Author: PSE Trading Analyst @Crypto 大表哥

Introduction：

Vitalik once remarked that the future development of ETH relies heavily on the construction of Layer2. With the approval of the BTC ETF, an increasing influx of traditional funds is anticipated to enter the crypto domain, enriching other ecosystems. Consequently, ETH will require not just one but multiple Layer2 solutions to cater to its growing needs. This explains the recent surge of Blast. For a comprehensive Layer2, the essential components include lending, swapping, and a perpetual DEX. This article will delve into Blast’s first perpetual DEX on SphereX and how SphereX is paving the way for the prosperity of the Blast ecosystem.

Overview of Blast

As the latest product from the founder of Blur, Blast enters the scene with inherent prestige, having already raised $20 million. In the realm of Layer2 solutions, the crucial factor lies not merely in the technical disparities and choices between them, but rather in how to attract market attention, control it, and channel it towards various ecosystem projects. This creates a positive feedback loop, enriching the ecosystem. Blast delicately achieves these objectives. Firstly, users depositing ETH and stablecoins in Blast can earn an annual interest rate around 4-5%. The primary sources of income are ETH staking and the RWA protocol, distinguishing Blast as a superior option among other Layer2 protocols. Furthermore, deposits can potentially receive airdrop incentives, and future integrations with Blur. The anticipated resurgence of NFTs will contribute to Blur’s development, subsequently benefiting Blast. Blast could potentially carve a niche as a dedicated chain serving NFTs, reshaping its competitive landscape.

Blast has rapidly attracted substantial deposits ( $1.1 billion), showcasing its achievements even before fully unveiling its ecosystem. The future deployment of the ecosystem is poised to attract more TVL. Additionally, Blast can leverage its existing TVL to assist or channel funds towards various ecosystem projects.

1.2 The Significance of Native Layer2 Protocols

Every Layer2 or public blockchain necessarily requires swapping, perpetual DEX, and lending protocol. Without these fundamentals, the ecosystem of a given chain struggles to thrive. This is primarily because users seek fund flexibility, business scalability, and leverage demands on a particular chain. Therefore, the focal support for each Layer2 will revolve around one or more of these services. From the ecosystem perspective of Arb and OP, it is evident that perpetual DEX and DEX business data outshine others, capturing the market’s attention.Hence, as the first perpetual DEX on Blast, what kind of business data can SphereX bring to the table?

2: Introduction to SphereX’s Features

2.1 Competition Landscape between Dex and Cex

Despite the passage of over a year since the FTX incident, concerns about the CEX persist, leading to a continued cautious stance among users. Any hint of irregularities can trigger massive withdrawals, and some smaller exchanges resort to soft rug pulls when faced with redemption challenges. Consequently, the market has witnessed a growing demand for the reliability offered by DEX. As depicted in the graph, Dex trading volume currently accounts for approximately 2% of Cex trading volume. This suggests significant growth potential within the vast crypto market. Additionally, many Cex confront regulatory issues, preventing them from providing trading services in regions such as the United States and China. This inconvenience inconveniences local users, prompting some to abandon cryptocurrency trading and resulting in the loss of a portion of the market. In contrast, Dex operates with flexibility regarding regulation and boasts on-chain transparency, turning these challenges into advantages. With the anticipated arrival of the next bullish market, Dex is expected to further expand its market share, capitalizing on its strengths.

2.2 How SphereX Addresses Dex Challenges

SphereX, as the first DEX on Blast, addresses existing problems through several methods. Dex platforms generally avoid regulatory issues, almost all of them lack KYC procedures, providing convenience for various illicit activities such as money laundering. In response to this concern, SphereX introduces the concept of on-chain KYC. Utilizing the functionality of on-chain DID, this approach ensures that while not facilitating illicit activities, it also preserves transaction efficiency and user experience. Moreover, it avoids being prohibited due to regional restrictions. Secondly, the primary reason many users hesitate to engage with Perpetual Dex is poor liquidity, hindering big fund entry and exit. SphereX tackles this challenge by developing a comprehensive set of independent SDK tools and API interfaces. These tools seamlessly connect liquidity providers to the platform, ensuring abundant liquidity. In the future, SphereX aims to compete on Tir 2 exchanges in terms of depth. Now, the notable competitors being DYDX and GMX in the market.

On the graph, we observe that DYDX and SphereX are likely to offer great depth in comparison to GMX. GMX essentially relies on a model where both whales and retail users deposit funds to become contracts opposite. This model is inherently unstable, as the withdrawal of whales affecting liquidity can cause a decline in LP token prices, causing more users to withdraw liquidity. Orderbook, since its inception in the crypto field, has proven to be the most stable model, providing the best depth.In contrast to DYDX, SphereX offers a broader range of leverage options, making it more adaptable to market demands. Moreover, SphereX presents the possibility of multi-chain deployment.

Thirdly, similar to DYDX, SphereX has developed its own Zk rollup. This not only ensures greater scalability but also guarantees security. The advantage of this approach lies in not being dependent on the performance of a specific Layer2, as they are not designed specifically for SphereX/DYDX, thus addressing some product requirements that might not be met otherwise.

2.3 Investment Institutions and Team Introduction for SphereX

SphereX initiated a $30 million seed round of financing on January 16, 2024. This round was led by the well-known institution Fundamental Labs, which has previously invested in prominent projects such as Binance, Avalanche, and Polkadot.

The team members of SphereX possess extensive industry experience and backgrounds in Wall Street. Among them, Kaimin Hu, Will Wang, Han Liu, and Lan Gu come from BitMmart, Huobi, and AscendEX, a Wall Street-based exchange. Lan Gu, a team member, is also a senior trader from Alameda Research.

Additionally, SphereX benefits from the assistance of several renowned advisors. The most notable among them is Sandeep Nailwal, co-founder of Polygon. The involvement of founders from public blockchains contributes to helping Dex go from 0 to 1. There are also contributions from Paul, a partner at BlockRock’s investment department, Jonathan, the manager of Coinbase’s investment department, and Peter, a manager at Distributed Capital. When compared to other perpetual Dex platforms, SphereX’s team boasts a more professional and luxurious lineup, further indicating the market’s high expectations for SphereX’s prospects.

2.4 SphereX Economic Model

SphereX adheres to the principle of prioritizing retail users, entrusting platform governance, among other aspects, to the DAO. Users holding tokens possess the authority to govern the platform. Examining token distribution, true institutional shares only amount to 3.5%, allowing retail users to hold the majority of chips, ensuring a relatively fair distribution.

For token holding users, the economic model exhibits user-friendly features such as fee reductions, profit dividends, and staking rewards. Users with the necessary resources and technical capabilities can also become node validators, enjoying rewards associated with node validation. Overall, the economic model is designed to be favorable and accessible to token holding users.

Summary

The current market is eagerly anticipating the development of Blast as a Layer2 solution. Indeed, as the first Blast Perpetual Dex, the market has high expectations for its performance upon launch. As the first Perpetual Dex, there are high expectations for its performance upon launch because an excellent Dex is crucial, even indispensable, for initiating and sustaining an ecosystem on a particular blockchain. Furthermore, compared to other Perpetual Dex platforms, SphereX boasts superior technical expertise, is friendly to liquidity providers, and offers favorable conditions for token-holding users.

The rise of Dex is expected to become a consensus in the future, and we believe that the market share of Dex will continue to grow during bullish market periods. We also look forward to witnessing what kind of spark SphereX can bring to the market.