Deri AMA Recap on Mar 29th, 2023

Deri Protocol
8 min readMar 31, 2023

On Wednesday, Mar 29th, Deri launched a dedicated AMA on Gamma Swap and zkSync.Let’s watch the detailed & complete AMA recap below:

The AMA Entrance: https://discord.gg/dQyuBkBKBe

OxAlpha: Hello, everyone!AMA time again!

First thing, We are so excited to anounce this! Our Gamma Swap, as anticipated, went live yesterday (Mar 28th)! It is deployed on the Pro version of deri.io and there are three trading symbols available: mBTC-Gamma, ETH-Gamma, BNB-Gamma.

Get ready for a game-changing experience in the world of DeFi! Try it: https://deri.io/#/trade/gamma/mBTC-Gamma

What makes Gamma Swap by Deri Protocol stand out?
1. The first ever derivative offering pure gamma exposure
2. Optimized capital efficiency for traders
3. A groundbreaking PnL curve introduces a novel approach to speculation

If you are still confused what is Gamma swap & how to use it? I hope this document can make you clear: https://docs.deri.io/library/academy/gamma-swap

And, welcome the community to share our Gamma Swap launch tweet: https://twitter.com/DeriProtocol/status/1640653864629305348. Let more people in the DeFi space know about this innovative derivative. Thank you for your support of Deri.

Another thing, which is pretty exciting too: Deri Protocol’s is now on the zkSync Era testnet. And soon on the mainet! An exciting milestone as we have officially joined the zksync ecosystem!

zkSync Era is a trustless protocol designed for scalable, low-cost payments on Ethereum, powered by zkRollup technology.
Utilizing zero-knowledge proofs and on-chain data availability, zkSync Era ensures users’ funds are as secure as if they never left the mainnet.

Deri’s mission is to foster mass crypto adoption in derivative trading by harnessing zkSync Era’s performance and scalability, all while maintaining Ethereum-level security. We’re committed to building towards a more efficient DeFi ecosystem.

Please stay tuned for more updates on our zkSync progresses.
Ok, let’s get to the questions now.

Q1: Suggestion: If contracts are currently not tradable due to high open interest, this should be visible from the outside so that gas fees and network fees do not have to be wasted trying to trade the contract again and again.

A1:Yes, that’s a great suggestion. I think it’s already in our pipeline. Sorry for any trouble caused by this.

Q2: Within the contract that manages the assets or margin, a swap function would be very helpful in order to be able to react more efficiently to different market phases. So it would be helpful if I could swap my deposited ETH into WBTC or other supported currencies without having to withdraw, swap and then deposit again.

A2: That’s a very interesting one. Could you provide more details about your demand? Are you talking about a situation where you are a trader or LP? We’ve not thought about such a function before. But we are gonna evaluate and see if we should provide it.

Q3: Daily funding for gamma 3303$? So to hedge a 50/50 USDC ETH LP range 1597–1912 it would require .0041 gammaswap, which is 10$ a day in funding, that is too expensive. Is this price expected to go down or is it a good estimate.

Actually 13$ a day. It would need to be under 7$ a day to break even

A3: Well, the thing is, as far as IL-hedging is concerned, Gamma Swap cannot guarantee your profit (nobody can).

What Gamma Swap provides is a highly predictable cost for you to hedge IL (V.S. the scenario if you leave it unhedged, then you don’t know how much you will pay, as it’s a risk)
Then you need to make the judgment whether it makes sense to pay the Gamma funding to earn the transaction fee income on that particular LP position or not. Gamma Swap makes this judgment straightforward and easy. That’s what it is.

Put in another way: one of the very obviously determining factors on this issue is the trading volume on the Uniswap pair (ETH-USDC in your example). That’s entirely up to what happens on the Uniswap, out of Gamma Swap’s control.

Think of this as an arbitrage opportunity: If the funding cost by Gamma swap is lower than your transaction fee income on Uniswap, then you can take it as an arbitrage. But obviously that arbitrage opportunity might not always be there. By the 10$-v.s.-7$ scenario, you were talking about a no-arbitrage situation.

Q4: Deri vs Gammaswap labs, what’s the difference? I have heard of Gammaswap labs doing similar things like you for impermanent loss. Are you both the same? Gammaswap labs has a new product known as impermanent gain. Can Gamma Swap generate impermanent gain?

A4: Yes I heard about the project named gammaswap. As far as I know (but correct me if I am wrong), it is a specific-purpose tool dealing with the impermanent loss problem (and for that problem only). Whereas, Deri’s gamma swap is a general-purpose derivative. It is quite straightforward: with Gamma swap, you swap Gamma. That’s what it is. In that sense, the thing implemented by the project gammaswap should not be called “Gamma swap”, as it does not swap gamma on a generic basis.

As for the question whether Deri’s Gamma Swap can generate “impermanent gain”? The short answer is Yes. Within that context, “impermanent gain” should refer to the opposite of “impermanent loss”. As I explained before, from a quantitative financial perspective, the essence of “impermanent loss” is negative Gamma. Since you can obtain positive Gamma from Deri’s Gamma swap (by taking a long position), then yes you can get “impermanent gain” (the opposite of “impermanent loss”). Nevertheless, I want to emphasize that this is just one of the many use cases of Deri’s Gamma Swap. (Deri’s) Gamma Swap is a general-purpose tool (i.e. swapping Gamma on a generic basis).

Q5: When will Deri be on zkSync? Will Deri receive extra tokens when zkSync token is launched?

A5: For your first question, very soon. We have already finished all the network-level testing and the smart-contract deployment has been completed. Right now we are working on the front-end. Please stay tuned.

For your second question, I don’t know. That’s totally up to the zkSync team. While it would be nice if we get such airdrop, this is not the purpose for us to working on zkSync.

Q6: Will the Gamma Daily Funding Fee and transaction fee parameters be adjusted? The current daily funding fee seems a bit expensive.

A6: Regarding the funding fee:
Daily funding is determined by the theoretical pricing as well as the DPMM pricing (by trading actions). The theoretical pricing model tries to price the Gamma as fair as possible. And then the price will be further pushed up or down by trading (this is the DPMM pricing procedure). Unless we find that the current pricing framework is biased (always overpricing the Gamma), there is probably not too much space to adjust this pricing to a lower level. If that funding fee looks too expensive for you (that is, you think it’s overpriced), the most reasonable action is to short it. If your judgment is correct, you will make profits.

Regarding the transaction fee:
We will review it at the end of the beta stage and see if there is a better model. For the moment, the fee mechanism is sort of experimental, as Gamma Swap is an entirely new species, which means we are too sure what’s the best way to charge transaction fees. And your suggestion on this part is more than welcome.

Q7: How to hedge Uniswap V3’s LP? Is there a tutorial?

A7: Yes, here is the document if you want to do it yourself. There is a little math involved though.

https://docs.deri.io/library/academy/gamma-swap/hedging-impermanent-loss-with-gamma-swap

Also, we will make some tool to facilitate this function. If the methodology talked about in this document looks too tedious for you, please wait for our tools.

Also, we will roll out IL-less LPing product for dummies, with which you don’t need to understand all the tech and math details of Gamma Swap at all.

Q8: Last time during maintenance, I couldn’t trade and suffered a loss. Can’t the contract be deployed for stable operation? If daily maintenance, how can I trust trading on your platform?

A8: I think you were referring to the maintenance during the time we brought Gamma Swap online. I am very sorry for the trouble caused by this. It was due to a rare situation where several factors occurred together. I think such a situation will never happen in the future.

But again, I apologize for the trouble and loss you experienced during this maintenance.

Q9: Deri Protocol has recently launched gamma swap. What kind of impact will it have on the entire Deri ecosystem, and how do you plan for it? What is the positioning of this product?

A9: It makes the toolkit more complete. Specifically, it serves Deri’s mission to facilitate people to deal with all kinds of risk in various ways. Gamma is one of the most important Greek letters, and now for the first time, people can trade pure Gamma directly. This is a very big thing for professional traders.

Q10: What kind of partnership will there be between zkSync and Deri Protocol? and how do you plan to position yourself in the zkSync ecosystem?

A10: I think Deri will be part of the zkSync infrastructure playing a fundamental role for derivative trading and risk dealing. There will be a lot of things rolled out soon. Please stay tuned.

Q11: Deri Protocol has a higher entry barrier for users. How do you plan to address this issue? Also, how do you ensure the safety of decentralized products for retail investors?

A11: Yes, the entry bar has been a pain for retail users for a while. And we are aware of that. The initiative of introducing the Lite mode is to tackle this problem. I know it’s not perfect yet. We are still working on improving our lite mode to make it more user-friendly than it is right now. Meanwhile, please continue to give us feedback on this part. We cannot build a user-friendly interface without you guys’ feedback.

Q12: What advantages do you have compared to some top competitors? As the zkSync ecosystem becomes more popular, can you have the same influence as GMX in the Arb ecosystem? If you think you can achieve this, why?

A12: One of the most apparent advantages of Deri compared to the competitors (e.g. GMX) is that Deri is a comprehensive toolkit of derivatives, which means you can deal with all kinds of risk with Deri, rather than the simple linear risks handled by futures.

I think as DeFi evolves into a more mature and advanced stage where people need to deal with risk in a more sophisticated way, the value of Deri Protocol will be more and more recognized.

Q13: What is the marketing plan for Gamma after we have deployed gamma update into deri.io?

A13: We are just about to roll out a series of activities. Please stay tuned.

OxAlpha: I am going back to work now. Please come and try out the Gamma Swap, and tell us about your feeling.

About Deri Protocol

Deri, your option, your future!

Deri is the DeFi way to trade derivatives: to hedge, to speculate, to arbitrage, all on chain. With Deri Protocol, trades are executed under AMM paradigm and positions are tokenized as NFTs, highly composable with other DeFi projects. Having provided an on-chain mechanism to exchange risk exposures precisely and capital-efficiently, Deri Protocol has minted one of the most important blocks of the DeFi infrastructure.

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Deri Protocol

Deri Protocol = (Perpetual Futures + Everlasting Options) x Decentralized.