How a Startup Uses AI to Evaluate Traders' Performance on a Decentralized Prime Brokerage

On the mission to decentralize and democratize the internet, Primex Finance is a Web3 project that leverages AI and blockchain technology to make prime brokerage accessible for everyone. Founded in August 2021, the startup seeks to fill an important gap in the nearly $60 billion decentralized finance (DeFi) market, where users can use a wide variety of open-source financial services without intermediaries.

Tell us about your background

As a team of developers, crypto enthusiasts, and distributed ledger technology experts, we have been active members of the blockchain industry since 2016.

Before Primex, we worked together as part of the blockchain development and services company Adoriasoft. In addition to collaborating on big data, AI and information security projects, our team has helped game-changing decentralized solutions become a reality.

We were always passionate about AI and Web3 and how these two emerging technologies are gradually advancing throughout the world. And, as we are building our protocol, we are excited to combine the two on Primex by introducing an artificial intelligence-based mechanism to provide a score for traders based on their performance.

Why did you decide to create Primex?

There's a big gap between lending and trading, two of the core use cases of the DeFi sector. When it comes to spot margin trading, traders can't borrow capital from lenders, and the latter can't earn interest by providing liquidity for leveraged trades.

It's an opportunity we didn't want to miss out on, and that's why we created Primex to bridge this gap by replicating a prime brokerage and trader tooling from traditional finance into the decentralized space. Our platform will work as a one-stop solution that combines the functionality of lending platforms and decentralized exchanges (DEXs) to enable permissionless spot margin trading.

Tell us more about your company. What’s your mission?

Our mission is to make prime brokerage services accessible for everyone.

In the traditional finance industry, investment banks often offer a bundled group of financial services for their customers, which they can use to borrow and lend assets, execute leveraged trades, and manage their funds.

However, some of these services are only available for hedge funds and other large institutional investors. As we value the core principles of decentralized finance, our team is building Primex so anyone with a working internet connection and a smartphone or desktop device will have access to prime brokerage solutions.

How does your company innovate?

One of Primex's most innovative and exciting components is the trader scoring mechanism that leverages the power of AI to evaluate traders' performance.

After the launch of our platform's second release (Primex v2), the community will nominate trader efficiency notaries. As the newest participants of our ecosystem, notaries will leverage artificial intelligence tools to give a Credit Score to each trader on Primex Finance using their historical trading activity available publicly on the blockchain.

Notaries will regularly update this score, which will determine the assets, the leverage, and other parameters traders can use for margin trading. A higher score grants them access to additional pools and more opportunities.

For a specific time, the very best traders on Primex will be able to maintain under-deposited positions that would otherwise get liquidated. This offers them increased flexibility and the opportunity to survive highly volatile market periods. At the same time, traders are incentivized to pay back their debt to lenders after a liquidation occurs to avoid losing their hard-earned score.

Another innovative feature of Primex is related to the trading experience's decentralization. While current DEXs with margin trading capabilities use centralized components like order books to match orders, we execute all trades on the protocol with a decentralized network of keeper bots.

As true believers of decentralization, we will also transition to community governance. This will be achieved through creating a decentralized autonomous organization (DAO), a blockchain-based structure to manage and govern a group or a DeFi ecosystem like Primex in a permissionless way.

What are some challenges that Primex is facing?

In the last few years, the decentralized finance industry has grown tremendously.

However, while we have seen rapid development in many fields, the sector lacks the decentralized infrastructure for hosting machine learning nodes and easy-to-use data that we could use for ML.

So, this remains a core challenge for the Primex team, especially as we are in the middle of developing the upcoming AI-based trader scoring mechanism.

How do you see Primex’s future?

As Primex is currently operating on one of the Ethereum' test networks, it's safe to say that the most anticipated event on our roadmap is the launch of the platform on mainnet.

After that, our objective will be to expand Primex's coverage by integrating the protocol with more DEXs. At the same time, we will also deploy the platform to multiple blockchains so we will have access to a larger market with increased liquidity.

As we progress with this milestone, we will gradually defragment liquidity in the decentralized finance sector, providing access for more users on a wider range of platforms to trade digital assets with leverage.

What advice would you give to fellow entrepreneurs?

Be passionate about what you are building and the tech you use for your projects. If you don't believe in your product, neither will your community.

Currently, we are in a stage where decentralized tech is new and has true value. And, as the internet is gradually transitioning to Web3, this leaves enough room to create value with innovation and experiment so you can potentially solve long-standing problems within the industry.