On Friday, November 19th, we had a Telegram AMA. The following shows a recap of the questions with 0xAlpha’s answers.
Since the last AMA, we had some amazing milestones. The first Trade-to-Earn has completely super successfully. We had a great boost of trading volume! During Epoch1, people have traded 5.7B$ of futures and options on Deri! That was beyong our expectation. The total trading volume on Deri has achieved 7.7B$, futures + options!
Q1: Is the team in negotiations with some dex or not yet?
A1: I am not sure I understand this question. Could you clarify what DEX you were referring to? If this is about getting DERI traded on DEX, most of the DEXs are permissionless so no negotiation is needed.
Q2: Admins I have a proposition: double reward on the Deri token pool. Deri +BNB
A2: Were you referring to the reward for liquidity mining?
If yes, that unfortunately is not doable, simply because we don’t have that much BNB to reward the LP. Neither does it make sense to reward the LP of Deri Protocol with some other tokens.
If you asked this because there is BNB award in our Trade-to-Earn program, please note that the BNB special award will be provided by the BSC $100M Liquidity Incentive program, not from us.
(i.e. from this one:
Q3: Am new here..please what is the use cases of Deri?
A3: Not sure if you were referring to Deri Protocol or the DERI token.
For the former, Deri Protocol is for you to trade derivatives (perpetual futures and everlasting options).
For the latter, please refer to this document:
Q4: Like i see there are only calls, but u can short calls, as in sell calls to people?
A4: First of all, there are not just calls, but also puts. And yes, you can sell calls to people.
Q5:Hi, why the daily trading volume of Deri up and down too much?
A5: Fluctuations of trading volume are quite common and just normal.
Q6: Hi, great project. I’ve been holding DERI for a while. Today I just read the tokenomic and raise me a few concerns. It seems that the allocation to team and advisor is kind of a really large amount (260M which is equivalent to 26% of Total Supply and 65% of Initial Circulating). Is the rate normal compared to other projects?
A6: The allocation was only following the common practices and thus at par with most of the other projects, if not below.
You can check out the other projects (Uniswap, Compound …) yourself.
FYI, the original plans allocated 360M to the team and early investors, which was following common practices too. However, the operation team transferred their part, 100M, to the treasury.
Q7: So the BUSD pool trades against the derivatives traders?
A7: Yes, your understanding is correct. You can find more details of this from our whitepapers: https://docs.deri.finance/whitepaper
Q8: Do you have any plans for index futures trading? For example, the large cap index.
A8: We have been working on index futures for a while. For example, we have iGAME, iBSCDEFI. And we are definitely gonna have more. If you have any suggestions on this, please share them with us. For example, what kind of “large cap index” you have in your mind? we are all ears!
A9: We have 10+ teammates distributed over Asia, Europe and North America — I guess that is what you are asking.
Q9: We have 10+ teammates distributed over Asia, Europe, and North America — I guess that is what you are asking.
Nevertheless, I want to point out that, beyond the small team of 10+, there are way more people out there who are doing a lot of work for this project, which is owned by all of us (yes, including you!). For example, we now have 7 telegram groups of local languages (French, Japanese, Chinese, Vietnamese, Thai, Spanish, Turkish), which are all run by the communities. Without the “extended team”, it is impossible for us to achieve what we have done so far. Deri is really a project owned and run by the community!
Q10: I am wondering if I stake my BUSD in BTC pool. What will the platform use my BUSD for?
A10: The pool is playing the role of the counterparty for the trading. That is, if you are long a future contract of BTC, the pool would take the opposite side of your trade. Please read our whitepapers for more details (https://docs.deri.finance/whitepaper)
Q11: Hi ADMINS, I have a suggestion. knowing that bsc just invested in order to bring more liquidity on the platform, almost all the strategies that you will offer will be based on rewards. Those rewards added to the high inflation (even if it has decreased is still a lot) would be a double side sword to hold on too. Because you might bring users and liquidity but the price of the token would inevitably get suppressed. what do you think about rewarding with vesting? I know that you are kinda doing it by letting winners withdraw 10k der/day. what do you think about making it more relevant? just saying
A11: Yes, as you said we are doing “rewarding with vesting”. I am guessing that, by “make it more relevant” you meant a longer vesting period? Please keep in mind that it has pros and cons too. If you are the one being rewarded, of course, you want the vesting period to be as short as possible. Applying a longer vesting period to the reward obviously will make the reward less attractive, which is against the initial motive of such reward.
That being said, what is the most proper vesting period is open for discussion. If you think the current vesting period is too short, please share your thoughts.
I want to add a bit more here. It’s not necessarily for your point. Just more thoughts that came into my mind about the “inflation”.
You might want to look at the process of rewarding participants from another perspective: while in the short-term this might bring some inflation and put some pressure on the token price, it is how the community grows in the long term! People contribute to the system and earn tokens, that is exactly the purpose of “mining”. This has taken place for Bitcoin, Ethereum, etc, and it’s also gonna be the approach of Deri. Otherwise, how do you suggest new-comers get DERI tokens? Only buying from the existing holders? I don’t think that is the tokenomics we want.
Put simply, the Deri community is growing. For such an open game, “inflation” is not necessarily your enemy. The key is to grow the community faster than the inflation. So I am again encouraging you all to help grow the Deri community. Ask your friends to trade or mine on Deri, or join the Deri community in any possible way.
Q12: Which chains are Deri Protocol running on? What are its privileges and features compared to other projects? Is there a mining system? If yes, how does the mining system work? $DERI #DeriProtocol
A12: You can find the answers to your questions in the links below:
Q13: Currently there are already derivative solutions for the crypto space, but they are usually not enough, so how is the solution proposed by the Deri Protocol project different and why are you betting that it will really serve the community that needs it?
A13: This tweet post is for you: https://twitter.com/DeriProtocol/status/1460942483408498695
Q14: 100k Busd for buying back deri? Will you spend all 100k one time? From when to collect the buy&burn fee? this month?
A14: The executing team will make the call independently.
The “protocol fee” has been collected ever since DIP1, but at a different ratio prior to DIP2.
Q15: Is there any reason to leverage up to 10X? Can't you make it higher?
A15: It is technically possible to make it higher. As a matter of fact, internally we had discussions whether we should provide a higher leverage in Deri V3.
It is easy to just provide a 15X or 20X leverage but we need to think about the risk management of the traders. We definitely don’t want to induce the traders (especially the non-professional ones) to abuse leverage. That is what has been holding us from going more aggressive about leverage.
Please note that 10X is already a very large leverage, in my opinion. I myself, as a professional trader, rarely use leverage as large as 10X in my own trading business. And I am pretty sure any professional trader would tell you the same thing.
Q16: Liquidity mining is a tool for projects to attract liquidity by giving incentives and rewards. generally speaking, liquidity mining aim to attract liquidity until the protocol is able to give sustainable rewards to liquidity provider in form of fees generated and redistributed. if the mining will take decades to mine the 600 mil DERi , what is the purpose of burning to be recycle DERI? by the time DERI will be all mined DERI liquidity mining could be irrelevant because the protocol could flourish and live with fees or we could brake (we don't want that). So from an investor/trader point of view knowing that the DERI will be gone forever changes a lot. I would propose a governance votation for this topic. This proposal would help out holders and investors. Don’t forget that DERI is a project but it’s also a COIN, so we are fine with all the incentives you are giving away to attract liquidity but the next step will be protecting holders and investors, this could be the first step towards us. thank you very much.
A16: First of all, this falls in the scope of token governance. (So it’s not something that I should decide on my own.) “Burning to be recycle DERI” was the decision of DIP1.
Let me clarify the difference between the types of burning mechanisms:
1) burn the tokens so that they will be mined out again, i.e. the ultimate supply of DERI will remain 1B.
2) burn the tokens so that they will be put into a blackhole, i.e. the ultimate supply of DERI will decrease.
Please note that it’s the circulating supply that matters and the two mechanisms have no difference in terms of impacting the circulating supply whatsoever (they would take out the same amount of DERI from the circulating supply). The only difference is that: with the 1st type of burning mechanism, the mining process will last longer.
Let’s say we stick to one single mining algorithm, if all the 600M DERI will be mined out after 20 years for approach 2. Then for approach 1, after 20 years, there will still be more DERI tokens (the burned ones) to be mined. So you are really talking about whether we should have more DERI tokens to be mined after 20 years. (20 is not a decided number, just for example.)
Nevertheless, as I said, this falls in the scope of token governance. So you are welcome to launch a DIP vote if you are unhappy with the current mechanism.
(I myself think the current mechanism is perfectly fine, as long as you get the logic I explained above.)
Q17: Also, why is it that the OPT liquidity pool has such high fees to use, while all the other pools have very small fees?
Removing liquidity from OPT costs .01 BNB, while all other fees are about .001-.002 BNB
Q17: That is because the smart contract (specifically, the trading function) of options is more complicated than that of futures. This is how blockchains works: the more complicated the action is, the more gas would be consumed.
Gas consumption is one of the primary focuses during our development. This will be substantially optimized in V3.
Q18: But they can use big position to manipulate the mark price.
A18: No, they cannot.
Technically they can push the mark price up by entering a large long position (or push it down by short), but that kind of price-push cannot make any profit. The only way to make profit is to speculate on the correct direction. This is how DPMM works. And every possible scenario has been thoroughly analyzed.
As a matter of fact, with the introduction of DPMM to futures trading (the recent upgrade from V2 to V2.1), any trade would push the mark price toward the trading direction but that’s not a possibility of manipulation. Among the several considerations behind this design, it makes arbitrage much easier because of the slippage mechanism. More aggressive arbitrage activities would protect the LPs better.
As for the recent LP loss due to the trading activities on MBOX, it’s really because the arbitrage on the Inno Zone is not quite active.
We would call more arbitragers to participate in the funding fee arbitrage.
Please refer to this sample code for doing so:
Q19: The problem is trader can monitor the price and withdraw when it rises/drops sharply. I understand that. I mean there is a natural advantage for traders. They can take action faster than miners.
A19: This is not about taking action faster. Tt is about the information asymmetry you mentioned below.
It’s a complicated issue but I will try to explain it as simple as I can.
This is the situation that a market maker needs to handle. In the traditional centralized exchanges, market makers are facing this issue too: the active traders might trade with some information that the market-makers don’t know.
So market making is really all about dealing with the information disadvantage. That is the case for both traditional market makers as well as AMMs (in our case). In other words, the “natural advantage for traders” exists in every marketplace. And usually market makers are compensated with bid-ask spread for their disadvanteges.
The so-called AMM (automatic market maker) is essentially adopting some kind of market-making algorithms and let the LPs (non-experts) to participate in such market making. So it’s really the same mechanism adopted here: market-makers are at disadvantage but compensated by the several fees (corresponding to the bid-ask spread in tranditioan markets).
This is what DPMM is about.
That being said, we are working on next-generation AMM, together with the team of DODO. there is always space for AMM improvement.
Q20: What does v3 makes so better than v2?
A20: That’s a big question beyond the scope of AMA. I will explain all the improvements of V3 in a separate session.
Q21: Another question for the AMA: many users are bothered by the fact that they lose everything after a liquidation, perhaps one could consider in the future that the amount that is liquidated is divided between 3 parties. Liquidity providers, traders & liquidators? So a part let’s say 15% goes back to the trader so he doesn't lose everything
A21: Let me explain why it does not really make sense to share some of the remaining value to the trader with a concrete example.
Let’s say the liquidation point is 5% (i.e. maintenance margin = 5%). Upon liquidation, if 40%, 40% and 20% of the remaining value go to LP, the liquidator and the trader, respectively. then it is equivalent to the following:
1. setting the liquidation point to 4%,
2. let LP and the liquidator to share the remaining value half and half (50% and 50%)
3. But do the liquidation 1% earlier (i.e. trigger at 5% instead of 4%)
This is even worse than setting the liquidation point to 4% and let LP and the liquidator to share the remaining value 50–50 because the position gets liquidated 1 percentage point earlier.
Q22: Ah thanks for reminding me of my third question, when will you introduce stop loss?
A22: “stop loss” won’t be easy on blockchain. we don’t have a plan for that yet. Maybe after V3 is online we will add some plug-in mechanism to implement “limit order” and “stop-loss” orders. but not now.
please note that blockchain is a state machine. it does not naturally support anything that needs proactive mechanism, such as “stop loss” order.
Q23: I don’t think this description is right, when I buy a put option that means I am a short guy. so the direction is short. but the dapp shows the direction is long
A23: We are simply following the terminology of options trading here. It is true that when you long a put of BTC, your delta of BTC is negative. In that sense, you are short BTC. But here when the website says you are long a put of BTC, the action “long” is with respect to the option itself, not the underlying asset. This is just how options traders express their trades.
Q24: Hi 0xalpha. I have a question about minning risk in Deri option inno zone. Yesterday there is great drop in value share because a trader made a lot of profit from MBOX/USDT option. Do you think the risk of minning in inno zone is higher than expected?
A24: I would not say it’s higher than expected. This is an AMM, meaning LP are playing the role of market makers. That kind of loss is quite normal for market makers in centralized exchanges for traditional market makers on volatile symbols such as the ones on Inno Zone.
The rationale of setting Inno Zone is partially for this. We already have Main Zone, but we put the more volatile trading symbols in Inno Zone so that the risk are separated.
Q25: DERI TOKEN POOL IS THE ONE MAKING MORE VOLUME out of the futures one. Why we still dont have btc o eth to trade knowing that are the most traded pairs?
A25: I am not sure I got your question. We already have BTCUSD and ETHUSD as trading symbols in Main Zone. Are you saying why we cannot trade BTCUSD/ETHUSD with DERI as base tokens?
We will discuss on this internally. Also please discuss it within the community. We would like to know whether it’s common demand to trade BTCUSD/ETHUSD with DERI as base tokens.
Q26: I am also concerning that there might be some information asymmetry between trader and miner. When there is sudden price move (like mbox yesterday), traders can act faster than miner to gain/stop loss and have better advantage to avoid great loss. It is also harder for miners to hedge market risk for inno zone because miners cannot monitor the net position for some many indexs 24/7. I believe that when there is unilateral quotation, miner may bear a huge risk.
A26: The information asymmetry issue was discussed previously.
As for hedging market risk for LP, it’s doable. Please refer to this FAQ:
Q27: If there is not enough arbitragers, the pool is under high risk right?
A27: Yes, that’s correct.
One of the motivations for us to upgrade from V2 to V2.1 is to make it more convenient for the arbitrators so that the pool would be better protected.
Q28: Any compensation for the huge loss on the MBOX LP?
A28: I guess you are asking about compensation from the team? Unfortunately, that’s not something we can do here. We are simply developers implementing protocols for you to use at your will and risks. The risk of mining on Deri was made very clear. You could have profit and you could have loss. I guess you won’t share your profit with the team. You cannot socialize loss while privatizing profit.
Q29: True. There is always information asymmetry… But here in Inno zone we can see the compensation of fees is minimal compared to the potential market risk. I suggested that the Inno zone pool can be introduced as high risk pool so the new comers can choose the risk level.
A29: Fees of the Inno zone are already set higher than that of the Main Zone, for that reason. But there might be a question whether the fee is high enough. We will evaluate on this. Meanwhile, please share with us your thoughts on the fee setting.
As for the risk reminder, we have made it very clear about the risks. And thanks for your suggestion — we will emphasize the higher risk of the Inno zone in the future.
Q30: And I cannot see any information about the arbitrage on the Inno Zone is not active. Miners who mine in the Inno zone maybe mislead by the FAQ page with the arbitrage mechanism and assume that they are protected. Hope there is a way for miners to better understand the underlying risk.
A30: The arbitrage mechanism is never a guarantee of protection. Arbitrage is always a spontaneous activity motivated by profit-seeking, never an obligation. That’s also true for the main zone. it’s just the trading is more active on Main Zone so the arbitrage is also more active.
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.