As an introduction of the DeFi way to trade derivatives, Deri Protocol V1 has been live and running smoothly since Feb 2021. Deri Protocol aims to serve as key infrastructure for decentralized finance, providing extreme capital efficiency to all users in a secure and robust decentralized financial marketplace from Day one.
Today, we are excited to present a brief introduction of Deri Protocol V2. We are targeting our Binance Smart Chain launch next week.
Inheriting all the features of V1, Deri Protocol V2 introduces:
- Dynamic mixed margin
- Dynamic liquidity providing
- Multiple trading symbols in one pool
With these features, the derivative trading on Deri Protocol can achieve an optimal capital efficiency, which is potentially higher than that of centralized exchanges such as BitMEX.
Dynamic mixed margin
Deri V2 implements a margin system accepting multiple base tokens. With such a system, a trader could choose one or more from the supported range of base tokens to post as margin. And this does no longer have to be a stable coin.
To explain it in even simpler terms:
Imagine you are about to enter your first long trade on BitMex: You deposit 0.5 BTC into your BitMEX account and open a 2x long leverage position on the BTC/USD pair. Shortly afterward, Bitcoin drops massively in value and your position is about to expire. You still have some $UNI in your web3 wallet and quickly decide to deposit those to BitMEX, only to discover that you cannot deposit $UNI to BitMEX, to back your soon-to-be-liquidated $BTC long margin position, but only with $BTC itself. On centralized exchanges, the deposit capabilities are severely limited to a hand full of assets, at BitMEX even to $BTC only. That is why a $BTC margin position on BitMEX cannot be enhanced with $UNI, $CRV,etc. but with $BTC only. Therefore, you must buy $BTC for your $UNI on a spot exchange first and deposit the traded $BTC back to BitMEX, to avoid liquidation.
But these unnecessary, inefficient intermediate steps take up too much time. And your position has been already liquidated. This is what we call capital inefficiency, which Deri Protocol V2 will solve by offering Dynamic mixed margins.
Imagine you opened the same position as mentioned above on Deri v2, $BTC drops massively in value and your position is about to expire again. In contrast to BitMEX, this time you can just use your $UNI on your web3 wallet to back your $BTC-margined long position without using a spot exchange first to get the right asset. All supported base tokens on Deri Protocol V2, can be used to extend $BTC margin position. The capital efficiency increases tremendously as consequence.
Dynamic liquidity providing
Just like on the trader side, Deri Protocol V2 also allows liquidity providers to choose one or more from the supported range of base tokens to provide liquidity. Also just like the margin value, the provided liquidity provided is dynamic too.
In contrast, Hegic, a non-custodial exchange to trade options, for example offers yield for their users who provide liquidity to their liquidity pools.
There are only two assets to select here: $WBTC & $ETH. Please notice that both pools offer a different yield.
Let us assume that users would like to participate in the $WBTC pool since the APY is currently highest there. Unfortunately, the user only has $UNI , and there aren’t $UNI pool. The inefficiency here is also the fact that the user must first convert his $UNI into $WBTC to be able to deposit $WBTC as liquidity into the right pool.
Deri Protocol V2 instead, allows users to add several different assets as liquidity into the same pool. By keeping the given liquidity dynamic in Deri Protocol v2, tokens that can otherwise hardly be traded due to a lack of liquidity like we see on exchanges of all kinds, benefit from the depth of mixed, shared liquidity. This strengthens the accessibility, and the efficiency to trade and provide liquidity.
Multiple Trading symbols in one pool
Another new feature introduced in Deri Protocol V2 is that multiple trading symbols (i.e. underlyers) could be traded in one pool. This is to further enhance the capital efficiency since the trades of different symbols are sharing the same liquidity hub. The correlation between the price movements of the trading symbols determines the degree of capital efficiency improvement. The less correlated the price movements are, the higher capital efficiency the pool can achieve. Please note this is something unimaginable in the traditional orderbook-based trading paradigm since an orderbook is always for one specific trading symbol and there is no chance two or more symbols can share liquidity.
Audit and Bug Bounty
Security first in Deri Protocol. To be comfortable with launching Deri Protocol V2, security audits from Peckshield and Certik are carried out to reduce the threat of direct protocol vulnerabilities.
To help find any potential vulnerabilities, a bug bounty program will start from Deri Protocol V2 launch day, with up to $50,000 offered for critical bugs. More details on the bug bounty will be disclosed later.