⚙️MARKET MECHANISM

This contains detailed architecture of how the protocol is designed to run.

Protocol Design:

FEDIX FINANCE uses an inverse type of perpetual market to open and settle leveraged positions. In an inverse perpetual contract, positions make use of crypto-margins quoted in USDC and the PnL is settled in the underlying crypto asset. That is to say, for ETH/USDC position, the trader needs to hold ETH for margin in the ETH trading contract account. Any profit or loss incurred at the time of closing the position is paid or subtracted in ETH. This exposes the trader and the protocol to the price volatility of the underlying asset. It is advantageous compared to a Linear/USD contract when you expect a price increase of the base asset suppose you take the long position.

For instance, in ETH/USDC pair, assuming a trader have a long ETH/USDC inverse contract position. As the prices increase, the trader will accumulate profits in ETH. The USD value of the accumulated ETH will continue to increase with its rising prices. Had the trader used a linear contract, the PnL would end up with less value in USD compared to holding ETH at the end of the trade.