Deri Protocol x Arbitrum AMA
Q1: What started Deri Protocol? And what brought you into crypto?
A1: First of all, thank you everyone for being here. I’m 0xAlpha, the co-founder of Deri Protocol. Prior to Deri Protocol, I was in New York doing quantitative Finance in some of the US Banks on Wall Street. Before turning to finance, I was a physicist by training so after I got my first PhD; I then went to New York and then turned to a career path including quantitative finance. I was dealing with financial derivatives — which led me to doing derivative, pricing structuring trading and risk management, so basically all aspects of financial derivative business. Post Wall Street, I actually started my crypto Adventure in 2017; I launched a trading firm, which also provided market making services to some of the derivatives centralised exchanges.
And then in 2020, I was pretty much attracted by this DeFi concept, which boomed in that year. I realized I could use a lot of my experience and better knowledge of financial derivatives. Deri Protocol is real on-chain protocol, which means trades are executed on chain under AMM paradigm and positions are tokenized as NFTs, highly composable with other DeFi projects.
Happy to be here, and excited to explain what makes Deri Protocol unique.
Q2: What do you think of people making the change from Tradfi to DeFi?
A2: So when DeFi started, it was viewed as a pure computer science thing. A concept which basically one knows coding and could put together all kinds of projects. The shift happens when you go to something deeper like derivatives which is quite complicated, you need a background of not just coding programming, but also math and finance. And that’s I think a lot of the TradFi people that you mentioned have many such roles to fill.
Q3: Let’s have an intro Deri Protocol
A3: The name Deri, is actually the short for derivatives, as you can tell from the first four letters. Deri is a decentralized Derivatives platform. Right now, we have three types currently, we have a Perpetual Futures which is pretty standard offered by one of several other projects and also everlasting options, which is kind of special.
You can think of everlasting options as a Perpetual version of classical options. also, we have a power perps; a new thing for which you are basically trading the square of Bitcoin, or a square of ether. And as far as I know, we are the only Defi Protocol providing these three types of derivatives simultaneously. Another feature is the new mechanism called “External Custody”. In addition, the external custody refers to the practice of leveraging some other protocol to hold the liquidity involved in our trading business. In particular, we chose AAVE on Arbitrum to be the partnering protocol of our external custody, meaning the capital involved in Deri’s trading business is actually stored in AAVE. Generally, any token accepted by AAVE as collateral would become a supported base token of Deri Protocol. For derivative traders, all tokens accepted by AAVE can be used as margins for trading. Traders can use USDC, ETH, WBTC, DAI, and LINK as margin to trade derivatives on Deri Protocol.
For example, our DPMM design made it possible to put different underlyer and different derivative type in the same trading pool so that they can share liquidity. In other words, when you trade the futures of bitcoin or options of Ether, you are trading against the same piece of liquidity. Such a sharing makes the capital efficiency higher than any of the other AMMs or orderbooks.
Q4: What made you guys decide to build this protocol on Arbitrum?
A4: We are actually very picky in terms of platform choice, so the platform to deploy Deri Protocol has to be fast, stable and gas efficient. So by this measure, I think no other network be it L1/L2, can beat Arbitrum. Diving a little more in, I think the early 2021, We first started with Ethereum and then we soon expanded to some other faster and cheaper Networks. I think it’s fair to say our first try on Ethereum didn’t work out, because nobody wants to trade derivatives through it due to the horrible gas cost and very slow speed.
But then several months ago we basically abandoned L1 as they were one and that was, so we always wanted to come back to the Ethereum world. We now have this super fast and low-cost platform without compromising security. For example, we use Uniswap as swapper and AAVE as out external custodian. This is also a part where we want to bring added value. We want Deri Protocol to be, not just a Dapp but the derivative infrastructure on Arbitrum.
Q5: The protocol has multiple products, also different offerings, people can try out, let’s dive into that.
A5: Yeah. So from day one, we named Deri as a protocol. Like. So from day one, the plan was to build the Protocol, which means it is part of the infrastructure. And we’ve actually done a lot of work. We have a Deri Developer Community which contributes, which already has built a number of community dapps. We have a dedicated website for these dapps called deri.fi whereas our main website is deri.io. So if you go there, you can see, for example, this, the app called Dip Hunter, which is built to help people, buying the dips while making passive income. And also there’s this, the app called, for example, is the app called Stable Earn, which was actually a joint, which has a product jointly built by us & The stader team. It’s a fund for the investors to invest stable coin and earn a risk-free yield from BNB POS staking yield. And as we speak, we are doing the same thing on Arbitrum. Basically, you can stake stable coin, such as USDC, to participate the ETH staking. You can stay tuned for that.
Next year, we are gonna put more efforts on this part. By the end of 2023, we will see a lot of Deri-based dapps out there serving all kinds of specific demands. We think, derivative trading is the ultimate demand for derivative trader but not the ultimate demands for the vast majority. But that doesn’t mean the vast majority does not need derivatives. They might just need derivatives in an indirect way — they are probably not explicitly trading derivatives but in a lot of cases they need something that has derivatives as part. So, that is how we want to serve more people, not just derivative traders but more than that.
Q6: What are the core features in Deri Protocol distinguishable against other different products?
A6: Yep. I think the most important keyword here is innovation. So back to early 2021, I remember we were the first one to provide the on-chain derivatives. Derivatives with this, what we can call it LP as counterparty model. And I think nowadays, this model has sort of become the standard for the onchain derivatives. So most of the now order book based Derivative platforms have adopted, this LP as counterparty model. Product wise, Everlasting options by their Deri Protocol is actually the first ever, everlasting options not in just crypto world, but in the whole financial history. Give it a try at deri.io, I think most would like it over other platforms.
We emphasise the ease of capital efficiency. For example, our mechanism which we call DPMM design, made it possible to put different assets and different derivative types in the same liquidty pool. Now we, we put the Futures and options and the Power Perps of Bitcoin and Eth. So that’s two underliers and three types. And for each of the options, they have different strikes.
Lastly, another feature we provide is a wide range of token choices for margin. You can choose to provide liquidity or deposit as collateral.
Q7: What is your current strategy on security and maintenance for Deri Protocol?
A7: Security should always be a major concern for all Defi Projects; Deri Protocol is secure. In addition to the regular things, like our internal security efforts, audits from Certik/PeckShield have also been completed. We also launched a bug Bounty program on immunifi, which has been very helpful. But I guess when it comes to this question I guess every project will put a lot of things to answer this question and they probably all seem to make a lot of sense. There’s probably only one way to check the security of a protocol, which is how long it has been operating; it has been without accident. So that’s, that’s probably automatically, that’s probably the only way to check. So for Deri Protocol, we first launched in early 2021. We have been running for almost two years; only experienced a couple of minor security issues and no significant issue has ever taken place at all.
Q8: What’s currently usable on Arbitrum and a quick rundown of what the roadmap is looking like?
A8: Well, we have a very long pipeline that keeps us busy. The features that would be rolled out in the very near future include, for example, limit orders and the stop orders. So these were these features that have been demanded by the community for a while. And right now as we speak we have a Deri V3.1 under development; we call it a V3.1 only because there are actually not too many changes from the users’ perspective but it’s a major upgrade of the architecture.
After the core architecture has been totally revamped. The product is going to be much better, more efficient and way more robust than the current v3.
I think the most exciting feature of V4 is the interchain liquidity pool, which means the liquidity can be staked from different layers. So, yeah. That’s, that’s our actually, there’s a lot of other things but I guess those are probably the ones that people will be on the lookout in the coming year.
Q9: What is the best way to send in questions regarding Deri Protocol?
A9: Check out Deri.io, you can also send in your questions to our discord. https://discord.com/invite/kb8ZbYgp8M
Q10: Who is your target audience/user?
A10: Okay, yeah, actually, we focus on the professional kind of traders, and also the traders learning about derivatives. So, for quite a while, we’ve been criticised for having a very complicated UI. Our website seemed complicated, which is really, because the derivatives themselves are really complicated. We solved this and rolled out a trading mode called Deri Lite, which is for those who are relatively new to derivative trading and not so familiar with all the complicated mechanisms of derivatives. Basically, Deri Lite mode offers a streamlined interface focused on speed, ease of use, and simplicity. Our old mode is still there for those who are more experienced and used to the TradFi derivative trading. It’s very powerful, with better capital efficiency. Good for the pro traders.
You can switch between Lite and Pro modes at any time, so you can try out both and see which one works better for you.
Q11: Could you state some of your key features and your cooler features. What way are you planning to scale further?
A11: That’s a good question. I think you’re right. Derivatives are getting very competitive here on Arbitrum. Nowadays, Arbitrum is where all the advanced DeFi is going. I mean, those defi projects that are complicated like derivatives. So when it comes to Deri Protocol, I think I mentioned some things that make us unique. For example, there’s a lot of innovative features about Deri.io. Also we are the only one to simultaneously provide Perpetual Futures, Everlasting options and Power perps. Well, we are in competition with other projects for futures but for those products like, options and power perps, I don’t see any competition with us as of now. As for scaling, Arbitrum being fast, efficient and low gas and a great community is great for us.
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.
