Use Cases, Subnets, EVM Compatibility and $FX utilities
In the past two months, we witnessed the dead spiral algorithmic stablecoin, the CeFi frozen fund to the on-chain hyper-leveraged trade liquidation. Some people might think it is the end, we think NOT.
For builders, this season is the best time to build and keep innovating without any distraction. The big question is: how to on-board people to Web3 to use those innovative solutions? A product without users is not a product.
Main topic 1: Use Cases: Function X is a product with use cases
Function X is a unique chain. It is a highly customizable and expandable multi-chain architecture blockchain network (subnets) that can meet different business needs. The first subnet built on the Function X blockchain was the Pundi X chain, in X 2021 way before the subnet conversation before mainstream: The Pundi X Chain is to facilitate world-wide retail payments by bringing transactions on-chain. Our second subnet is the upcoming MarginX subnet, which facilitates the trading of perpetual contracts of cryptocurrency assets and other stock-based perpetual derivatives on the blockchain.
How many blockchains out there sell an idea without a working product and use case? We will keep this question for you to think about. The first two subnets (and more in future) are intended to generate massive amounts of transactions on the Function X blockchain.
Are we confident that the network can handle this heavy load? The more important question is whether we can be sure that the heavy loads from certain subnets will not impact the whole Function X network? Let’s break it down.
Main topic 2: Subnets
Function X is the (one of) first Cosmos-SDK-based chain that launched subnets with our first subnet launched in X 2021 in the form of PundiXChain. Subnets usage is twofold, increase of speed and decrease of price.
Back in May 2022, we saw the most hyped NFT project on Ethereum clog the network and sent gas prices to an all-time high. The average gas price on that night was roughly 100–200 times normal. The ideal daily transaction amount to maintain the current gas price (less than 50 gwei) is around 900,000–1,100,000 transactions. Based on the Ethereum transactions history, users can enjoy the low gas fee (less than 20 gwei), when the average transaction amount is around 500,000–700,000. This analysis is based on transactions and gas fees history on Etherscan.
High demand and transaction numbers are great, but this architecture will sacrifice the other group of users who are not participating in this certain project but are using the network at the same time (they need to pay high fees for their transactions). We do not want this scenario to happen on Function X.
A subnet is the best solution to address this problem and it allows developers to build a fully customized chain that inherits Function X’s speed and security. Subnets ensure the high traffic from retail payment (Pundi X), perpetual trading (Margin X) and together with the next subnet (i.e AMM DEX like f(x)Swap) will not cause congestion for users across the entire network. This will ensure that the Function X network maintains low fees and fast transactions for everyone.
One of our missions is to bridge traditional financial products to the blockchain.
The ability to scale will be one of the main criteria used by institutions to decide to come and start their on-chain journey. No one wants to build a great product and beg users to use it who might otherwise be dissuaded by the high fees on the network. In the upcoming months, we will publish more technical documentation to assist developers to build Subnets on the Function X blockchain and help us to fulfil our vision to become the Blockchain of Finance.
Main topic 3: EVM Compatible Chain
If you have been following Function X development status, you may be aware that the f(x)EVM is launching very soon (The Testnet phase is already available and the f(x)EVM on mainnet is expected to be online in about one month). By integrating EVM, Function X is connecting the two biggest groups of developers (Ethereum and Cosmos) to become the Home of Builders. This EVM integration will allow various DEXes, liquidity protocols, yield aggregators, P2E games and other dApps to deploy on the Function X network.
By having this EVM compatible chain and subnet, Function X allows developers to migrate their dApps instantly and provides the infrastructure to make sure the dApps run smoothly with low fees on a secured network. Function X is one of the first few projects to integrate the EVM compatible chain on a Cosmos-based chain.
Some Cosmos-based projects, such as EVMOS and KAVA, have started to launch the EVM compatible chain and locked the total TVL of ~$320 million. This multi-chain compatibility will be an interesting sector for projects to build. Together with the Subnet architecture, we believe that Function X has the upper hand as the early mover.
There is no subnet architecture in a blockchain that supports both Cosmos and EVM yet. The first project which launched the EVM-compatible chain on the Cosmos-based chain had a massive amount of failed transactions. We think the chain architecture is one of the crucial parts here. Developers want to build on a chain where it is secure and has potential to scale and Function X is combining this with a proven use case where we are onboarding millions of non-crypto users to cryptocurrency space.
We are the pioneers with our previous blockchain-based retail payments solution and Function X is at the front row to introduce this upcoming dApps on EVM to the masses. The non-crypto users who came to our chain started with payment and now, more decentralized applications. We believe that multi-chain will be the future and Function X aims to be the hub for developers and users to be connected in one chain.
What’s next for EVM?
We invite all developers to come and build on the f(x)EVM. Our team has been in touch with several developers and working closely with them to deploy their dApps on f(x)EVM. If you are a developer and interested to build on f(x)EVM, here are some ideas for you on what can be done on our chain:
1. Bridge Support from other Chain to f(x)EVM
2. AMM DEX
3. Yield Farming Protocol
4. Lending Platform
5. NFT Marketplace and Launchpad
Function X has allocated the Ecosystem Genesis Fund for builders and it is the time for you to make a move.
Main topic 4: FX coin Utilization
As you know, $FX coin is the native token on the Function X ecosystem. It is currently utilized as a governance token as well as a gas token on f(x)Core. The upcoming EVM compatible chain will also utilize $FX as the gas token.
As announced at the June All-Hands Meeting, the upcoming subnet MarginX and f(x)Swap will also utilize $FX as the gas token. This is a great utilization of $FX coin, since we know that a trading platform (especially a perpetual trading platform) can have a substantial number of transactions, and it will significantly increase the utilization of $FX coin. The bigger the platform, the more $FX will be utilized.
As a comparison, dYdX (the leading perpetual trading platform) on Ethereum (and L2 Starkware) processed $14 billion worth of transactions in the past 7 days, and $627 billion in transactions since its inception. The transaction amount is huge and the team decided to launch the platform on Ethereum L2 to solve the gas issue. Users are still required to bridge their $USDC from Ethereum to Starkware (which requires $ETH as gas fee), but most of the transactions on dYdX will not utilize Ethereum, unfortunately, because of the high gas fee (and network congestion!). In our opinion, it is a big blow to the chain itself, and the native token cannot benefit from the platform’s growth.
On June 22nd 2022, dYdX announced that they will develop a standalone chain based on the Cosmos SDK and Tendermint consensus protocol. This shows that MarginX’s decision to build on Function X was correct, because Function X offers a full customization chain for MarginX and it keeps the most important point of a DEX, to be a fully decentralized protocol (from place order, cancel, order book matching, etc). MarginX is also the first on-chain DEX that runs the orderbook in a memory pool, which results in all orders to be matched by the network (you can imagine this to be similar to a blockchain transaction). This application will allow MarginX to process a significant number of transactions while remaining decentralized. We believe we will see more DEXes start to apply this approach in the near future.
The other comparison is Dexalot on the Avalanche blockchain. Dexalot is the first exchange on Avalanche with an on-chain Central Limit Order Book and currently utilizing $AVAX as the gas fee. In the near future, Dexalot will create their own subnet and will utilize their native token $ALOT as the gas fee. Again, it is very unfortunate that the chain’s native token cannot benefit from the platform’s growth.
By building the platform on Function X Subnet, MarginX and the upcoming f(x)Swap are filling two needs with one deed. First, MarginX and f(x)Swap generate numerous transactions with low fees. The biggest problem on DEXes in Ethereum is the high fees, which has been solved by other chains. Second, both MarginX and f(x)Swap will increase the utilization and value of $FX coin through swap and transaction fees.
How about the other Subnets built on Function X, will they utilize the $FX coin as gas?
It depends on the project. However, we encourage Subnets to utilize the $FX coin. If not, we will find a way to utilize the $FX coin on the subnet. It could be requiring $FX coins as a minimum validator setup fee, bridge fee. There are many more possibilities. We want to make sure that $FX is fully utilized on every dApp and Subnet on the Function X blockchain.
We hope the four points above can help you to understand more about the Function X blockchain and why we have confidence in our innovative solutions.
As an information, the governance proposal #10 with the scope to support EVM and introduce new features & functionalities on f(x)Core is now live. We encourage all Function X delegators and validators to read the details and cast the vote here. The voting will end on July 13, 2022 6.30pm (GMT+ 8).
Thank you for reading the June Hash Out and we look forward to sharing more exciting updates and progress in the future. If you have any questions regarding the Function X blockchain, you can always reach our support team on the Function X Forum.
Data Sources:
Function X Blog 