What is Decentralized CopyTrading Protocol (DCP)?
What is Decentralized CopyTrading Protocol (DCP)?
Decentralized CopyTrading Protocol (DCP) is a decentralized protocol designed to facilitate copy trading directly on decentralized perpetual exchanges (perp DEXes) within the DeFi ecosystem.
Since the collapse of FTX, an increasing amount of traders have abandoned centralized exchanges in favor of on-chain alternatives. The rise of decentralized exchanges (DEXs) offering perpetual derivatives has been remarkable, marked by a surge in both transaction volume and user participation.
Currently, there are over 50 DEXs operating across various blockchains and Layer 2 solutions, boasting a user base of over 2 million and a staggering trading volume surpassing $330 billion. This trend has significantly expanded access to, analysis of, and utilization of on-chain perpetual trading data for copy trading purposes.
Decentralized CopyTrading Protocol (DCP)
In simple terms, copy trading is a widely-known strategy where investors automatically replicate the trades of another trader, often referred to as a signal provider. This approach allows less experienced traders to benefit from the expertise of more seasoned traders without needing to actively manage their portfolios. With copy trading, users can mirror the actions of successful traders, potentially leading to similar profits.
Decentralized CopyTrading Protocol (DCP) is a decentralized protocol designed to facilitate copy trading directly on decentralized perpetual exchanges (perp DEXes) within the DeFi ecosystem.
Unlike traditional copy trading platforms that operate within centralized exchanges (CEXes), DCP leverages the decentralized nature of blockchain technology to enable seamless and trustless copy trading experiences. Through smart contracts, DCP allows users to replicate the trading strategies of experienced traders on perp DEXes, who are selected by users without the need for intermediaries or centralized control.
Why is Decentralized CopyTrading Protocol (DCP) inevitable?
Leveraging data from on-chain perpetual trading and the decentralized nature of DeFi, the Decentralized CopyTrading Protocol addresses challenges associated with traditional copy trading, such as selecting copy traders, managing assets, and most importantly, ensuring transparency. Here are four key reasons why DCP is revolutionary:
Trust in Data
Decentralized CopyTrading Protocol (DCP) relies on on-chain perpetual trading data, which offers unparalleled transparency and reliability. Unlike centralized exchanges where data sources are often obscured, blockchain technology ensures that trading information is immutable and publicly accessible.
For example, when a trader executes a long order for a specific cryptocurrency on a decentralized exchange, the transaction hash (TXH) associated with that trade is recorded on the blockchain and can be readily verified using blockchain explorers like arbiscan. This transparency instills confidence in traders, as they can verify the authenticity of trading data and make informed decisions based on accurate information.
Permissionless
One of the key advantages of Decentralized CopyTrading Protocol (DCP) is its permissionless nature, which enables anyone to participate in copy trading without the need for cumbersome registration processes or intrusive KYC requirements. Traditional copy trading platforms often impose restrictions based on geographical location or regulatory compliance, excluding many potential participants from accessing trading opportunities.
With DCP, users from around the world can seamlessly join the ecosystem and engage in copy trading activities without facing barriers or limitations. This inclusivity fosters a vibrant and diverse community of traders, driving innovation and collaboration within the decentralized finance (DeFi) space.
Non-Custody
Decentralized CopyTrading Protocol (DCP) prioritizes the principles of decentralization and self-custody, allowing users to retain full control over their assets throughout the copy trading process. Unlike centralized exchanges that require users to deposit funds into custodial wallets managed by third parties, DCP operates on non-custodial infrastructure, where users maintain ownership of their assets at all times.
By managing assets directly through their non-custody wallets, users mitigate the risk of loss or mismanagement associated with centralized custody solutions. This non-custodial approach aligns with the ethos of DeFi, empowering users to safeguard their funds and participate in copy trading with greater security and autonomy.
Passive trader
Decentralized CopyTrading Protocol (DCP) revolutionizes the way traders are selected and engaged within the copy trading ecosystem, offering users unprecedented flexibility and control over their investment strategies. Traditional copy trading platforms often rely on proprietary algorithms to recommend traders to copy, limiting users' ability to tailor their trading preferences to their individual needs. In contrast, DCP empowers users to personalize their trader selection criteria based on factors such as performance metrics, trading style, and risk appetite.
By leveraging data analytics and research tools, users can identify and evaluate potential traders more effectively, ensuring that their copy trading strategies align with their investment goals and preferences. This personalized approach enhances the user experience and enables traders to optimize their copy trading activities for maximum effectiveness and profitability.
Smart wallet
One of the most significant distinctions between traditional copy trading and Copin's hybrid copy trading, especially with DCP, lies in the utilization of Smart Wallets. Unlike the process of copying via centralized exchanges (CEX), which typically involves multiple steps such as registering an account, completing KYC procedures, and obtaining API access (for Copin's hybrid copy trading). Decentralized CopyTrading Protocol (DCP) streamlines the process significantly. With DCP, users only need to take a few simple steps to operate their smart wallet.
Smart wallet or smart contract wallet, is a wallet managed by a contract account instead of an EOA (Externally Owned Account). A smart contract wallet or a programmable wallet is a digital wallet governed by predefined rules programmed into a smart contract. This type of wallet operates on a blockchain platform, which makes it secure, transparent, and immutable.
Why Copin's Decentralized CopyTrading Protocol uses smart wallet?
A smart contract wallet can potentially help Decentralized CopyTrading Protocol in several ways:
Safe: Funds allocated for copy trading through DCP are securely stored in a smart contract wallet, distinct from funds held in an externally owned account (EOA). This segregation ensures isolated funding, enhancing security A smart contract wallet is programmed to execute transactions automatically according to pre-defined rules, making it resistant to hacking or other security breaches.
Transparency: The use of smart contract wallets can increase transparency on our platform, as all transactions are recorded on the blockchain and can be easily audited. This can help build trust among users and increase confidence in the platform.
Convenience: Instead of having to go through many steps when registering for copy trading through traditional platforms or Copin's hybrid copy trading, you simply need to create a smart wallet, deposit funds, and start copy trading directly on Copin. This creates an experience that is more convenient, easy, and seamless than ever before.
Overall, smart contract wallets can help improve the security, efficiency, convenience, and transparency of Copin's Decentralized CopyTrading Protocol (DCP), leading to a better copy trading experience.
With our vision, once completed, the DCP will allow all perp DEXes to integrate UI and create additional utility for web3 beginner traders or non-trading users. DEX will have a useful feature to compete fairly with CEX and onboard users from web2.
Copin's Decentralized CopyTrading Protocol (DCP) is undergoing internal testing phase. You can check stats at Synthetix Perps Dune dashboard. Wanna be a super early bird?
About Copin Analyzer
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