CoFiX 2.0: Major Upgrade of the Decentralization Trading Protocol

CoFiX is a decentralized trading protocol based on the NEST Protocol. Since its launch in October 2020, it has become one of the important projects in the DeFi space. Recently, the CoFiX team announced a major upgrade to version 2.0, aimed at addressing existing issues and improving overall performance.

Major Changes in CoFiX 2.0

Arbitrage Hedging Mechanism

CoFiX 2.0 introduces the concept of arbitrage hedging, which is an important improvement over the perfect hedging requirement in version 1.0. The new mechanism requires the asset ratio of trading pairs to remain constant, for example, the initial ratio of the ETH/USDT trading pair is 1:500. When trading disrupts this ratio, the system encourages reverse trading through incentive mechanisms to restore the initial ratio. This approach not only simplifies the hedging process but also reduces the operational difficulty for liquidity providers (LPs).

Market Making Mining Adjustment

CoFiX 2.0 has adjusted the market-making mining rules:

• The NEST/ETH pool produces 3 CoFi per block
• The ETH/USDT pool produces 1 CoFi per block
• The ETH/HBTC pool produces 1 CoFi per block

10% of the mining output will be allocated to nodes, and the remaining part will be distributed to market makers.

DAO Governance Optimization

The new version strengthens the DAO governance mechanism, mainly involving the following aspects:

1. Code correction and upgrades: Initially adopting multi-signature, it will gradually transition to a voting mechanism in the future.
2. Determination and distribution of mining assets: This is one of the most critical functions of a DAO, which will be executed through clear on-chain standards.
3. DAO account management: Introduce a buyback mechanism that allows CoFi holders to sell CoFi to the DAO at the NEST oracle price.

Buyback Mechanism Explained

• The buyback price is based on the NEST oracle quote.
• Each block releases 50 CoFi buyback quota, accumulating up to 300 blocks at most.
• When the difference between the current price of CoFi in the NEST oracle and the average price exceeds 5%, the buyback will be paused.
• The repurchased CoFi will be temporarily held for future destruction.

Upgrade Principles

The CoFiX team commits to adhering to the following upgrade principles:

1. Keep the asset pool unchanged to avoid re-depositing funds.
2. Deploy first, trigger later
3. Establish and validate the community upgrade process

Outlook

The upgrade of CoFiX 2.0 is not only an innovation in the DEX field but also a further validation of the value of the NEST Protocol non-cooperative game system. This upgrade reflects the team's deep understanding of market needs and their relentless pursuit of enhancing user experience.

With the continuous development of the DeFi ecosystem, the innovations of CoFiX 2.0 may bring new ideas and solutions to the entire industry. We look forward to seeing how these improvements perform in actual operation and how they will impact the future development of the DeFi field.