Deri AMA Recap on September 11th, 2023
On September 11th, Deri launched an AMA. Let’s watch the detailed & complete AMA recap below:
The AMA Entrance: https://discord.gg/dQyuBkBKBe
OxAlpha:
Hello, everyone. Recently we came across quite some questions regarding Deri V4, hence we hold this special AMA to address them.
Frist of all, the first Deri V4 i-chain final vote result is out: Arbitrum. So when the development is completely ready, we will deploy on Arbitrum to make it our first i-Chain! And don’t forget the nomination for the second i-chain is ongoing: https://forms.gle/eBRdNsYtufoEv4vA6
Thank you for the community’s participation.
All right, now let’s get to the questions!
Q: What are the differences between i-chain and d-chain? We only get one d-chain, while we’ll have many i-chains?
A: That is correct.
There is only one d-Chain, which is a dedicated AppChain built and run by the team. It’s an L3 chain built using Arbitrum Orbit. However, d-Chain is the engine — LPs and traders don’t interact with it directly.
Instead, LPs and traders interact with Deri V4 via the smart contracts deployed on the i-Chains, which could be any public layer 1 or layer 2. We can choose to deploy the i-Chain smart contracts on Arbitrum, BNB Chain, zkEVM, or zkSync, so on and on. That is why the community needs to choose which public layer 1s or layer 2s to deploy the i-Chain smart contracts (to make them i-Chains in this context).
From a user’s perspective, presumably one would choose (i.e. vote for) their favorite public layer 1 or layer 2 to be the i-Chain, as this is where they interact with Deri V4.
For example, if most of your money is on Arbitrum and also you are mostly used to doing all the DeFi operations with Arbitrum, then you would prefer Arbitrum to be one of the i-Chains.
(Please note this is just an example, which does not imply any team preference.)
Q: Will these transactions be conducted on d- chain or i-chains?
A: Good question. Your transactions will be requested from i-Chain, then passed to d-Chain to execute. The core logic is processed on d-Chain. However, as an user, you only interact with i-Chain.
Q: What about the gas cost?
A: There will be two parts of gas costs: 1. the cost to interact with Deri V4 on the i-Chain; 2. the cost to process the transaction on d-Chain.The latter is very small as it’s an L3.
The former depends on your i-Chain. For example, Ethereum could be an i-Chain too. If you make transaction with Ethereum as the i-Chain then it would be a bit expensive. However, if you call from Arbitrum or BNB Chain as your i-Chain, then it’s just like other regular calls on Arbitrum or BNB Chain.
Note: the two parts of gas costs is just a break-down. The cost includes two parts does not mean it costs more. In fact, moving some procedures to L3 reduces gas costs.
Q: Do I need to cover gas fees on both the i-chain and Deri Chain? What are the gas fees on Deri Chain?
A: Yes, but the gas fees on Deri Chain is very small as it’s an L3 (even cheaper than L2).
TLDR: the on-going DIP6 voting is all about choosing your favorite public layer 1 or layer 2.
Q: Are i-chains smart contracts?
A: i-chain could refer to the smart contract that plays the role of interface, or refer to the layer1 or layer2 where that smart contract is deployed. Which one it refers to depends on the context.
In the DIP6 voting, the concept “i-Chain” refers to the latter. That is, you are choosing which layer1 or layer2 to deploy that smart contract.
Q: What sets V4 apart from the current version for traders on Arbitrum? Are there any enhancements or optimizations we can expect?
A: The interactive procedure will be the same. As a trader on Arbitrum, you will trade with Deri V4 the same way as you are doing with V3. Also you will find the trading website (i.e. the UI) pretty pretty the same.
However, the enhancements will be:
The second step will be faster and cheaper. Currently, when trading with V3 on Arbitrum, the second step is executed on Arbitrum. Whereas, with V4, the second step will be on d-Chain, a dedicated L3, which is faster and cheaper than Arbitrum while keeping the same security.
You will experience better liquidity (e.g. smaller slippage, less funding fee, etc) since the liquidity pool will be bigger (all the liquidity pools on different i-chains are unified into one).
V4 will be more scalable in terms of supporting more symbols. For instance, options have often faced criticism for their limited strike choices. V4 will address this issue by offering a wider range of strikes.
Q: I’ve noticed a key benefit of V4, which is the reduction in transaction fees. Could you clarify if this translates to a lower fee percentage?
A: V4 aims to decrease gas costs, although this does not extend to the reduction of transaction fees. To illustrate, the current transaction fee for futures stands at 0.1% of the notional, a rate that will persist in V4. It’s essential to differentiate between gas costs and transaction fees as they are distinct concepts.
(Separately, the transaction fee algorithm for Gamma Swap will undergo optimization, which is expected to substantially reduce the fees. However, this adjustment is independent of the transition from V3 to V4.)
Q: How do you ensure the security of communication between i-chains and d-chain?
A: Excellent question. Addressing this issue was one of the pivotal technical challenges during the V4 development. Simply speaking, communication is safeguarded through a signing mechanism, allowing each side to authenticate the validity of messages received from the other.
However, this question may warrant its own dedicated article for a thorough explanation, which we are considering for future publication.
Q: Is it necessary for traders to interact with i-chain, and is there a possibility of reducing gas fees to zero?
A: Yes, it is necessary and i-Chain is the only interface that traders interact with.
As for reducing gas fees to zero, while we would love to, we can’t eliminate gas fees entirely. Such fees are intrinsic to blockchain operations. If traders aren’t bearing these costs, then who will? Without these fees, how would a blockchain network operate?
Q: Why did the team choose Arbitrum Orbit as the platform to build the AppChain?
A: Another great one!
We’ve extensively researched various solutions, including dedicated app layer1 (e.g. Cosmos), app layer2, app layer3 (Orbit and others), as well as directly deploying on public layer 1 (e.g. Solana or Aptos) or layer 2 (all the popular layer 2s). Among these, Arbitrum Orbit stands out as the most cost-effective, mature, and reliable option we ultimately selected.
Nonetheless, it’s important to note that d-Chain is designed to be migratable. If a superior platform arises in the future, we retain the flexibility to seamlessly transition d-Chain to it.
Q: Apart from the xDapp feature, what optimized functions are available for traders?
A: For the optimizations, please see my reply above.
If you were asking about new functions, the transition from V3 to V4 is not about rolling out new functions. Instead, it’s more about building a new architecture. Nevertheless, we believe this new architecture will naturally open the doors to a lot of new functions in the future.
Q: The LP of Deri in both BSC and Arbitrum chain is really low. Any plan to increase our LP?
A: Regarding the LP, if you are talking about the TVL of the main pool on Arbitrum and BSC, our entire V4 endeavor aims to consolidate these into a more substantial, unified liquidity pool.
Q: If we do marketing for Deri V4, what is the best sentence that we can tell about Deri V4?
A: For the marketing sentence, I am thinking maybe the community can come up with the best one?
Q: What are the differences between Deri V4 and Dydx V4?
A: I’m sure many of you are already familiar with the fundamental differences between Deri Protocol and Dydx. In essence, while Deri operates on an AMM mechanism, Dydx is built on an orderbook-based model. Deri offers a diverse toolkit that encompasses futures, options, power perps, and Gamma swaps, whereas Dydx focuses on futures only. These foundational differences will remain in V4.
However, I sense the core of this question is centered around the respective V4 updates of both platforms.
In V4, Deri adopts the iChain-dChain structure. Here, users initiate actions on the iChain (e.g. Arbitrum), and these actions are subsequently processed on the dChain. In contrast, Dydx functions as a dedicated AppChain, meaning all interactions take place directly on the Dydx Chain. From a security perspective, Deri’s dChain (being an L3) enjoys the same level of security as Ethereum. On the other hand, Dydx Chain relies on its own blockchain nodes for security — likely not on par with Ethereum (and hence Deri Chain), but arguably surpassing centralized exchanges.
In my view, Deri and Dydx epitomize two distinct future trajectories for trading platforms. Should Dydx’s model prove successful, it could serve as a blueprint for centralized exchanges transitioning to a similar system. Deri, meanwhile, embodies the quintessential DeFi approach.
Q: How to ensure the security of i-chains and d-chain?
A: There are several parts of security to ensure.
i-Chain: this is ensured by the i-Chain themselves (e.g. Arbitrum)
d-Chain: as an L3, its security is ensure by the L2 and ultimately by the L1, i.e. Ethereum.
The communication between i-Chain and d-Chain: please see my reply to one of the previous questions.
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.
