# Fiat Denomination of Trading Positions

Fiat-denomination of trading positions will make the trading experience on DXS more profitable and intuitive

The trading experience on DXS is about to get even better. We're going to allow our traders to pick any popular fiat currency for their profit and loss (P/L) to be calculated in. This post explains the mechanics of the change, using USD as an example.

Here’s a quick summary:

- Your profit and loss (P/L) on DXS is currently BSV-denominated
- BSV/USD price movements impact USD profitability on positions
- The risk / reward for longing BSV/USD is unfairly better than going short

- DXS will move to fiat-denomination of trading positions (positions will still be collateralized with BSV, until there is an option to use a stable coin backing)
- DXS can offer a more intuitive trading experience. We can allow our traders to speculate on any asset’s price movement in a familiar currency, with less consideration for the BSV price
- The long/short ratio in the orderbook (especially BSV pairs, BSV/USD and BSV/BTC) will become more balanced, resulting in healthier liquidity and more profit potential
- The insurance pool will no longer be exposed to BSV price appreciation risk, further protecting our liquidity providers

**Your profits will still be paid out in BSV!**

Use the below links to access various trade examples that walk through the proposed fiat-denomination change:

Compare the scenario where the BSV/USD price moves from $100 to $125. In both cases, the position is at a 25% profit. In both cases the full margin balance of 1 BSV is returned.

It is the profit return transactions that differ when comparing BSV and USD denomination:

- Under BSV-denomination, 0.25 BSV is returned as profit. 0.25 BSV represents the 25% position gain on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 1.25 * 125 - 100 = 56.25

- Under USD-denomination, 0.2 BSV is returned as profit. 0.2 BSV represents the 25% position gain on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 1.2 * 125 - 100 = 50

Compare the scenario where the BSV/USD price moves from $100 to $75. In both cases, the position is at a 25% loss:

- Under BSV-denomination, 0.75 BSV of the margin balance is returned. 0.75 BSV represents the collateral remaining after the 25% loss on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 0.75 * 75 - 100 = -43.75

- Under USD-denomination, 0.66666667 BSV of the margin balance is returned. 0.66666667 BSV represents the collateral remaining after the 25% loss on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 0.66666667 * 75 - 100 = -50

Compare the scenario where the BSV/USD price moves from $100 to $20. In both cases, the position is liquidated at an 80% loss (note that DXS automatically liquidates any position at an 80% loss):

- Under BSV-denomination, 0.2 BSV of the margin balance is returned. 0.2 BSV represents the collateral remaining after the 80% loss on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 0.2 * 20 - 100 = -96

- Under USD-denomination, 0 BSV of the margin balance is returned. 0 BSV represents the collateral remaining after the 80% loss on an initial margin of $100 (1 BSV). In other words, losses totalled $80 but only 1 BSV ($20) was posted as margin, hence no margin is returned
- The final P/L in USD terms is:
- 0 * 20 - 100 = -100

Compare the scenario where the BSV/USD price moves from $100 to $125. In both cases, the position is at a 250% profit. In both cases the full margin balance of 1 BSV is returned.

It is the profit return transactions that differ when comparing BSV and USD denomination:

- Under BSV-denomination, 2.5 BSV is returned as profit. 2.5 BSV represents the 250% position gain on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 3.5 * 125 - 100 = 337.5

- Under USD-denomination, 2 BSV is returned as profit. 2 BSV represents the 250% position gain on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 3 * 125 - 100 = 275

Compare the scenario where the BSV/USD price moves from $100 to $98. In both cases, the position is at a 20% loss:

- Under BSV-denomination, 0.8 BSV of the margin balance is returned. 0.8 BSV represents the collateral remaining after the 20% loss on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 0.8 * 98 - 100 = -21.6

- Under USD-denomination, 0.79591837 BSV of the margin balance is returned. 0.79591837 BSV represents the collateral remaining after the 20% loss on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 0.79591837 * 98 - 100 = -22

Compare the scenario where the BSV/USD price moves from $100 to $92. In both cases, the position is liquidated at an 80% loss (note that DXS automatically liquidates any position at an 80% loss):

- Under BSV-denomination, 0.2 BSV of the margin balance is returned. 0.2 BSV represents the collateral remaining after the 80% loss on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 0.2 * 92 - 100 = -81.6

- Under USD-denomination, 0.13043478 BSV of the margin balance is returned. 0.13043478 BSV represents the collateral remaining after the 80% loss on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 0.13043478 * 92 - 100 = -88

Compare the scenario where the BSV/USD price moves from $100 to $75. In both cases, the position is at a 25% profit. In both cases the full margin balance of 1 BSV is returned.

It is the profit return transactions that differ when comparing BSV and USD denomination:

- Under BSV-denomination, 0.25 BSV is returned as profit. 0.25 BSV represents the 25% position gain on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 1.25 * 75 - 100 = -6.25

- Under USD-denomination, 0.33333333 BSV is returned as profit. 0.33333333 BSV represents the 25% position gain on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 1.33333333 * 75 - 100 = 0

Compare the scenario where the BSV/USD price moves from $100 to $125. In both cases, the position is at a 25% loss:

- Under BSV-denomination, 0.75 BSV of the margin balance is returned. 0.75 BSV represents the collateral remaining after the 25% loss on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 0.75 * 125 - 100 = -6.25

- Under USD-denomination, 0.8 BSV of the margin balance is returned. 0.8 BSV represents the collateral remaining after the 25% loss on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 0.8 * 125 - 100 = 0

Compare the scenario where the BSV/USD price moves from $100 to $180. In both cases, the position is liquidated at an 80% loss (note that DXS automatically liquidates any position at an 80% loss):

- Under BSV-denomination, 0.2 BSV of the margin balance is returned. 0.2 BSV represents the collateral remaining after the 80% loss on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 0.2 * 180 - 100 = -64

- Under USD-denomination, 0.55555556 BSV of the margin balance is returned. 0.55555556 BSV represents the collateral remaining after the 80% loss on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 0.55555556 * 180 - 100 = 0

Compare the scenario where the BSV/USD price moves from $100 to $75. In both cases, the position is at a 250% profit. In both cases the full margin balance of 1 BSV is returned.

It is the profit return transactions that differ when comparing BSV and USD denomination:

- Under BSV-denomination, 2.5 BSV is returned as profit. 2.5 BSV represents the 250% position gain on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 3.5 * 75 - 100 = 162.5

- Under USD-denomination, 3.33333333 BSV is returned as profit. 3.33333333 BSV represents the 250% position gain on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 4.33333333 * 75 - 100 = 225

Compare the scenario where the BSV/USD price moves from $100 to $102. In both cases, the position is at a 20% loss:

- Under BSV-denomination, 0.8 BSV of the margin balance is returned. 0.8 BSV represents the collateral remaining after the 20% loss on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 0.8 * 102 - 100 = -18.4

- Under USD-denomination, 0.80392157 BSV of the margin balance is returned. 0.80392157 BSV represents the collateral remaining after the 20% loss on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 0.80392157 * 102 - 100 = -18

Compare the scenario where the BSV/USD price moves from $100 to $108. In both cases, the position is liquidated at an 80% loss (note that DXS automatically liquidates any position at an 80% loss):

- The final P/L in USD terms is:
- 0.2 * 108 - 100 = -78.4

- Under USD-denomination, 0.25925926 BSV of the margin balance is returned. 0.25925926 BSV represents the collateral remaining after the 80% loss on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 0.25925926 * 108 - 100 = -72

Compare the scenario where the MSFT price moves from $300 to $450 (additionally BSV/USD price moves from $100 to $50). In both cases, the position is at a 50% profit. In both cases the full margin balance of 1 BSV is returned.

It is the profit return transactions that differ when comparing BSV and USD denomination:

- Under BSV-denomination, 0.5 BSV is returned as profit. 0.5 BSV represents the 50% position gain on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 1.5 * 50 - 100 = -25

- Under USD-denomination, 1 BSV is returned as profit. 1 BSV represents the 50% position gain on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 2 * 50 - 100 = 0

Compare the scenario where the MSFT price moves from $300 to $200 (additionally BSV/USD price moves from $100 to $200). In both cases, the position is at a 33% loss:

- Under BSV-denomination, 0.66666667 BSV of the margin balance is returned. 0.66666667 BSV represents the collateral remaining after the 33% loss on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 0.66666667 * 200 - 100 = 33.33

- Under USD-denomination, 0.88888883 BSV of the margin balance is returned. 0.88888883 BSV represents the collateral remaining after the 33% loss on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 0.83333333 * 200 - 100 = 66.67

Compare the scenario where the MSFT price moves from $300 to $60 (additionally BSV/USD price moves from $100 to $50). In both cases, the position is liquidated at an 80% loss (note that DXS automatically liquidates any position at an 80% loss):

- The final P/L in USD terms is:
- 0.2 * 50 - 100 = -90

- Under USD-denomination, 0 BSV of the margin balance is returned. 0 BSV represents the collateral remaining after the 80% loss on an initial margin of $100 (1 BSV). In other words, losses totalled $80 but only 1 BSV ($50) was posted as margin, hence no margin is returned
- The final P/L in USD terms is:
- 0 * 50 - 100 = -100

Compare the scenario where the MSFT price moves from $300 to $450 (additionally BSV/USD price moves from $100 to $50). In both cases, the position is at a 500% profit. In both cases the full margin balance of 1 BSV is returned.

It is the profit return transactions that differ when comparing BSV and USD denomination:

- Under BSV-denomination, 5 BSV is returned as profit. 5 BSV represents the 500% position gain on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 6 * 50 - 100 = 200

- Under USD-denomination, 10 BSV is returned as profit. 10 BSV represents the 500% position gain on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 11 * 50 - 100 = 450

Compare the scenario where the MSFT price moves from $300 to $285 (additionally BSV/USD price moves from $100 to $200). In both cases, the position is at a 50% loss:

- Under BSV-denomination, 0.5 BSV of the margin balance is returned. 0.5 BSV represents the collateral remaining after the 50% loss on an initial margin of 1 BSV ($100)
- The final P/L in USD terms is:
- 0.5 * 200 - 100 = 0

- Under USD-denomination, 0.75 BSV of the margin balance is returned. 0.75 BSV represents the collateral remaining after the 50% loss on an initial margin of $100 (1 BSV)
- The final P/L in USD terms is:
- 0.75 * 200 - 100 = 50

Compare the scenario where the MSFT price moves from $300 to $276 (additionally BSV/USD price moves from $100 to $200). In both cases, the position is liquidated at an 80% loss (note that DXS automatically liquidates any position at an 80% loss):

- The final P/L in USD terms is:
- 0.2 * 200 - 100 = -60

- Under USD-denomination, 0.6 BSV of the margin balance is returned. 0.6 BSV represents the collateral remaining after the 80% loss on an initial margin of $100 (1 BSV). In other words, 0.4 BSV at a price of $200 were required to settle the $80 trading loss, leaving 0.6 BSV to be returned to the trader
- The final P/L in USD terms is:
- 0.6 * 200 - 100 = 20

- Provides a more common and intuitive trading experience (and P/L)
- Reduces underlying volatility, allowing traders to focus on the pair they are trading. Less consideration needs to be given to the price of BSV
- Reduces the Insurance Pool’s exposure to BSV upside risk, thereby reducing the frequency of profit deductions (further down)
- Helps to balance our orderbook

The Insurance Pool contains over 33,000 BSV:

The Insurance Pool apportions liquidity to trading sessions. Session Liquidity takes the opposite position of every trade on DXS.

Consider a trader who is profit-seeking in USD. This trader opens a long position on the MSFT pair. Due to the current BSV-denomination paradigm, this trader is also effectively long the BSV/USD pair:

- If BSV/USD declines, the trader’s position suffers in USD terms
- If BSV/USD appreciates, the trader’s position benefits in USD terms

Session Liquidity takes the opposite trade position. The implication is the Insurance Pool (and Session Liquidity) are permanently short the BSV/USD pair. During periods of significant BSV/USD price appreciation, Session Liquidity is excessively drained, resulting in profit deductions.

The Insurance Pool being permanently short the BSV/USD pair also represents additional risk for liquidity providers in the scenario where BSV/USD appreciates significantly over the longer term.

USD-denomination reduces both of these risks and improves the trading experience for users of DXS.

Until our implementation of Stablecoins on DXS, all positions will continue to be collateralized with BSV. The value of the collateral posted on any open position therefore fluctuates in fiat terms.

DXS

**does not**consider the value of your margin when automatically liquidating positions at the 80% loss level. The below example illustrates this:Compare the scenario where the BSV/USD price moves from $100 to $20. In both cases, the position is liquidated at an 80% loss (note that DXS automatically liquidates any position at an 80% loss):

- The final P/L in USD terms is:
- 0.2 * 20 - 100 = -96

- Under USD-denomination, 0 BSV of the margin balance is returned. 0 BSV represents the collateral remaining after the 80% loss on an initial margin of $100 (1 BSV). In other words, losses totalled $80 but only 1 BSV ($20) was posted as margin, hence no margin is returned
- The final P/L in USD terms is:
- 0 * 20 - 100 = -100

As the above example shows, with USD-denomination, the P/L in the liquidation scenario is negative.

**DXS allows the trade to remain open**, only liquidating the position when the traded position itself (BSV/USD in this case) has depreciated by 80%. This implementation by DXS is in contrast to our competitors who will liquidate trading positions as collateral deteriorates in value.Fiat-denominated positions are the first phase of DXS's stablecoin implementation. This first phase helps protect our Insurance Pool from BSV price appreciation. When DXS stablecoins are released, traders will have the option to collateralise positions in stablecoin, further hedging from BSV volatility.

We will implement this change in the first quarter 2022.