A New Attempt at Decentralization: Combining Security and Convenience

If a decentralized contract exchange can enable Google account login, it will undoubtedly greatly expand its audience. At the same time, if it can allow users to fully control their assets while maintaining the user experience of centralized exchanges, it will inevitably attract a large number of users to migrate when centralized exchanges encounter a trust crisis.

A decentralized derivatives exchange called MUFEX(Most User Friendly EXchange) is attempting to achieve these goals, combining the advantages of GMX's fast launch and dydx's high ceiling.

Core Mechanism of MUFEX

MUFEX mainly consists of the following three core mechanisms:

1. Adopting an asset self-custody model similar to DYDX, users can forcibly withdraw their assets.
2. Utilize account abstraction (AA) wallet solution to support Google login and other more convenient user experiences.
3. The hybrid order book model includes passive market makers like GMX/GNS and also supports traditional market makers.

Each of these mechanisms has its advantages, and we will analyze them one by one below.

The advantages of self-custody of assets

After the FTX incident, users' trust in centralized exchanges has significantly declined, and decentralized exchanges like GMX have gained more attention as a result. Asset self-custody can effectively address users' security concerns. Although the degree of decentralization in trade matching is also important, there is still room for compromise in this area.

The significance of account abstraction wallet solutions

After a year of rapid growth, GMX has encountered a bottleneck in user growth, with an average of only about 1,000 users trading contracts daily. To further expand the user base, it is crucial to lower the barriers to entry. The account abstraction wallet solution adopted by MUFEX improves scalability while ensuring security, allowing users to log in using familiar methods such as email and Google accounts, significantly reducing the learning curve.

This user experience, which is close to that of a Centralized Exchange, helps attract more users. For users of Centralized Exchanges, migrating to MUFEX involves almost no learning cost, while also improving asset security. If token incentives are added, user growth will become even easier.

Advantages of the hybrid order book model

MUFEX adopts a hybrid order book model, which includes a dynamic slippage mechanism similar to GNS and supports market makers providing liquidity through APIs. This design retains the advantages of the GMX/GNS model while enhancing the ceiling by introducing more external participants.

Although passive market-making MLPs are safe, the slippage and fees are difficult to compete with Centralized Exchanges, and the scale limit is also lower. Supporting active market makers can further enhance the platform's potential while retaining the already validated successful model.

Summary

The design goal of MUFEX is to combine the advantages of the following aspects:

1. The asset security of DEX
2. User Experience of Centralized Exchange
3. Low Slippage of GMX/GNS
4. The Composability of GLP
5. The scale potential of the order book model

Whether this design can succeed still requires market validation. It differs significantly from current decentralized finance projects and requires strong operational capabilities, which can only be tested through practice.

Industry Trend Analysis

The decentralized finance sector has begun to emphasize user experience, which is a trend worth noting. Looking back at the development history of perpetual contracts, although initially invented by small and refined teams like Bitmex, later exchanges such as Binance, which excelled in operation and user experience, ultimately captured a large share of the market.

For users engaged in frequent contract trading, the experience is particularly important. Although most decentralized finance sectors have limited profitability and are unable to invest significant resources to improve user experience, the derivatives market is an exception. MUFEX's attempt has set a good precedent for the industry, and the performance of various forces in the future is worth looking forward to.