OPNX Introduces ‘oUSD’ Credit Currency for Crypto Margin Trading

OPNX, the crypto futures exchange, has unveiled a credit currency for margin trading, known as “oUSD.” This announcement was made by Mark Lamb, co-founder of the exchange, on July 5th, according to a statement provided to Cointelegraph. The currency is currently available in its initial phase, requiring users to deposit crypto assets into the exchange in order to obtain it.

In a future phase, OPNX plans to make oUSD accessible to users who deposit crypto into on-chain contracts, with the aim of ensuring “bankruptcy remoteness,” explained Lamb.

oUSD has been devised to address three key issues outlined in its litepaper. Firstly, lenders are unwilling to entrust platforms with cash loans backed by crypto collateral. Secondly, exchanges and lending platforms are reluctant to lend cash to margin traders due to the multiple bankruptcies that occurred during the 2022 bear market. Lastly, crypto derivatives traders seek “portfolio margin,” the ability to borrow and trade based on their crypto holdings rather than stablecoins.

To tackle these challenges, oUSD functions as a credit currency. It can be acquired at a 1-to-1 ratio with Tether (USDT) or used to measure profits and losses for trades conducted with Bitcoin (BTC), Ethereum (ETH), and other cryptocurrencies as collateral. Users with negative oUSD balances are subject to an interest rate determined by holders of the exchange’s native token, OX. Those with positive balances can redeem their oUSD for USDT.

Lamb revealed that in the future, users will also be able to acquire oUSD by staking cryptocurrency in smart contracts outside the exchange. This feature will provide them with bankruptcy remoteness, shielding them from potential insolvency risks within the exchange.

When discussing the advantages of this approach, Lamb remarked, “If we can instead remove that custodial aspect and put that custody on-chain, we end up with a system where users have provable solvency, and they know that their collateral is not being touched. […] And so you give users that bankruptcy remoteness, that protection of their assets, they then are able to trade on a safer exchange.”

OPNX has faced controversy since its inception, primarily due to its co-founders Kyle Davies and Su Zhu, who also co-founded the failed hedge fund Three Arrows Capital. The exchange has drawn heavy criticism, prompting its CEO Leslie Lamb to rebuke investors for allegedly misleading the public by distancing themselves from the exchange.

In response to the criticism, Lamb argued that the mistakes made by Davies and Zhu have actually contributed to improving OPNX as an exchange. He said, “I think Kyle and Su kind of portrayed the zeitgeist of the last crypto bull market well, and they lost the majority of their net worth, but they are building back, and that’s what I am doing as well, and that’s what everyone should do, […] is just build back.”

The introduction of oUSD as a credit currency brings several benefits for margin traders. These advantages include:

• Trustless Transactions: With oUSD, lenders no longer need to trust platforms with holding cash loans backed by crypto collateral. The use of on-chain contracts ensures a trustless environment, minimizing counterparty risk.
• Reduced Bankruptcy Risk: By allowing margin traders to borrow cash using their crypto holdings as collateral, oUSD helps to mitigate the risk of bankruptcies, which were prevalent during the 2022 bear market.
• Improved Flexibility: oUSD allows traders to measure profit and loss in trades conducted with cryptocurrencies as collateral. This flexibility aligns with the preferences of crypto derivatives traders who wish to utilize their crypto holdings for trading rather than relying solely on stablecoins.

OPNX has ambitious plans for the future of oUSD and the exchange as a whole. In the next phase, users will be able to acquire oUSD by staking their cryptocurrency in smart contracts outside of the platform. This will grant them bankruptcy remoteness, providing an additional layer of security for their assets.

By leveraging on-chain custody, OPNX aims to create a system where users can trade with confidence, knowing that their collateral is safe and accessible. This approach aligns with the growing demand for transparency and security within the crypto industry.