Recap of Deri & Arbitrum AMA on April 27th
On Wednesday, April 27th, we had a AMA with Arbitrum in ArbitrumNews DAO Discord. Since Deri Protocol was newly deployed on Arbitrum, the AMA’s theme was the introduction & Q&As of Deri Protocol to Arbitrum community.
Let’s watch the detailed & complete AMA recap with Deri Protocol’s CEO, 0xAlpha’s answers below.
ArbitrumNews DAO Discord: https://discord.gg/ArbitrumNewsDAO
0xAlpha: I am so excited for our launch on Arbitrum! Can’t wait! we have been planning our Arbitrum kick-off for a while. I wish we could have done this earlier. But we needed to wait for the AAVE V3 launch on Arbitrum first as Deri adopts AAVE as “external custodian”.
But finally, we are here!
Larva | ANDAO Founder: So welcome to Arbitrum!
0xAlpha: Hello, my dear Arbitrum fellows!
Larva | ANDAO Founder: Okay! Could you please introduce yourself and the Deri Protocol?
0xAlpha: Hello everyone. I’m 0xAlpha, Co-founder of Deri Protocol. Deri, your option, your future!
Deri Protocol 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.
Deri has been supporting three major derivative types: Perpetual futures, Everlasting Options, Power Perpetuals.
As of today, it has been deployed on multiple blockchain networks to serve traders’ hedging and speculating demands and processed a total trading volume of over 20 billion USD. Statistics show that Deri Protocol has become one of the most used DeFi derivative protocols per trading volume.
Larva | ANDAO Founder: Got it! Great product! So may we know your roadmap?
0xAlpha: let me simply paste it here.
Larva | ANDAO Founder: Sure, it’s the most important thing to know about a project. Thanks! Is there some news about Deri Protocol recently?
0xAlpha: Of course! Deri is coming to Arbitrum! We have been deployed on Arbitrum Rinkeby on this Monday. To celebrate this and encourage traders to provide more feedback on their usage, we are having a 7-day promotion on Arbitrum Rinkeby. Click here for more details:
Larva | ANDAO Founder: Cool! Don’t miss this my family! Could you please introduce your team?
0xAlpha: We are a team of experts of finance, math and computer science.
The core members have PhD degrees in science and come from the derivative business of Wall Street. The team has in-depth experiences of derivative pricing/trading/structuring. The team members have been in the crypto trading and solidity programming for several years.
More details can be found here.
Larva | ANDAO Founder: Got it! Very professional team! I have no question now and let’s pick some questions from our members. Some of you members will get a total of $300 reward if you were selected by 0xAlpha!
Q1: Can you please explain the process of arbitrage trading on your platform. Also, I will like to know why you choose to launch on Arbitrum? Thank you!
A2: That’s a great question but it’s a bit too complicated to be addressed in a short answer. So I would like to refer you to this article explaining the arbitrage on Deri.
As for why we choose to launch on Arbitrum, it’s the layer2 network with the best performance and the best ecosystem. In short, it’s the best L2 (probably the same reason why you are here.)
Q2: What AMM is Deri using or is it using its own?
A2: Deri is using DPMM, which is a version of PMM adapted for derivative trading. More details about DPMM can be found here
Q3: “With the introduction of “external custody”, Deri Protocol V3 supports multiple base tokens with substantially higher scalability and capital efficiency.”
You have mentioned that in your official documentation page. Could you expound that one a little bit more? Especially the part where you said “higher scalability and capital efficiency.”
A3: One of the key features of Deri V3 is “external custody”. In particular, we chose AAVE to be the partnering protocol of our external custody on Arbitrum, meaning the capital involved in Deri’s trading business is actually stored in AAVE.
In general, any token accepted by AAVE as collateral would automatically become a supported base token of Deri. Traders can trade with these non-cash assets (ETH, BTC, AAVE, LINK) as collateral, while LPs can provide non-cash assets as liquidity contributions. Since you don’t have to trade with stablecoin (cash) as collateral, it substantially optimizes capital efficiency. And since we leverage AAVE’s build-in mechanism to support multi base tokens (rather than support one by one ourselves), it’s super scalable.
Q4: Also, my next question. What will be Deri Protocol’s main contribution(s) or main goal(s) towards Arbitrum being the popular, cheap and quick to use Ethereum L2 scaling solution?
A4: Despite the high DeFi adoption, Abiturm still lacks a great derivatives trading platform providing a complete set of derivatives. Deri Protocol would fill that void as the main derivatives trading protocol, offering Perpetual futures, Everlasting Options, and Power Perpetuals. In Addition to the perpetual futures by Deri Protocol, this would be the first time the Arbitrum fellows can trade everlasting options and power perpetuals.
In short, Deri completes the DeFi puzzle of Arbitrum!
Q5: Can you be a bit more specific about the Powers, what mBTC² provides new, will we see new tokens soon?
A5: Put simply, you are trading the square of BTC price: if BTC doubles, BTC² increases 4x. However, if the price were to drop, the relative loss to power perpetual longs is far less than the potential upside.
Upon kick-off, we will provide mBTC² and mETH². And yes, there will be power perps of other symbols. The long-term plan is to provide power perps for any trading symbol in a permissionless way.
Q6: Do you consider the possibility of deploying any mechanism to generate revenue on all the collateral positions? Others perpetual protocols are offering this and it seems to be very interesting to attract traders.
A6: Are you referring to the margin capital that the traders deposit as collateral? This part of capital generates revenue (interest) within the current mechanism. That's one of the amazing features of Deri V3! It means if you as a trader just deposit margin without doing anything further, you are making money!
Larva | ANDAO Founde: Great! Deri V3!
Q7: First of all, I used your testnet dapp,It has problems. I tried many times but just deposited 2 asset ( will try again ). Futures Dapp is totally needed at Arbitrum because I got sick of cex margin bots.
I have several questions：
1- will it have mobile app ? For me it is needed .Many user can’t carry their PC near them. And at futures you always be online whenever you want (now DyDx is testing it )
2- Which assets you plan to add in the beginning mainnet of Arbitrum ? Like Luna, Sol, Avax, Ens
3-I don’t understand powers section. Will you clarify it?
A7: Users like you who found problems are the ones we like the most! Would you mind forwarding the issues to our discord ? That would be a great help to optimize our product.
1- First of all, whatever DyDx does cannot represent the trend of DeFi, simply because DyDx is fake DeFi. It’s just a centralized exchange running on AWS but adopting some starkware technology to communicate with Ethereum.
Back to your question, DeFi projects usually don’t build their own mobile apps because you need to access the on-chain smart contracts via wallets. But this is not a problem for non-pc users at all. You can access Deri Protocol from so many wallet app on phone: Metamask(mobile version), imToken, Safepal, TokenPocket, etc. You have many choices!
2-We will start with BTC and ETH and add more. All of those you mentioned are in the pipeline.
3- Put simply, you are trading the square of BTC price: If BTC doubles, BTC² increases 4x. However, if the price were to drop, the relative loss to power perpetual longs is far less than the potential upside.
More details can be found in this article
Q8: In Deri protocol, each pool charges the majority-side positions funding fees and reimburse the minority-side positions. This is to balance the long and short sides of the positions. How is the funding rate calculated and what fees do I pay when investing in a Deri project?
A8: It’s a very important question (touching the core logic of Deri DPMM) but a little bit beyond an AMA answer. So I would like to refer you to this document for details.
Q9: Deri Protocol slogan says that is the “ DEFI way to trade derivatives” but the only derivative trading that is mentioned in your website is Margin, how many types of Derivates Markets Deri Protocol is capable to support?
A9: At the moment, we provide three types: Futures, Options, Power Perps.
And we will add more. In fact, it is almost effortless for Deri to add support for more (funding-fee-based) derivative types without too much hassle. The liquidity pool of Deri Protocol can support different derivative types (futures, options, power perps, etc) at the same time.
Q10: Can you explain a bit about Arbitrage? Why is it called a special trader, what does it mean for Old Traders, then how Early Traders can be categorized as Arbitrage? How big is the funding factor in this case, so it can be categorized as Arbitrage?
A10: Being Early Traders is not enough. To take arbitrage you have to trade between Deri and another platform (a CEX or another DEX).
The DPMM of Deri Protocol is designed around the arbitrage mechanism to offset the net position of the trading pool. Please check out this detailed document explaining how to arbitrage
Q11: I am currently using Deri’s power perps, and I am researching all the power perps products of other platforms. Solana’s Friktion Options Protocol has launched a beta service of a volatility exchange called entropy. Here, we plan to release a 0.5 power perps that can directly hedge yield farming. It is possible to directly hedge impermanent losses, so it has excellent capital efficiency. A 2 power perps imitates a call option, while a 0.5 power perps imitates a put option. However, since this exchange is a bidding system, the trading volume is very low. It would be great if Deri protocol released a product like this.
A11: You won’t be disappointed as we are releasing a product like that. And even better, Deri’s power perps are provided by AMM (DPMM, to be specific) so the issue you mentioned (“Since this exchange is a bidding system, the trading volume is very low”) is perfectly avoided.
As for the “0.5 powers” VS “2 powers”, we will roll out the 2 powers at the beginning for sure. And we are evaluating the 0.5 powers too. There is no technical obstacle whatsoever for us to provide 0.5 powers.
Q12: Can you tell me more about the feature: Simulator PNL? Will it be 100% correct or will there be some deviation with reality ? And how does it work？
A12: There will be slight deviation with reality (That’s why it’s called simulator). However, deviation would not be significant.
It works simply: it calculates the theoretical derivative (options, powers) price for hypothetical underlying price (specified by moving your mouse) so that you can see clearly where it goes when the underlying price changes.
Q13: What is the current operation of the burn mechanism? Have 80% of the previous votes been publicly implemented?
A13: Since the start of the DERI burning mechanism, over 2.45 million DERI tokens have been burned. Please refer the details here
Q14: Who have the right to change/add pool on your website? Is it possible to create a pool by myself?
A14: At the moment, that right is owned by the team but this will soon be transferred to the community DAO. It’s already on the TODO list.
Also, we will soon support permissionless pool-creation (just like the pair-launching on Uniswap).
Q15: Nowadays, NFT and Metaverse are booming & popular. Market follows the hype of them. Do you have any plan related to NFT & Metaverse?
A15: DeFi is the financial infrastructure of Metaverse. As long as people in Metaverse need a way to deal with their financial demands, they must use DeFi, not CeFi or Fake DeFi. And Deri Protocol is where people should go to when it comes to derivative demands.
Larva | ANDAO Founder：Can’t agree more! DeFi is the financial infrastructure of Metaverse.
Q16: Will there be any chance to trade Arbitrum P2E game coins on Deri Protocol? Moreover, most importantly, will $MAGIC be tradeable?
A16: Of course. If you have any requests or proposals, please go to our discord to talk about them.
Welcome to join a decentralized community protecting the integrity of the Deri Protocol through discussion and on-chain voting.
Q17: Since the Defi Protocol team is built around 5 people from mainly Pekin and Shanghai, do you plan to have a more international team in the future or do you intend to focus primarily on Chinese talent?
A17: I think you were referring to the team members listed on our website. But that’s not the whole team. Quite a few members in the core received education in China — that is what you saw on the website. However, the team is pretty diversified and decentralized now. Geographically, we are distributed over Asia, Europe and North America.
As I am talking to you guys right now, I am sitting in the Bay Area of USA.
Q18: Now Arbitrum holds to more than half of TVL at layer 2. For future, what is your prediction ?
A18: What’s more important than TVL is the ecosystem. For example, for Deri to be deployed on any network there has to be some dependencies: Oracle, Spot dex, Lending Protocol. On Arbitrum we use Chainlink, Uniswap, and AAVE. Ecosystem has a Matthew effect. Right now Arbitrum has the best ecosystem, without any doubt.
Q19: when is the launch?
A19: We are doing the last-stage testing and aiming at the beginning of May. The preparing jobs include the public testing on testnet.deri.io. So I would encourage you all to go to try it out on testnet
Q20: Is there any video for the project to understand it better?
Q21: What is the major difference between the Deri protocol Version 1.0 and Deri Protocol Version 2.0 and Deri Protocol Version 3?
A21: Multi-base-token supporting was introduced in Deri V2: you can deposit tokens other than stablecoins (i.e. cash) to do LP or trading. That's a huge promotion of capital efficiency. Also, everlasting option was introduced as part of V2.
Deri V3 has optimized the multi-base-token supporting by introducing the "external custody", a more scalable solution. Also, Deri V3 supports futures, options, and power perps in a uniform way.
0xAlpha: Haha! I explained that above. From our perspective, ecosystem is the key! It’s amazing! so many insightful ones!
Larva | ANDAO Founder: We enjoyed a great AMA with you!
0xAlpha: Same here! I enjoyed it a lot! Reminder again: Don’t forget to go to out testnet to try Deri out! Again, thank you guys, my dear Arbitrum fellows! Bye now.
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.