete with cryptocurrency-based derivative trading platforms such as Bitmex, Deribit, and Bybit. However, Poon iterated, “because of the way Demex is built in terms of types of markets (i.e., options, and perpetuals), as well as types of underlying [markets] (i.e., VIX, and gold), [the potential for variety is] larger than the centralized counterparts.”
Eventually, Switcheo aims to allow users to create any market of their choosing through Switcheo TradeHub, whether they be spot (i.e., Switcheo Exchange) or derivatives-oriented (i.e., Demex). Support for this functionality it expected to be rolled out slowly to prevent potential spam or undesired markets.
NEO and GAS tokens will be tradable on Switcheo Exchange and Demex. Additionally, Switcheo’s current liquidity pools will migrate to Switcheo TradeHub, and therefore shared by the trading platforms.
Switcheo’s SWTH token is a NEP-5 token and there are no plans to change its standard. Poon said, “Since Demex is built on top of Switcheo TradeHub, SWTH will still be the primary underlying token, [and] can only be withdrawn to the Neo blockchain.”
Poon also noted that Switcheo is working closely with Neo Global Development (NGD) on one of its primary cross-chain mechanisms in Switcheo TradeHub and that NGD is a shareholder of Switcheo Pte. Ltd.
There is no firm release date for Demex, but Switcheo has stated that it will launch soon.