FTT Whitepaper (Summary)

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Read Pitch Deck Here

Read Detailed Whitepaper Here

FTX is a cryptocurrency derivatives exchange that offers futures, leveraged tokens, and OTC trading. We believe that our derivative products are better-suited to current market demand than BitMEX and OKEx’s have. We launched a few weeks ago and already have more liquidity than OKEx does. We’ve partnered with TUSD and USDC and are backed by the largest liquidity provider in the space. We are confident that we have what it takes to become one of the best crypto derivatives exchanges. Here’s why:

Proven Track Record of Success

We have an all-star team and have proven time and time again our ability to enter a crowded space, disrupt the status quo, and become one of its dominant players. 

  • All-Star Team: We come from leading Wall Street quant firms and tech companies - Jane Street, Optiver, Susquehanna, Facebook, and Google.
  • Alameda Research: FTX is backed by Alameda Research, a ~$100 million AUM quantitative cryptocurrency trading firm. Within a year, Alameda has become the largest liquidity provider and market maker in the space. Alameda trades around $600 million and up to $1 billion per day depending on market volatility, accounts for 15% of global stable coin volume and is ranked fourth on the BitMEX leaderboard.
  • OTC: We launched an automated OTC RFQ system a few months ago. Despite the bear market and the competitive OTC landscape, we were able to provide some of the tightest spreads in the industry and quickly scaled our volume to $30 million per day without marketing. We currently serve the largest exchanges and OTC desks and expect to grow extremely fast when we start marketing FTX.

FTX Features

We’ve been one of the largest crypto futures traders for the past 1.5 years and found many problems with the top futures exchanges. We’ve written countless white papers and given hours of feedback to these exchanges, but to no avail. We decided to take matters into our own hands and build FTX. Here’s what sets us apart:

  • Clawback Prevention: A significant amount of customer funds on other derivatives exchanges has been claimed by socialized losses. FTX significantly reduces the likelihood of clawbacks ever occurring by using a three-tiered liquidation model. See here for a detailed explanation.
  • Centralized Collateral Pool + Universal Stablecoin Settlement: With existing futures exchanges, collateral is fragmented across many separate tokens and margin wallets. This makes it difficult for traders to rebalance and prevent positions from getting liquidated. To solve these issues, FTX derivatives are stablecoin-settled and require only one universal margin wallet.
  • Innovative New Products:
    • Leveraged Tokens: These tokens allow traders to put on short or leveraged positions without having to margin trade. For instance, a trader who wants to 3x short Bitcoin can simply buy a 3x short Bitcoin leveraged token on FTX. Leveraged tokens are ERC-20 and can list on any spot exchange. We currently offer BTC, ETH, EOS, USDT, XRP, BNB, TRX, and LEO leveraged tokens; check them out here. See here for the whitepaper and here for a detailed FAQ.

 

 

  • USDT Futures: USDT futures are game changers; there are many large crypto firms who desperately need some way to hedge USDT deltas given its historical volatility, and USDT futures will give it to them

 

Why FTX is Hard to Replicate

FTX is backed by Alameda Research, a crypto trading thought leader and the largest liquidity provider in the secondary markets. Many of the following points rely on Alameda’s expertise, which makes them very hard for someone else to replicate

  • Live Product: Unlike many exchanges and projects who are conducting a token raise, our exchange is already live and actually functional.
  • Liquidity From Day 1: FTX is very liquid. It already has more liquidity than every other futures exchange in crypto; only the BitMEX BTC perpetual futures are more liquid than their FTX equivalent. This is really hard to replicate. No new exchanges will be able to do so, and those around for 5 years have only succeeded in doing so for a single contract.
    • Domain Expertise: FTX is designed by people who really know the products.  Everything from collateral to maintenance margin to liquidation processes to product listing has been redesigned from the ground up by one of the heaviest users of the products.
    • Pioneering New Products: We are the first to launch USDT futures and leveraged tokens. There is a huge demand for these products, and we foresee them becoming very popular.
    • Fast Development Cycle: FTX can leverage Alameda’s tech team -- an experienced, battle-tested group used to building complex crypto trading systems under time pressure. This means that our development cycle is much shorter than others’; we can roll out multiple large features per day.
  • Strong Partnerships: Currently, we are partnered with USDC and TUSD. Because Alameda is an integral part of the secondary markets, we have strong connections with top exchanges, trading firms, OTC desks, etc. who we’ll be partnering with.

 

Revenue Model

Exchange fees, trading fees from volume generated by leveraged token, and listing fees

 

Strategies to Acquire Users and Grow Volume

  • Conventional Crypto PR/Marketing: Our plans include releasing PR articles on traditional and crypto news outlets, employing influencers (from Twitter, Reddit, WeChat, etc.), content writing, AMAs, referral programs, meetups, trading competitions and more.
  • FTX OTC: We’ve integrated our OTC portal into FTX, giving all of our OTC counterparties easy access to derivatives. We estimate that our existing OTC user base accounts for something like $150m/day of futures volume. We think we have a pretty good shot at getting at least $25m/day of that. In addition, we expect our OTC user base to grow dramatically once we start marketing.
  • Stablecoin Fiat Gateway: We have strong relationships with the teams behind TUSD and USDC. Through FTX OTC, our counterparties will be able to convert between USD and TUSD/USDC for large size
  • Listing New Leveraged Tokens on FTX: We will partner with popular projects to list their leveraged tokens. For instance, listing 10x BNB, TRX, or ONT tokens could be very exciting for the coins’ communities.
  • Listing Leveraged Tokens on Other Exchanges: We expect leveraged tokens to be listed on other venues within the next month or two. Leveraged tokens achieve their target exposure by buying and selling futures on FTX. Increasing the volume of leveraged tokens will also increase FTX futures’ volume.
  • Future Initiatives: In the future, we are planning to add options, exchange-traded tokens, lending, and spot margin trading to FTX.

 

Token Utility

  • Token Burn/ Revenue Share: Approximately one third of all fees generated on FTX will be used for an FTT repurchase, for information please click here. Any FTT bought this way will be burned
  • Discount on trading fees:  Lower trading fees on FTX futures and tighter spreads for OTC.
  • Collateral: FTT can be used as collateral for futures positions. This increases utility and demand for FTT.
  • Socialized Gains: Our backtests and live simulations have demonstrated that, during large market movements, instead of incurring clawbacks, our backstop liquidity fund will see a net gain. A portion of this gain will be socialized among FTT holders.
  • Leveraged Token Listing Fees: Projects that want to create leveraged tokens using their coin can do so with FTX.
  • White Label Solutions: Crypto institutions have expressed strong interest in purchasing a white label version of our OTC portal and futures exchange. Costs for this will be in FTT.
  • Future Expansion: FTT is the backbone of the FTX ecosystem. FTT will become even more useful when we add other derivative products to the platform.

 

Token Raise Terms: Read Here

Growth Potential

Competition Analysis

  • First Tier: BitMEX, OKEx, and Bitflyer charge roughly 5bps/trade on roughly $1.5b per day of volume, making roughly $200m/year in revenue.  BitMEX has a well-designed product with a large existing userbase but no marketing, and OKEx and Bitflyer have poorly designed products with large userbases and substantial outreach.
  • Second Tier: Huobi DM is a recently launched product. It’s poorly-designed and didn’t have any foothold, but was able to leverage a large existing client base (Huobi). It now trades about $750m/day and generates about $100m/year in fees; it is also still growing.
  • Third Tier: Deribit has a decent but rather vanilla product. Weak marketing is driving little liquidity and a small user base to their platform; their products trade about $50m/day and generate about $10m/year in fees.

 

Opportunity Analysis

  • FTX: We think that FTX will be the most well-thought out product among the field; be in the top tier of liquidity; have the most appealing products; have built-in flow from our large institutional counterparties; and have substantial room to innovate and grow over time. On the other hand, it currently does not have a large built-in retail user base. Here’s a conservative estimate of our volume:
  • OTC: Currently, Alameda Research OTC trades $30m/day. We are in the process of moving all these clients to FTX OTC. 
    • OTC Growth: With marketing, we expect our OTC volumes to double, adding another $30m/day.
    • Crypto Trading Firms: We have been onboarding and getting very positive feedback from top crypto trading firms. We estimate we will get at least $10m/day of FTX volume from them.
    • Leveraged Tokens: We will start listing leveraged tokens on other exchanges within the next month or two. We believe this will generate at least $10m/day of FTX volume.
  • Because of these factors, we are optimistic that $100m/day of volume represents a floor for the exchange (third tier), with $1b/day a real possibility (first tier).  
  • Our cheapest token implies an FTT market cap of $35 million.

 

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