Digitex Futures | How sustainable is a zero-commission futures trading platform?

Good morning guys, this is Bait and in this post, I will be talking about Digitex Futures from a different point of view.

A few weeks ago, I wrote a post explaining the fact that Digitex is offering a zero commission trading experience to traders and a user from one of my social accounts replied to that article stating how impossible that would be; since Digitex is a business and the goal of every business is to make profit. Maybe he is right but not entirely. Digitex is a business and just like every other business other there; they also generate revenue to keep the platform going and to cover the necessary cost of developing the platform.

The purpose of this post is to show you in a precise manner, how Digitex intends to make this model a sustainable one for the long-run. Before I go on, I would like you to know that making profit through traders’ funds in the form of transaction charges is not the plan here.

Digitex Generates Revenue by Token Issuance instead of Transaction Fees

Digitex is bringing the desires of many traders to reality because transaction fees will no longer be used as a model for revenue generation but instead, Digitex is using their native token (Ethereum ERC-223) to cover the cost of maintaining the platform. All profits, losses, margin requirement and account balances are all displayed in DGTX denominations. It is the use of this token that makes the commission-free model possible on the Digitex Futures exchange.

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Digitex creates a utility for the token in the sense that, for traders to enjoy the features of Digitex Futures, they must own some DGTX tokens. This will increase the demand for DGTX and this demand is the single factor that will offset the relatively small inflationary cost of creating more tokens for the purpose of revenue generation. The minting of DGTX will be carried out in such a way that must meet the demand that is made for the token by these traders and then have some left-overs for the purpose of maintaining the platform.

The important question here is; who decides how many tokens will be minted for the purpose of generating revenue? That’s a rational question and of great importance. This is because the level of trust that traders will have in the team will depend on the extent at which the team pursues revenue generation through the minting of new tokens. If traders must own DGTX token to participate on the platform, then theymust be able to assure them that the value of the token will be preserved in such a way that preserves the value of their tokens (both now and in the future). This is why Digitex Futures came up with the idea of having a decentralized governing system just for the purpose of reaching an agreement with all stakeholders on the platform (i.e. all the holders of the DGTX token).

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Over-minting the token would depreciate the value of the token and may lead to a loss from the traders’ perspective. This will be as a result of a surplus in the quantity of the token in circulation. Currently, they have 1 billion DGTX tokens in circulation and only 10% of that is meant for maintenance purposes. This will cover the cost of maintaining the platform for the next two years after launch (i.e. till 2021). However, after this period, there will be a need to mint more tokens for revenue generation and that’s when the team would need the traders to reach an agreement on how many of the DGTX token needs to be minted for this purpose. This process is known as the Decentralized Governance by Blockchain (DGBB).

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With the DGBB, there is a guarantee that the interest of all stakeholders or traders will be protected because they will all have the capacity to influence the decision based on the number of tokens they own. In simpler terms, there is a positive relationship between the trader’s influence and the number of DGTX tokens he or she possesses; 1 DGTX = 1 Vote.

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It is possible that some traders will not be able to participate in this process, so provision has been made to enable traders to participate passively by delegating their voting influence to a trusted individual on the platform. This is to ensure that all traders are directly or indirectly represented in the decision-making process. It is also important to know that token issuance for revenue generating purposes will always be carried out in such a way that any sharp increase in the demand for the DGTX token would lead to a corresponding increase in the price of the token in order to lessen the impact of the first set of tokens created for maintenance.

With the rapid changes that you've seen in the token’s price, you can rest assured that the future will be great for the token. Also, the project is gaining a lot of attention and this is already causing a rise in the price of the token. Their waiting list is also rapidly increasing which in my opinion, is an indication that more people will own the token than we have already seen, before the final launch date.

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Digitex Futures is just starting and has experienced so much growth within a very short period of time. The need to own their token in order to participate on their platform will always strike a balance between the minting of new tokens for revenue generation purposes and the actual value of the token.

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So for those who are still in doubt regarding how Digitex will achieve this, I hope I have been able to clear your doubt to some extent. You can also read more from the Digitex Futures Whitepaper (find the link below in this post).

The key to stability on the Digitex Futures platform is a function of the demand and supply of the DGTX token and the token is already showing the signs of having a very high utility as against other tokens with similar nature.

The token will be the unit of account on the Digitex Futures platform and this is why I am buying as much as I can for now. No futures trader would ignore the promise of a zero fee trading platform. Thank you for reading this, guys. This is Bait and I’m bringing you words from the Offline Minnow School.