VDEX
  • overview
    • Introduction
    • What is VDEX?
    • Core Features
      • Omnichain Trading
      • Full Self-Custody
      • Sustainable BTC Yield
      • ZeroGas Transactions
      • Sub-Millisecond Finality
      • No KYC, No VPN Restrictions
  • Trade
    • Platform
      • Getting Started
      • Platform Navigation
      • Deposit and Withdraw
      • Supported Collateral
      • Pairs
      • Finality Time
      • Perps
      • Orders
      • CLOB
      • Margin
      • Leverage
      • Liquidations
      • Fee Schedule
      • Gas Fees
      • Funding Rate
      • Insurance Fund
    • Access
      • Chain Abstraction
      • No VPN, No KYC
    • Beta
    • Market Making
    • Security
      • VDEX Fund Protection
      • Dispute Resolution Mechanism
      • Oracle and Collusion Safeguards
  • Yield
    • Virtual Market Maker
    • Volatile Asset Collateral
    • Fund Strategy
  • Ecosytem
    • Overdrive
      • Overdrive: The Ultimate Trading Advantage
        • Activating Overdrive
        • Key Participants
      • Market Makers-Overdrive
      • Traders-Overdrive
    • Bug Bounty Program
    • Bug Reporting Guidelines
    • Contact & Support Channels
    • FAQ
    • Whitepaper
    • Definition of Terms
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  1. Yield

Fund Strategy

Optimizing Liquidity Through Smart Capital Deployment

The VDEX Fund Strategy is designed to ensure deep liquidity, efficient capital utilization, and sustainable trading conditions for all market participants. Unlike traditional perpetual exchanges that rely on fragmented liquidity pools or external market makers, VDEX integrates an advanced Virtual Market Maker (VMM) system to dynamically adjust capital flows and maintain a robust trading environment.

How It Works

1. Liquidity Pool Structure

VDEX's liquidity ecosystem is powered by the Virtual Market Maker (VMM) and the Virtual Insurance Pool (VIP). These two components work together to provide liquidity, manage risk, and ensure smooth trade execution:

  • Virtual Market Maker (VMM): Functions as a decentralized liquidity provider, ensuring tight spreads and deep order books. It dynamically adjusts based on market conditions, reducing slippage and improving execution speed.

  • Virtual Insurance Pool (VIP): Acts as a risk management layer, covering unexpected shortfalls and protecting traders from adverse liquidation events.

Both the VMM and VIP operate without centralized control, meaning liquidity remains decentralized, transparent, and accessible to all traders.

2. Volatile Asset Collateral for Capital Efficiency

VDEX allows traders to deposit BTC, ETH, and stablecoins as collateral, optimizing capital efficiency. However, all profits and losses are settled in USDT, ensuring stability in fund settlements while maintaining exposure to volatile assets.

  • BTC & ETH Collateral: Traders can post BTC and ETH as collateral without converting them into stablecoins.

  • USDT Settlement: All realized profits and losses are settled in USDT to prevent capital depreciation due to market volatility.

  • Capital Optimization: This structure allows traders to use their existing holdings efficiently without additional conversion costs.

3. Risk Management & Market Stability

A robust fund strategy is incomplete without effective risk management mechanisms. VDEX’s model incorporates:

  • Automated Liquidations: Positions that exceed margin thresholds trigger controlled liquidations to prevent systemic risks.

  • Dynamic Leverage Adjustments: Leverage parameters adjust based on market conditions to maintain exchange stability.

  • No Bad Debt Exposure: The system ensures that all trades are backed by sufficient collateral, preventing bad debt accumulation.

By combining Virtual Market Making, Volatile Asset Collateral, and Automated Risk Management, the VDEX Fund Strategy ensures a balanced ecosystem where liquidity remains accessible, risks are managed, and capital efficiency is maximized.

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Last updated 3 days ago