A spot market built on secured obligations

Spot orders and fully secured obligations in one order book. One matching engine for price, IR and solvency.

Market concept

One order book.
One matching engine.

If repayment of an obligation to pay a specified value in a specified currency is 100% secured, the obligation is worth exactly its face value.

This makes it possible to list conventional spot orders and fully secured obligations in a single order book. The chart below shows how the mechanism simultaneously selects the price, IR and a state that satisfies the market-solvency condition.

3D chart

Price, IR and solvency in one matching process

The visualization illustrates the idea of real-time fixing: the matching engine does not select price alone. It simultaneously considers executable order volume, bankrupt-account volume, market solvency and the optimal IR.

Spot orders+Secured obligations→Price + IR + solvency

Price × IRConceptual model

Conceptual 3D visualization: price, IR, volume, bankruptcies and market solvency.

Selected market state = maximization of executable order volume (weight 1) and minimization of bankrupt-account volume (weight -1), after the solvency filter.

PUNKS.com order-matching mechanism

Mechanism in detail

PUNKS.com is a spot market built on the observation that an obligation to pay a specified value in a specified currency, provided that repayment is 100% secured, is worth exactly its face value.

This observation leads to the following principles behind the PUNKS.com order-matching mechanism:

obligations denominated in a given currency can be listed alongside spot exchange orders in that currency, provided those obligations are 100% secured;
the asset acquired in exchange for an obligation in the relevant trading pair may serve as collateral for that obligation for as long as the issuer of the obligation can repay it using the asset held;
for each new market event, the matching engine seeks a new price at which it matches participants so that the volume of executed orders is as high as possible (weight 1), while the volume of bankrupt accounts—accounts whose holdings no longer sufficiently secure the obligations they have issued—is as low as possible (weight -1);
of all offers considered during such matching, only those for which the market remains “solvent” after matching are selected.

Market solvency

Here, “solvency” means that, taking into account the obligations sold on both sides of the market, the system checks whether all participants’ obligations can be repaid by matching participants who owe one asset with participants who owe the other asset.

If this does not eliminate all outstanding obligations, the system checks whether, by additionally using orders in the order book, the assets held by accounts with obligations could be sold for the asset needed to extinguish the obligation.

Such a market state also means that, regardless of what happens in the future, every obligation remains sufficiently secured.

IR / interest rates

to maximize trading volume, accounts issuing obligations must be allowed to make execution conditional on the IR they are entitled to receive. In other words, either side can state whether it requires interest and how much, or whether it is willing to pay interest and, if so, the maximum amount. In addition to the optimal price, the matching engine selects an optimal IR to maximize trading volume.

Order execution

From the trader’s perspective, a market organized in this way closely resembles a familiar spot order book while offering almost unlimited leverage.

By combining spot and leveraged spot transactions in one order book, this market structure means that every trader order will always be executed better than, or at worst equally to, execution on any of the separate markets.

This means that, for the trader, it is always more advantageous to trade on the market we organize than on any other market.

So if you are considering a leveraged transaction on a perpetual or futures market, leveraged spot implemented through borrowing on other exchanges, or a pure spot transaction, it will always be more advantageous for you to execute it through our single order book, which combines offers traditionally associated with at least the perpetual, inverse perpetual and spot markets.

Detailed mathematical analysis

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