Part I Where the idea of MCDEX comes from?
M：Today, I have invited Liu Jie, the founder of MCDEX, to be the guest on 51% podcast. Before we start, Liu Jie will give the audience a self-introduction.
L: Hi, I am Liu Jie, the founder of MCDEX. I used to be a developer at Baidu. At Baidu, I developed a distributed system and created a distributed database called Doris. This project is open-source and is widely used. In addition, I also developed a mining software called Minerbabe, a management tool for GPU mining. I have been in the blockchain industry for almost 3 years.
M：Why did you think of doing mining after leaving Baidu?
L: I had two to three years of entrepreneurial experience in advertising projects, achieved through machine learning. Initially, we had plans for mining for a long time and had hoped that mining could be our first step into the blockchain industry. However, due to the concentrated upstream of resources from the industry, there were fewer opportunities available and we gradually faded out of the industry.
I first gained knowledge about blockchain in 2010 when Satoshi released the Bitcoin white paper. But at that time, I only regarded it as a technical issue for research and did not see it’s value too much at that time. It was technically ok, but I didn’t know of any application scenarios.
When we wanted to enter blockchain in 2017, our knowledge of blockchain was not sufficient. As such, we wanted to enter the industry by mining. Mining is not actually at the core of blockchain and it was not our final goal. In hindsight, mining was mainly to improve our understanding of the blockchain.
M: I see. Maybe you pointed out an older method of mining. The mining industry is now much more professional than before.
When you have decided to develop MCDEX, the decentralized derivatives sector should not have been very crowded. So what made you choose to build a perpetual product in DeFi?
L: There was a process when we decided to develop MCDEX. In fact, it was inspired by mining. Back then, we were doing professional mining and I was also trading derivatives contracts with a company. As we worked on the trades, we realised that trust can be a big issue and we also do not have margin. What we do is just communicate by email on the expiry date to deliver the contract.
This requires mutual trust and there is high counterparty risk involved. That is when I realized by staking the margin into a smart contract, it can resolve the trust issue. This is exactly how DeFi can benefit users. At that time, Uniswap was not launched yet and I realized how powerful blockchain can be.
Immediately, I decided to work in the blockchain industry. My rationale is as such, firstly, I can understand the purpose of blockchain. Secondly, I believe that there is sufficient demand in the market and that this is a sector that will flourish.
We determined the plan and entered the DeFi industry by mining in the early stage and developed our DeFi project in the mid-term. In the long-term, we aim to build a strong and sustainable infrastructure.
In the beginning, we used something called the market protocol, which is actually a smart contract for a spread option. But after the product was developed, we found out that this spread option is difficult for many people to understand — and will not be adopted by the industry easily. We believe that if we want to make a product in the early stage of DeFi, we will need to develop a product that users can understand easily. We concluded that perpetual swap has the strongest product market fit as it is the most popular product in CeFi.
M: When did you realise this?
L: In 2019. Perpetual swap is easy to understand for users. It is similar to trading in the spot market, but with leverage. However, the structure behind it is very complicated — more complicated than the spread option which I mentioned previously.
We developed the second perpetual swap product. Our version 2 was launched in April 2020. After more than 6 months, the version２ still had many problems such as the liquidity issue. With feedback from the market and users, we developed our version 3 and I am excited to share more about our improvements.