On Friday, March 11th, we had a Telegram AMA with Deri’s co-founder and CEO, 0xAlpha. The highlight of this AMA is around the Deri’s upcoming new derivative — Power Perpetuals
The AMA Entrance: https://t.me/DeriProtocol
Let’s watch the detailed & complete AMA recap below:
Hello everyone~ it’s been a while since last AMA. We have been through a lot of milestones during this period. Let me first quickly summarize them before I start with the questions.
1. Deri Protocol became a founding member of the BNBChain DeFi League Steering Committee. We look forward to improving the experience for the next generation of DeFi builders and users.
2. Deri crossed another milestone. Our accumulative trading volume has surpassed $ 20 billion!
3. Deri Protocol has moved to the new domain name: https://deri.io/
4. Our website now supports 8 languages: English, Korean, French, Vietnamese, German, Chinese, Japanese & Turkish. And we will support more!
5. Thanks to the global community’s contributions & support, Deri Protocol now has an official Slogan now: “Deri, your option, your future!”
6. Our governance page has been updated. Deri’s decentralized governance will be established through Governance Discussion, Poll Votes & Executive Votes. Please visit the new page: https://deri.io/#/governance
7. Our support system is live, too! You can write to us by submitting tickets in “support” channel of Deri’s Discord once you need help, want to report bugs & have suggestions for our product.
Deri Discord: discord.gg/bdk6JutcWj
You can refer the support page: deri.io/#/support
Last, the most exciting one: We are rolling out Power Perpetuals! It will be officially available to trade on Mar 14th (the coming Monday!). Stay tuned for it!
OK, let me start to address the questions.
Q1: Suggestion after liquidation to have leftover funds return to trader, following best practices such as Binance; They also charge a small liquidation fee like $25 and threshold is like 0.5% maintenance margin with up to 125x leverage (You already collected this one I think)
A1: There are several related factors involved here:
1. For the leverage: we now provide 12.5x, which is lower than the typical leverage offered by centralized exchanges. This is due the fact that blockchain cannot process as fast as centralized exchange. So we have to be more conservative than centralized exchanges in terms of leverage.
2. For the early-liquidation mechanism: I explained it before that the so-called “early liquidation” is no good for the traders. For example, liquidating your position at 4% margin level and returning 1% to you is almost equivalent to liquidating your position at 3% margin level except the liquidation happens 1% earlier. In my opinion, this is a very shabby trick to screw the traders.
That being said, we are investigating to improve our liquidating mechanism. So your input is very much appreciated. Due to the limit of blockchain mechanism and performance, we cannot just do whatever practice adopted by centralized exchanges. But we are always looking for better ways to facilitate on-chain derivative trading. That’s our mission.
Q2: Maybe we should reverse split the coins? At 0.08 it looks more like a meme coin and we want to attract actual investors (change in tokenomics?)
A2: Technically, it’s doable but not easy (a bit complicated I would say). I personally don’t see a point from this. But I do see some responses from the community for your suggestion.
This belongs to the scope of community governance, so you have your right to launch the proposal through our new governance system.
You can start from here: https://deri.io/#/governance
Q3: Do you plan to create a Russian community? there are many of us who love the project very much.
A3: Yes, we do.
Q4: Until liquidations are on par with centralized exchanges and 90%+ value is returned to trader, people will not use Deri because too high chance of losing principal
A4: We are investigating how to optimize the liquidation mechanism to achieve a more “fair” division of the remaining value (if any). but early-liquidation is not a good one. it’s only a shabby trick as I said. It’s really screwing you but making you feel better.
Q5: Could you clarify what was the recent Pancakeswap LP hedging tweet about. Are we expecting to have such a feature?
A5: Yes, one of the most important use-cases of power perps is to hedge the impermanent loss of providing liquidity to CPMM such as Uniswap or PancakeSwap. We will soon publish another article to explain the details step-by-step. Please stay tuned!
Q6: What is Deri’s connection to paradigm? Idea for EOs & power perps seem to be originating from their (academic) work
A6: EOs and power perps are both originating from Paradigm Research’s academic work. Dave White and I had a lot of discussions over EOs and power perps. These discussions have been very helpful, which was acknowledged in our whitepaper.
Q7: Pancakeswap seems to entering the perpetual space with a new partner. How does this affect Deri if and when it’s not Deri
A7: I have no comment particularly on other teams entering this sector.
In general, it’s an obvious thing that derivatives (including perpetuals) are sitting in the core of modern finance. It won’t be surprising if any of the teams show interest in this. But doing it is another story.
Q8: Basically the perpetual game seems to be over. What kind of strategic changes is Deri going to make? They could not even compete with existing players and now PancakeSwap(i. e a monster) is entering the game with ApolloX. Deri seems to be purely an option solution now, sure power perps will be launched soon but don’t think they will attract many individual traders.
A8: I don’t agree with your regarding “Basically the perpetual game seems to be over”. The whole DeFi derivative sector is in its early stage. Other teams coming in only show the significance of this sector. It’s a very challenging field. The Deri team is in a good position to welcome all the challenges.
Regarding other teams entering the sector, think of it this way: Would you prefer our sector to be an exciting one (that many want to enter), or a boring one (that nobody wants to enter).
Q9: Why don’t the team members show their faces and real names? It looks a bit weird like they are hiding from the community
A9: It’s a DeFi project, which means we simply provide a protocol and every single detail is out there for you to check. Let’s again remember the motto “Verfiy, don’t trust!”.
Basically that is saying, I (or the team) might be a saint or a criminal but that should not matter in this world. You should not make your judgement based on who I am. Instead, you should make your judgement based on whatever information out there on the blockchain. Otherwise, you are not doing a crypto investment.
Q10: The concepts and terms in Deri website are difficult to understand. Will they be simplified and more friendly to new users in the future？
A10: I agree with you on that we need to simplify the UI/UX, while this is not easy. And we are working on this problem. While the terms are just what they are, we cannot change them, but we can provide more explanations on-spot to lower the learning curve.
Meanwhile, please let us know which particular parts you found most confusing so that we can optimize them more specifically. We need your input on this! Very much appreciate your help!
Q11: What are the advantages of powers over Squeeth?
A11: I briefly commented on Squeeth in our introduction paper：
Let me simply quote:
In Jan 2022, Opyn implemented the first power perpetuals of ETH, Squeeth. While mathematically well designed, Opyn’s Squeeth is essentially a synthetic asset (synthesizing the square of ETH price), rather than a derivative. In the Opyn framework, people mint oSQTH (a “spot” synthesizing ETH²) against collateralized ETH, and trade it on Uniswap just like trading spots. Thanks to its sophisticated design, oSQTH should theoretically work well in terms of tracking ETH² (the role of a synthetic asset) but would not sufficiently serve the purposes of derivatives. Among its drawbacks, lack of leverage and hence a low capital efficiency is limiting the adoption of Squeeth as a serious derivative tool.
Q12: Will this powers Compulsory liquidation？
A12: If your question is “is it possible for a position in powers to get liquidated?”, then the answer is yes. After all, we provide margin trading for powers. Any margin trading is subject to liquidation.
Q13: Could you introduce the new Power Perpetuals in a relatively simple & understandable way?
A13: Let me think about this. We have already tried to make things as easy as possible but there is always room to optimize. We might publish another article for your request. Also, we will provide some tutorials (e.g. in videos) which would also make things easier to understand.
Q14: Could you explain the below 3 Powers trading practice with scenarios?
1. Long powers to boost the up-side profit with protected downside
2. Short powers to charge the funding fee as a yield
3. Trade powers to hedge the impermanent loss of Constant — Product Marketing Making
A14: 1 refers to the fact that a long position in powers of BTC, will enjoy a squared profit if BTC goes up. Put roughly, if BTC price doubles, then a power of BTC (BTC²) will quadruples. In other words, when BTC’s gain is 100%, your return is 200%²-1 = 300% (3 times of BTC’s). If BTC price get cut by one half (BTC down 50%), your loss is 75% (only 1.5 times of BTC’s).
2 refers to the fact that a short position in powers constantly receives funding fee income. If you take a short position of BTC² and BTC stays stable, then you earn the funding fee kind of “for free”.
For 3, please wait for our next article explaining the details of hedging impermanent loss of CPMM (Uniswap or PancakeSwap)
About Deri Protocol
Deri Protocol = (Perpetual Futures + Everlasting Options) x Decentralized.
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.