DISCLOSURE: This is not investment advice. Please do your own research before investing. I am not affiliated, compensated or in any way associated with featured applications in my posts.
What is Fulcrum?
Fulcrum is a front-facing user application that interacts with bZx’s system of smart contracts to enable margin trading.
bZx is an open margin lending protocol on Ethereum. Learn more here: https://bzx.network/faq-fulcrum.html
Key features:
Open to anyone without registering for an account, just connect with a compatible Web3 wallet.
Increase your ETH exposure up to 4X.
DAI, ETH, WBTC, LINK, ZRX, REP and KNC tokens available although liquidity is not substantial for ERC20 tokens.
Your trades are tokenized and tradable just like any other ERC20 token.
Initial margin is determined by the leverage of the position you enter: 2x=50%, 3x=33%, 4x=25%. Minimum margin maintenance = 15%.
No platform trading fees, excluding Ethereum transaction costs.
Perpetual, no time-lock on trades.
Uses KyberSwap for trading liquidity and price feeds.
Margin monitoring and margin call initiation is open to anyone and callers receive a bounty for successfully executing a margin call.
The bZx team controls the interest rate model parameters, allowing the rates to effectively be set centrally. Although it is important to note that the team can't alter existing rates once a trader has entered a position. According to Kyle Kistner from bZx, there are plans to have the rates tuned algorithmically and to have token holders be able to tune the parameters of the algorithm.
Who is this for?
People who are seeking high growth potential but willing to accept substantial market volatility. To learn more about margin trading view the beginning of my dYdX tutorial.
Fulcrum tutorial overview:
Test date: September 16, 2019.
Trade type: ETH LONG 4X Leverage.
Collateral amount = 0.10 ETH
Buying transaction cost at the time of the trade = 0.0311287004 Ether (or $5.98)
Selling transaction cost at the time of the trade = 0.008316957 Ether ($1.65)
Gain after ~$7 ETH price rise = 0.00565 ether (excluding eth transaction fees)
Summary: as you can see my Ethereum transaction fees ended up being > my gains from the trade because I used such a small amount for my test. I increased my transaction fees in order to process my trades faster. Important thing to keep in mind is that this transaction fees do not depend on my trade amount. I would’ve incurred the same fee trading 100 ETH. Although larger amounts start experiencing higher price slippage. Some UI elements could be improved for end users as mentioned in Step 3 below.
Pre-requisite: Deposit ETH or DAI into your Metamask, or another compatible wallet (view Compound tutorial to learn how to set up Metamask).
STEP 1: Visit https://fulcrum.trade/#/trade and connect your Metamask wallet.
What does this do? Designates which wallet address you will use for trading.
Smart contract interaction(s): NONE
Total gas cost: NONE
STEP 2: Select your desired leverage and buy amount.
What does this mean? Your leverage amount (2x/3x/4x) is essentially your asset multiplier. For example, if you have 1 ETH available in your wallet you can buy up to 4 ETH if you choose 4x leverage. But keep in mind the higher your leverage, the higher your liquidation price.
Quoted ETH price = $190.72
Quoted liquidation price = 166.46 (given 4x margin,if ETH price drops to this amount, your position will be automatically sold to cover your losses + any liquidation penalties.)
Quoted Annual Interest Rate = 15.6% (interest you pay on borrowed funds for your margin trade. For example, if you place a 4X margin trade with 1 ETH collateral, you will pay interest on the 3 ETH borrowed for the duration of the trade.)
STEP 3: Click ‘Buy’, confirm your trade with Metamask signature and wait for the transaction to settle on Ethereum.
Ethereum tx: https://etherscan.io/tx/0xf3a70fa0513a4990108b1d043e45efae6cb4ac49b8ee5996ed4498e2ca4ee70b
Total transaction fee incurred: 0.0311287004 Ether (or $5.98)
End result: Your collateral (0.10 ETH in my case) gets Wrapped and locked in Fulcrum’s escrow contract (https://etherscan.io/address/bzxvault.eth) in case it needs to be liquidated if the price drops to liquidation level. In return you get a bZx Perpetual Long ETH-DAI 4X token (https://etherscan.io/token/0x5bc9845fa1fd30b4edcc468c0fe219c9030000d4) which is your tokenized trade.
Note: By default Ethereum transaction was taking a long time to settle so i sped up the transaction through Metamask by increasing maximum fee allowed.
UI recommendation:
When viewing my current position, it would be nice to see trade open price and how much interest is currently owed on the margin.
STEP 4: Closing your position.
Gain after ~$7 ETH price rise = 0.00565 ether (excluding eth transaction fees).
Selling transaction cost at the time of the trade = 0.008316957 Ether ($1.65)
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