OnTrade, a crypto exchange with spot and futures markets and plans to add derivative support, recently participated in Neo Global Development’s (NGD) Neo Live telegram event on Thursday, November 7th. In Neo Live events, community members can ask questions to projects in an AMA format on the official Neo Telegram channel. The events are hosted weekly in English on Telegram and in Chinese on WeChat.
Speaking on behalf of OnTrade was Hao Yang, chief product officer, who addressed questions on current Chinese trading laws, and how the exchange intends to differentiate itself in the market, and security considerations.
The full event transcript can be found below:
Songping Que (NGD marketing team): A quick intro about Hao. Before joining OnTrade, Hao gained a Master’s Degree in quantitative finance. He started his career as an assistant trader @OptiverEurope in 2012, and after Optiver he joined Delta Energy as a quantitative analyst. He discovered crypto currencies in mid 2017 and decided to dedicate the rest of his career to the advancement of crypto adoption, he also structured one of the best econometric models on bitcoin prices and can be found on his medium page.
As for OnTrade, you may have heard this name from before the Neo tweet. They received Eco Fund support from Neo in the middle of this year. They have also been invested in by many other well-known companies such as ONT and Time Stamp Capital. It was launched in May 2019. OnTrade‘s infrastructure was built by top tier engineers who built one of the best institutional grade, national-level exchanges. It has a compact trading, risk control and settlement system that can support both spot and derivative products. OnTrade’s flexible set up allows fast product innovation, iteration, and deployment, for example Bitcoin Volatility Index Futures, mini-BTC futures, etc.
OnTrade is an all-in-one crypto-to-crypto exchange that offers spot and futures trading. Their fast trading engine supports over 30,000 transactions per second, the modular architecture supports fast contract deployment and product innovation. They aim to support trading with a single trading, risk and settlement engine, which will allow them to build an institutional level trading experience for both retail and professional users alike. For example portfolio margin, cross or isolated margin, high leverage options and futures, and combined-orders. So the topic Hao will share today is about the innovative derivative exchange.
Hao Yang: Well, thanks for the intro, my name is Hao, I worked as a quant and an option trader in Amsterdam, Netherlands for a little bit over 5 years. Earlier this year I met a major investor @ontrade in Amsterdam and learned about OnTrade and decided to jump onboard.
Here we are trying to build a world-class all in one crypto exchange which can offer the best trading experiences for both retail and professionals alike, and I firmly believe we can become one of the best out there in the coming years. Our team is a combination of top tier engineers, traders, and crypto exchange operators, we know both the market and the technology of the exchange business inside out.
Songping Que: Cool, let’s take some open questions then.
Q1: With the market currently saturated with exchanges, what do you believe will differentiate OnTrade from the others?
Hao Yang: Our biggest differentiator is our technology, as I said, our team consists of engineers who hail from top tier national-level exchanges in the traditional financial sector. We know how to build a reliable matching engine and how to control risks, this setup allows us to go where others can not reach and reach new heights much faster than the others.
On top of our technology, we can build truly innovative products that the market wants and the market needs, for example, we have already built the world’s first tradable bitcoin volatility index futures. We will also be rolling out a whole suite of European options on Bitcoin within a month. Once our options system is online, you will find every major type of derivatives here @ontrade.
Q2: What country is OnTrade founded in?
Hao Yang: We are incorporated in Seychelles, have a distributed team spread across Hong Kong, Shanghai, and the Netherlands.
Q3: What are OnTrade’s plans to attract traders and organically grow liquidity?
Hao Yang: There are several ways to attract liquidity and traders. Basically, the number of traders and liquidity is a question about chicken and egg. We are thinking about signing long term exclusive contracts with the first batch of liquidity providers to give them fee rebates and to give them more action quotas per second so they can better protect themselves.
Q4: You know, there’s a lot of competition between the exchanges. What are your priorities to make yourself better than them. What do you offer investors as extras to pick you?
Hao Yang: To continue with the answer to Q1, once we get our options system online, we’ll be rigorously polishing our system and products, diving deep into the markets and discovering what does the market truly want and build the product for them. For example, we have learned that the miners hedging needs aren’t really met at this moment, and our derivative team is already onto something that’ll link the traders speculation needs to the miners needs for hedging.
Q5: There is some news recently of China relaxing laws in regards to trading. Are you able to comment on this, and do you think you might be able to benefit from this market?
Hao Yang: Crypto exchanges are treading on the “gray-zone” within China. On one hand, there’s a huge user base in China, on the other, the financial knowledge and risk awareness of the public is lacking behind. The recent relaxation of rules provides an opportunity for both market education and for attracting more users with true need for derivatives.
Q6: What are your plans for marketing? You’re talking about Europe, for example. I am asking as someone who lives in Europe, what are you planning to get into the European market?
Hao Yang: Customers from different regions have very different habits and communication channels, we are planning to start with seed users in different regions and once our brand and product is known, I believe the word of mouth will start like wildfire.
Q7: Do you also believe you will compete with other exchanges in volume? You know, the fake volume is so famous right now. Will you be able to provide this true and high volume?
Hao Yang: My vision is that we will differentiate ourselves by providing unique products, the derivatives you will only find here @ontrade but nowhere else. For example, we’ve already launched Bitcoin volatility index futures (VIX is a very actively traded product in traditional markets), and you will not find another Bitcoin VIX product anywhere else other than OnTrade.
Q8: I read about your derivative products mini BTC and BVIX Contract from the material, and find it quite interesting. Can you elaborate a little on these two products?
Hao Yang: Mini BTC contract is a futures contract with a face value of only one out of ten-thousandth(1/10000) BTC, settled in stablecoins, which is very popular amongst small and medium investors since the amount of money needed to open one contract is literally less than 1 USD.
Bitcoin Volatility Index BVIX Contract: The Volatility Index, measures how volatile the Bitcoin return is. It will provide users with more diversified risk hedging and investment choices and as said, our architecture is quite flexible, so we’ll be able to roll out more interesting products in the future. For example, a tradable index on platform tokens and many many more.
Q9: Can you tell me which projects you can imagine a cross-marketing?
Hao Yang: We have a very strict rule of selecting the projects to list and cooperate with. We want to build and advance the entire crypto-economy and will be willing to work with teams who are truly convicted with the goals of building a more distributed, global and free economy.
Q10: When people talk about centralized exchange, there is always a big concern about information leakage and token theft. How will OnTrade ensure the security of users’ information and assets?
Q11: Security is always the most important issue for exchanges. So, what is the security level of OnTrade? What does OnTrade do to ensure safety for users?
Hao Yang: I’ll answer this together with Q10. First of all, we have a very strict Chinese firewall built within our company structure. There are very limited people with information about our users, and all of them signed rigid confidential agreements. Secondly, our cold and hot wallet are separated, and all cold wallet assets are stored with third party custodians with bank-level security audits.
Also currently every withdrawal has to be manually audited and approved. Assets kept in a hot wallet is minimal, and we will set up insurance funds in the futures as well in case of unforeseeable breaches.
Q12: As we all feel that the exchange marketing is full of competition. How does OnTrade position itself? What plans are there for the next 1 year and 3 years?
Hao Yang: Continue to buidl, of course. Well, let me elaborate. None of the exchanges right now have the technology set up and know-how of how to build an institutional-grade exchange, within one year we will keep on polishing our products and technology.
We believe the race about crypto exchanges is a marathon, not a short sprint, and we have the true grit and the knowledge about how to build the best technology and the most suitable products for the crypto market. Within one year we aim to build an exchange that offers every major derivative you can find within the crypto market, and once we arrive there, we will start relentlessly boost our liquidity, listening to feedback, building more products, communities, and exploring new boundaries like building derivatives on smart contracts (I believe that’s the way to go) like decentralized exchanges.
At the same time, we intend to just keep continuously improving our technology and products, keep up with innovations, building the best trading experience, margin system, matching engine, and rolling out new derivative products.
Q13: Why should we care about OnTrade, when we have Nash and Switcheo? Also, what exactly makes you stand out from the other 500+ exchanges already out there?
Hao Yang: Differentiation mate, we aim to provide one of a kind derivative products. We are thinking a lot bigger, aiming to be the infrastructure for the new economy. You will find that some of the derivative products can be built nowhere other than OnTrade, and derivative products are crucial for any financial system.
Q14: So you’re getting into the stock market, bond or..?
Hao Yang: Options. Soon we’ll release a full suite of European options system, besides Deribit, we are the only one who knows how to build a complete option system.
Q15: So we can buy options via crypto? How does that work when crypto fluctuates from second to second or are prices locked in?
Hao Yang: Yep, stable coin denominated options. Derivatives actually help to curb volatility, in a way that a derivative product can be mathematically priced and can be long or short. We will not ask for your crypto for stable coins, but using the stability of stable coins to help to curb the volatility of the market.
Q16: But you are using stable coins based on the Neo network, correct?
Hao Yang: Nope. We might build an option on Neo, which gives the right to buy and sell Neo in the future at a specific price. With enough market participants, we’ll eventually reach a consensus about how much an underlying asset may be worth, through a process called “arbitrage-free” pricing.
Writers and buyers of options may mimic the price behavior of options solely with underlying assets. (i.e. Neo) thus with the introduction of options, the volatility might actually reduce since it gives mathematically sophisticated investors a chance to “price” the underlying asset.
Q17: Which stable coins are you using?
Hao Yang: Undecided, we might use a basket of stable coins.
Q18: Will you have your own trading token eventually based on the Neo network?
Hao Yang: We are still considering how we want to launch platform token. As mentioned we are aiming for a much bigger picture; we are also pragmatic idealists, Neo sees our potential in what we might become, and in the end, we aim to benefit the entire crypto ecosystem, including Neo as one of our biggest investors.
Q19: What will be the use case of the token?
Hao Yang: Fee reduction, buyback with our revenues, profit sharing. We might even distribute all our tokens as trading incentives and let the market decide how much it is worth.. risky and requires rigorous economic theory crafting.
Q20: So within a year or so, we have a chance to use your platform and do some 100x short or long. You have some new type of products. Volatility index and so on. Can I do just normal trade on your Exchange? Sell and buy?
Hao Yang: You can already do that right now. Perpetual swaps and futures contract are already online. I say we are on par with most other derivative exchanges in terms of technology right now, unparalleled in the reliability of matching engines… we’ve been building that for the last 15 years or so, in the traditional sectors. Yep, we also have spot market.
Songping Que: This is great! Thanks a lot for your sharing today, Hao Yang.
Thank you guys as well for participating the Neo Live this week!!!
Hao Yang: Thanks. Stay safe, happy trading.
Note: Some edits have been made for formatting and readability. The full conversation can be found at https://t.me/NEO_EN/31168.