67 total views
Deriswap provides a comprehensive and efficient market for trading, options, futures and lending, allowing LPs to maintain risk exposure and enjoy additional fees and returns.
Original title: “New Defi Gameplay | 1 minute to understand YFI founder AC’s new project Deriswap”
Written by: Andre Cronje, founder of YFI Compilation: Porridge Overnight
On November 23 news, yearn finance (YFI) founder Andre Cronje announced his latest work Deriswap today. It is reported that the project combines Swap, options and lending into a single contract with high capital efficiency, thus providing users with a Station-based transaction services. Up to now, Deriswap is in the review stage, and AC itself has not released the relevant contract address.
The following is a brief introduction about Deriswap from Andre Cronje:
I am more and more fascinated by capital efficiency, and the current (DeFi market) liquidity is fragmented. You can choose one of the following agreements:
- Swap transactions (Uniswap, Sushiswap, Bancor, etc.)
- Options (Deribit, Hegic, Opyn, Primitive, etc.)
- Borrowing (Aave, Compound, DyDx, etc.)
Deriswap (currently under audit) combines swap, options and lending into a single contract with high capital efficiency, allowing swaps, options and lending interactions between the two assets.
Let us consider the ETH-BTC pair.
The swap contract is a standard Uniswap x * y = k, and the liquidity provider (LP) provides ETH-BTC as working capital. Traders can exchange ETH for BTC and vice versa. LP earns transaction fees.
The TWAP oracle is expanded to read data every 30 minutes, which allows us to report the realized variance, realized volatility, implied volatility, and price on any selected time series.
The above derived values allow us to quote call/put options using the Black Scholes option pricing model. These are all American options and can be settled at any point in time. Settlement occurs in the pair asset, so call options need to buy full value, and put options need to sell full value.
Combining (swap) swap transactions and options is an interesting interaction. Options are a transaction against volatility, and transaction fees are a hedge against volatility. The pair volatility (+ve transaction fee) offsets the loss of settlement options (-ve settlement).
In addition, full settlement should also be selected, because LP has a perpetual position in its asset pair itself. If only the profit is settled, it is a permanent loss, but if the underlying asset is settled, it is an impermanent loss.
Settlement can be done in ITM or OTM.
Futures expand and simplify options, and you can pay basic additional fees, which allows you to settle with another pair on a user-defined future date.
The loan expands and simplifies futures, you pay additional fees and collateral, which provides you with borrowed assets. Then, you can settle the borrowed assets before a user-defined future date, or confiscate the mortgaged assets.
Loans, futures, and options are all tokenized through NFT, allowing the creation and trading of secondary markets.
Deriswap provides a comprehensive, capital-efficient market for transactions, options, futures and lending, allowing LPs to maintain risk exposure and enjoy additional fees and returns.