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Deri Protocol x Satoshi Club AMA Recap from 16th of February

Hello, Satoshi clubbers Another AMA took place in Satoshi Club and we would like to introduce to you the AMA session with our friends from Deri Protocol and our guest was 0xAlpha and Dev (Will not DM for ETH). The AMA took place on 16 February.

The AMA session was divided into 3 parts with a total crypto reward pool of 1000$

In this AMA Recap, we will try to summarise the most interesting points for you.

Part 1 — introduction and questions from the Telegram&WebSite

0xAlpha:
Hello, my fellows from Satoshi Club. How you are guys doing?

D. | Satoshi Club:
Hello! welcome to Satoshi club!

Andrés M. | Satoshi Club:
Welcome, we are so happy to have you here with us.

D. | Satoshi Club:
Our guests today — @im0xalpha @dev_deri !

Let’s begin our AMA with intro

could you guys please introduce yourselves and Deri Protocol

0xAlpha:
Deri is a decentralized protocol for users to exchange risk exposures precisely and capital-efficiently. It is the DeFi way to trade derivatives: to hedge, to speculate, to arbitrage, all on-chain. This is achieved by liquidity pools playing the roles of counterparties for users. With Deri protocol, risk exposures are tokenized as NFTs so that they can be imported into other DeFi projects for their own financial purposes. Having provided an effective on-chain mechanism to exchange and hold risks, Deri protocol has minted one of the most important blocks of the DeFi infrastructure. Or, in one short phrase, Deri is an Uniswap-like BitMEX.

D. | Satoshi Club:
Nice, this sounds cool

Can you tell us a bit about your team as well?

0xAlpha:
Deri Protocol is designed and developed by DeFi Factory, which is a team of experts in finance, math, and computer science. The core members have Ph.D. degrees in science and come from Wall Street. The founder 0xAlpha (i.e. me) has worked in Deutsche Bank, Goldman Sachs, and a hedge fund, with in-depth experiences of derivative pricing/trading/structuring. The team has been in the crypto trading and solidity programming field for several years.

D. | Satoshi Club:
Got it! so you prefer to stay anonymous?

0xAlpha:
So the keywords you need to remember is that this is an elite team of top-level of finance, math, computer science.

Andrés M. | Satoshi Club:
That’s great, a strong team that people can trust. @dev_deri what about you?

0xAlpha:
It’s not anonymous. I, 0xAlpha, am the founder. and you can find me on my personal Twitter (@0x_Alpha). feel free to follow and message me.

Andrés M. | Satoshi Club:
“Risk exposures are tokenized as NFTs” could you explain us a little bit this part?

0xAlpha:
That’s a great question!

Dev (Will not DM for ETH):
We’ve been a part of crypto for few years and have understood that DeFi is definitely ready for a complete turnaround. Traditional finance can’t innovate like the rest of crypto. Within the DeFi space, we’ve identified derivates to be of key interest within the Dex format. This is why we are working with Sushi and other DeFi teams to build a long-term viable product and reduce dependency on the CEX.

Andrés M. | Satoshi Club:
Thank you for the introduction Dev, nice to meet you

0xAlpha:
Composability is one of the keys of DeFi project. the way to achieve composability to through tokenization: to have the core element tokenized.

D. | Satoshi Club:
Nice! Actually, we have a question about NFTs in the first part of our AMA, so you can talk and explain more about this a bit later

0xAlpha:
In the case of Deri, which is a solution of derivative, risk exposure is the essential element dealt with through the whole system. Hence, risk exposure is being tokenized as NFT. And the reason this is tokenized as NFT is everybody’s position (and thus risk exposure) is different from others. That is why it’s NFT, instead of a fungible token like ERC20.

Andrés M. | Satoshi Club:
Then let’s proceed with the first question of part one, @im0xAlpha and @dev_deri are you ready?

0xAlpha:
Cool. Can’t wait!

Andrés M. | Satoshi Club:
Thanks for the clarification.

D. | Satoshi Club:
Thank you guys for the great intro!

Q1 from Telegram user @alice_wonderland12
Deri Protocol is a decentralized protocol to exchange risk precisely and capital-efficiently, would you explain in more detail what is considered capital efficiency in Deri Protocol and what tools of the platform will allow users to achieve it?

0xAlpha:
Great question! Capital efficiency means, to achieve a certain financial purpose, you would prefer to have as little money held as possible. for example, you want to have a risk exposure of 1 million USD of the stock market, you need to actually put $1M if holding stocks but you might achieve that with only $100K by using derivatives like futures. Basically, that is done by leverage. so leverage is something built-in with derivatives. Deri provides leverage just like other derivatives (e.g. the perpetual contracts on BitMEX), thus it achieves high capital efficiency. And this is in comparison with some other DeFi projects that are sometimes referred to as a derivative solution, such as Synthetix, which does not provide leverage and thus it does not provide the same capital efficiency. (that being said, Synthetix has its value just a synthetic asset solution. just not good for derivative).

Andrés M. | Satoshi Club:
How much is the maximum possible leverage you provide?

0xAlpha:
Deri itself is a protocol. whereas the max leverage is a parameter of every single liquidity pool. For the first several pools that are being rolled out, this parameter is set as 10 (i.e. initial margin = 10%).

D. | Satoshi Club:
I have never worked with derivatives, can you explain for such a rookie as me (and for other newbies in the Satoshi club) how to start working with them by using your platform? In a less risky way.

0xAlpha:
Sure. Say you think BTC is gonna go up and would like to profit from this prediction. One way to do that of course is to buy BTC. However, the derivative way to achieve that is to open a LONG position with Deri’s BTCUSD pool. Then you will make a profit if BTCUSD goes up as predicted (but lose money if you are wrong).
As for the risk concerns, you just need to manage your position and be careful with your leverage.

D. | Satoshi Club:
Got it! good explanation

Thank you for the answers! ready for the next question?

0xAlpha:
Another way of using derivative is when you would like to hedge your risk on BTCUSD’s price fluctuation, then you enter a position of the opposite direction of your existing risk exposure.
Yes, please.

D. | Satoshi Club:
Q2 from Telegram user @yellowchamp
Can you describe a little bit about the TVL Race event in Deri Protocol? How do these events work? What are the requirements and qualifications in joining this race? What are the benefits we can get in participating TVL Race? Can you also site some pros and cons of this race? Thank you.

0xAlpha:
TVL race is to prepare liquidity for the trading pools. Basically, we have pools with 4 different base tokens (USDT, BAC, BUSD on BSC, HUSD on HECO), and you can choose any of them to deposit the corresponding base tokens for staking. Depending on their time of reaching the target TVL, there will be 1st/2nd/3rd places, which will be awarded 1.5M/1M/0.5M DERI.

Dev (Will not DM for ETH):
https://twitter.com/deriprotocol/status/1358866366162374658?s=21. Users can still join the TVL race. 2nd and 3rd spots are still up for grabs.

0xAlpha:
To join the race, you can just go to the website and choose a pool to deposit the base tokens.

D. | Satoshi Club:
What is the minimum for deposit?

Dev (Will not DM for ETH):
The TVL race is basically rolling out Pre mining for the community to get familiar with Deri Protocol & its pool-based interactions. It attracts liquidity before the trading pool (for perpetual contracts) launches so we kick off with liquidity from the first block. The pros are there is no risk, it is simply staking

0xAlpha:
Right, you can find more details from this link. 100 of the base token (e.g. 100USDT).
Exactly.

Andrés M. | Satoshi Club:
What about if the price of the token changes abruptly while staking, people can redeem their tokens quickly?

D. | Satoshi Club:
Gotcha, so lots of people have chances to join

Andrés M. | Satoshi Club:
Or they should wait to do it?

D. | Satoshi Club:
They can use stablecoins

in this case, right?

0xAlpha:
Does this refer to the base token? yes of course you can withdraw your stakes at any time. there is a small redemption fee (0.2%) tho. but if you wait until the remaining ends, the redemption fee will be 0.
yes, all 4 racing pools are stablecoins. The only one not that stable is BAC, but it’s not changing too much during the time.

Andrés M. | Satoshi Club:
Oh great, so how much is the APR of each of them?

0xAlpha:
Let me simply put a snapshot for this question. the first 4 pools are the racing ones.

D. | Satoshi Club:
Thank you guys for the info! now we know everything about TVL Race

Ready for the next question?

0xAlpha:
Yep.

D. | Satoshi Club:
Let’s go!

Q3 from Telegram user @Arisabela
Deri Protocol developed a very complete ecosystem using three chains: ETH, BSC, and HECO. It surprises me that even having three different chains you are still basing the whole fees system on the Ethereum blockchain. Will it change in the future? How is Deri Protocol a reasonable gas-economic platform?

0xAlpha:
DERI will be an ERC20 token for sure. However, there will wrap DERI on BSC & HECO, just like there is WBTC on Ethereum. This is to make the mining on BSC and HECO more convenient while keeping them in one unified ecosystem. it will always be “3 Chains, 1 Ecosystem”. Deri is reasonably gas-economic since we keep that in mind when designing the whole system.

D. | Satoshi Club:
It’s very cool that you supporting BSC and HECO chains, it should attract more users who not ready for such a high gas fee on Ethereum at the moment.

0xAlpha:
Most of the actions cost around 100,000 gas per action. The most expensive action is trade-with-margin, the combined action of trade and post margin, which costs around 200,000 gas per action. If you are to trade frequently, it is encouraged to post sufficient margin to your position (i.e. your pToken) and carry out “simple trades” without adding/removing margin every time, which would cost around 100,000 gas per trade. If you do not have a clear sense about how much 100,000 gas is, this is for your reference: the minimum gas consumption of a single transaction on ETH blockchain is sending ETH, which costs 21,000 gas per transfer, while a common basic transaction like sending ERC20 token (e.g. USDT or DAI) costs around 40,000~60,000 gas. That is, a single operation with Deri consumes only around twice as much gas as a simple transfer of ERC20 token.
Yes, that is one of the important reasons we support BSC and HECO. And let’s not forget to mention that, we are working on layer2 solutions too, to further reduce gas cost on the Ethereum network.

Andrés M. | Satoshi Club:
Are you in contact with Binance to list DERI? Or maybe with other big exchanges?

D. | Satoshi Club:
Oh, this is nice, and when we will be able to use layer2 on your platform?

0xAlpha:
Haha, this is kind of confidential for now. but I can tell you we are in good relationships with the big exchanges, including Binance. Deri has got a lot of help from the BSC team and they are super interested in Deri becoming THE derivative solution on BSC. Just imagine what’s Binance’s role gonna be in that play. We are aiming at 2021 Q2.

D. | Satoshi Club:
Q4 from Telegram user @KevSalom
What is the reason you have decided to represent the positions taken in the form of NFTs? What are the advantages of doing it this way and not with a fungible token? I would also like to know what we can do with them and if we can sell them in the NFT marketplace.

Q5 from Telegram user @Antoni_azx
Deri is using a real derivative that calculates the users’ positions with mark prices updated by an oracle, what type of oracle is Deri Finance using? Do you have a partnership with any Oracle from the actual market?

Andrés M. | Satoshi Club:
@dev_deri could you help us with this one?

0xAlpha:
I talked about that a little bit. the reason is everybody’s exposure will be different, depending on your volume, entry price, margin(leverage). Only an NFT can meet that purpose. a fungible token simply cannot represent a derivative. As for the use-case, You can hold or transfer it. if you are building a defi project, you can import a Deri Position token into your own project to serve your financial purposes. And of course, you can sell them in the NFT market.
It supports two kinds of oracle: on-chain oracle smart contract or off-chain oracle server. right now we are using our in-house oracle solution but we are talking to a number of oracle teams regarding this.

Andrés M. | Satoshi Club:
Maybe is a chainlink in that list?

0xAlpha:
Say you have a portfolio and you want to adjust the portfolio’s exposure to BTC, then you can hold a position NFT of BTCUSD from Deri to achieve that.
Chainlink currently does not work well for derivative as the latency is big (~30min) and it’s too expensive (1LINK per query). We are working with some oracle solutions better for derivatives.

D. | Satoshi Club:
Q6 from Telegram user @kherrera22
DERI plans to launch its own exchange in the near future. Regarding the type of trades you plan to incorporate in it, are you going to include trading between all types of tokens, or only those between stable coins and project tokens that have a good solidity in terms of liquidity?

Dev (Will not DM for ETH):
For sure, solid liquidity is definitely required as we aim to cater to the large whales who trade derivatives for major crypto assets. As we are working with Sushiswap and other stable coins within its ecosystem, we aim to introduce users to perpetual trading where they can use these unconventional stablecoins to trade on Deri.

D. | Satoshi Club:
Thank you for the answers in part 1! @im0xalpha @dev_deri we will open chat for 2 minutes after the chat will be closed — you can start select questions from Satoshi Сlub members!

0xAlpha:
Deri is not for spot trading like uniswap to exchange between token pair. Instead, Deri is for derivative trading where you put some base token (eg USDT) as margin and bet on some underlying (say the price of BTCUSD or DeFi-index).

0xAlpha:
Yes, I can’t wait for “the raining of questions”

Part 2 — live questions from the Telegram community

Q1 from Telegram user @ Sen

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, so my question is: how many types of Derivates Markets Deri Protocol is capable to support?

0xAlpha:
This one is good.
The first stage we are supporting Perpetual contract. Going forward, we will roll out futures with expirations and options.

Q2 from Telegram user @ Sonia

How is the Deri protocol funding rate calculated to balance the long and short sides of positions?

0xAlpha:
Great one!
Basically, the majority side positions need to pay the minority side positions. So some arbitragers will simply take the minority side to earn the funding fee, and then, the two sides are balanced.

Q3 from Telegram user @ Ivan Prishepa

How will 1 billion DERI tokens be distributed? Are there locks for early investors and the team? What percentage of tokens are dedicated to liquidity mining and community rewards?

Dev (Will not DM for ETH):
40% of the 1 Billion Deri tokens are locked and linearly vested across the span of 2 years. 60% of the tokens are rewarded for liquidity mining. You can find more details on the tokenomics in the FAQ on Deri.finance

Q4 from Telegram user @ Boylut

Do you really think it’s possible to reduce dependency on the CEX? How will this be achieved? @im0xAlpha

0xAlpha:
Another good one.
I think CEX is good. it’s just the DeFi world needs organic and built-in solutions for derivatives. For that purpose, CEX can do little. Deri is not to get rid of CEX. Part of Deri’s functions might depend on CEX too. For example, the arbitragers on Deri might put their hedging position on CEX. So, in short, I think CEX and DEX will live together.

Q5 from Telegram user @ Pro Trader

How can I Deri token and stake it for the long term? Do I have to buy it from your smart contract address? What is the link to that?

Dev (Will not DM for ETH):
Deri token is available on Sushi, Hotbit, 1inch. You can stake it on Sushi for SLP tokens are stake that on Premining.deri.finance for more Deri tokens.

Q6 from Telegram user @ An Angel

I’d like to see some airdrops from you for users who hold Deri tokens. What do you say about this?

Dev (Will not DM for ETH):
We are already doing something very similar to an airdrop with premining.deri.finance. I suggest you check it out as it’s the simplest way to get some Deri before the event gets over

Q7 from Telegram user @ Batuhan ŞİMŞEK

Can you explain why the Deri Protocol might be attractive to arbitragers?

0xAlpha:
If you (an arbitrager) handle your position right, it’s quite simple for you to make a profit — to earn a funding fee. you simply take the minority side on a Deri pool and hedge your position somewhere else.

Q8 from Telegram user @ Albatros

Why sushi and not uniswap?

Dev (Will not DM for ETH):
We like the vision of Sushiswap and how quickly they are able to turnaround with new projects. We have been listed for their Onsen farms, which is where LPs for the DERI are able to get Sushi rewards as well as Deri. Dual mining via Sushiswap.
*our Onsen pair is expected to roll out by late February

Q9 from Telegram user @ STP

How is Deri protocol protected from flash loan attacks?

0xAlpha:
Another great question.
In every single step of Deri’s trading mechanism, we carefully designed it so that it’s flash loan-proof. We are flash loan experts that we even suggested some solutions for the Sushiswap team to improve their oracle solution while remaining flash loan-proof.
Plus, our code is audited by Peckshield. During the audit, flash load attach risk is on top of the priority to check.

Q10 from Telegram user @ Anisur Rahman

Who have the right to change/add pool on your website? Is it possible to create a pool by myself?
@im0xAlpha
@dev_deri

0xAlpha:
Great one.
In the launching stage, the team is in charge of that.
Going forward, this will be open to anybody, but maybe with an auction procedure where people need to use DERI to bid for the right to launch a pool.

Part 3 — Quiz Results

As usual, for the third part, Satoshi Club Team asked the chat 4 questions about the crypto project. A link to a Quiz form was sent into the chat.

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