Introducing Deri V4: The Dawn of Cross-Chain Decentralized Derivatives Trading

It was mentioned in the 2023 roadmap that Deri Protocol will upgrade to its fourth iteration this year. Now as we just kicked off the development of Deri V4, this article explains Deri V4 in more detail. Central to this transformation is the adoption of the Cross-Chain Decentralized Application (xDapp) model, a pioneering development in the blockchain sphere that promises to redefine the landscape of decentralized finance.

Our vision for Deri V4 is to build an all-chain, decentralized derivative trading protocol, enhancing the inclusivity, capital efficiency, and user experience in the DeFi derivatives market. By embracing the xDapp concept, we aim to bring unprecedented scalability and versatility to our ecosystem, overcoming limitations seen in previous iterations and setting a new industry standard for decentralized derivatives trading.

The All-Chain Strategy & xDapp Architecture

At the heart of Deri V4’s transformative design is the xDapp model. Short for Cross-Chain Decentralized Application, xDapps are a novel type of decentralized application architected to operate across multiple blockchains. They transcend the limitations of traditional Dapps, promising a new level of interoperability and integration within the blockchain space.

The key innovation in Deri V4 lies in its architecture, which consists of two main components: a request-interface and an execute-engine, implemented as two groups of smart contracts. Think of these as the front-end and back-end of our architecture — but don’t confuse them with the webpage UI, as they represent the contract level interface and execution.

The request-interface, or the “front-end” of the architecture, receives all user requests — including placing orders by traders, depositing or withdrawing margin by traders, and adding or removing liquidity by liquidity providers. These requests are then passed to the execute-engine, the “back-end” of the architecture, for execution.

This separation of the request-interface and the execute-engine allows us to deploy these components on different blockchain networks. In practice, we plan to deploy multiple request-interfaces on all major blockchain networks while maintaining a single execute-engine. This is what we refer to as our “all-chain strategy”.

Capital Efficiency and Unified Liquidity with xDapp

By implementing the xDapp architecture, Deri V4 aims to solve the major challenge of liquidity fragmentation, a common issue in many DeFi protocols. With this new architecture, all liquidity from different blockchain networks is aggregated into a single pool, promoting capital efficiency and providing traders with access to better liquidity.

In Deri V4, regardless of the blockchain network they are using, all liquidity providers contribute to a single, unified pool, which is then used by all traders, similarly regardless of the blockchain they are using. This is a fundamental shift from Deri V3, where liquidity pools on different blockchain networks were independent and thus fragmented. As a result, Deri V4 can provide a larger liquidity pool and a more efficient trading experience for our users.

Bridging Liquidity Across Chains

Deri V4 capitalizes on the cross-chain functionality of xDapps to bridge liquidity between different blockchains. This enhances capital efficiency by allowing a broader range of assets to be used within the Deri ecosystem. By integrating this cross-chain functionality, Deri V4 expands the reach of its services, enabling users from different blockchain networks to access the protocol. This inclusivity is expected to attract a diverse user base, fostering a more robust and vibrant DeFi ecosystem.

Maintaining Core Values

Despite the new cross-chain capability, Deri V4 remains committed to its core DeFi principles. It continues to operate as a series of smart contracts deployed on the blockchain, ensuring that the exchange of risk exposures remains on-chain, transparent, and secure. Deri V4 continues to support four major derivative types: Perpetual futures, Everlasting Options, Power Perpetuals, and Gamma Swap, while expanding the scope of these derivatives across a larger array of blockchain networks.

The Promise of Deri V4

As we transition to this xDapp model, Deri V4 is poised to offer several notable advantages:

• Expanded User Base: With the all-chain strategy, any user on any blockchain within our ecosystem can interact with Deri V4, significantly expanding our user base.
• Unified Liquidity: By pooling liquidity across multiple blockchains, we can offer improved liquidity and better trading conditions for our users.
• Increased Performance: Leveraging the strengths of multiple blockchains, Deri V4 will be able to deliver higher performance and efficiency.
• Increased Extensibility and Composability: Deri V4 can interact with any application across our ecosystem, including other xDapps, enhancing the composability and openness of our smart contracts.
• With Deri V4, we aim to bring the “lego gameplay” of DeFi projects to new heights, further solidifying our position as a leading player in the DeFi derivatives space. As always, we are committed to providing a superior trading experience, bridging the gap between conventional finance and DeFi, and driving innovation in the decentralized derivative markets.

In conclusion, Deri Protocol V4, as an xDapp, represents a pioneering approach to DeFi derivatives, demonstrating the potential of cross-chain applications and contributing to the ongoing evolution of the DeFi space. We are excited for you to join us on this journey and look forward to sharing more details about Deri V4 as the development goes.