Andre Cronje, the founder of Yearn.finance, recently launched an all-in-one protocol, Deriswap that combines different DeFi activities into a single smart contract. Andre Crone is a familiar name in the DeFi community for building capital efficiency on the Ethereum platform. With Deriswap, Andre is trying to solve the problem of capital efficiency and creating a single solution to combine Swaps, options, and loans all in one place. It is a solution for investors looking to access different segments of decentralized finance from a single platform.
There are already existing popular DeFi protocols in the market that provide different services like Swaps (Uniswap, Sushiswap), Options (Deribit, Hegic, Opyn) and Loans (Aave, Compound). Deriswap is unique in its ability to provide these activities within one contract.
All- in one platform for liquidity solution. Andre in a blog post explained that Deriswap will fuse different instruments (swaps, option and loans) together into a capital-efficient single contract that allows interaction between the two assets that make up the pair. Deriswap creates a consolidated capital-efficient marketplace for trading, options, loans and futures while allowing LPs to maintain their positions and receive additional commissions and rewards.
Andre was heavily involved in Hegic, while in Yearn.finance protocol. Andre struggled with pool-to-peer design. He ended up thinking of two viable options- one used cash settlements as LP, “I could use your LPs as liquidities for these options. I could take yDAI and use it as a backing for writing DAI to nominated options in Uniswap and send them to Ethereum." The other option was to follow Uniswap and have option pairs like ETH- BTC and vice versa. That is more fruitful for LPs. Being a Uniswap LP is a volatility hedge, the more the volatility, the more is the trading fees, "if i combine Uniswap trading principle with options underwriting principle, then when the market gets sideways, i ma not getting a lot of trading fees but I am getting option fees. If the market goes volatile, I am getting a lot of trading fees but I am taking some of the option losses." Combining both approaches, he perceived the idea of creating Deriswap from LPs perspective. Even if a participant chooses an ETH or BTC option, the user is going to have a dollar- value profit settlement.
Andre explains the procedure by giving the example of ETH-BTC pair. A swap contract is a standard Uniswap. Liquidity providers provide ETH-BTC as liquidity. Traders can swap ETH to BTC or vice versa on which they will earn trading fees. The TWAP oracle was expanded to take readings every 30 minutes. TWAP stands for time-weighted average price using Uniswap V2. The TWAP oracle was expanded to take readings every 30 minutes, this allows us to report realized variance, realized volatility, implied volatility (derived from Realizing Smiles), and price over an arbitrarily selected time series. The oracle gives information that allows producing on-chain options on which a time parameter is set.
Stablecoins like DAI, ETH in Uniswap have the highest yield. Andre wanted to do DAI-ETH but the depositor was only willing to give DAI. Andre started looking for ways of providing DAI-ETH for the LP without risks. Andre did not know anything about this market and started exploring options. One problem Andre considered while using Hegic was that the participants constantly have to settle the options because of their inability to get perpetual options. Yearn.finance depositors are long term depositors. The Hegic formulas are designed very well-positioned, the strike price and current price are the same but it starts deviating to the higher side as one moves out of the money position where the strike rate is further away from the current price. The calculations on-chain is not developed yet that led Andre to write codes from scratch and built the protocol.
The project suggests combining receiving fees from providing liquidity to AMM markets like Uniswap to form a network that can access both fees from AMM and also collecting fees from providing liquidity markets. Andre has not released complete details about the network as it is still under the audit stage.
Andre Cronje is DeFi explorer, and has been experimenting with different projects within the DeFi ecosystem. Recently, he launched a decentralized coordination ecosystem, Keep3r Network. In just a few hours since its contract was released, the token KP3R token gained from 0 to as high as just over $225. KP3R is currently trading at market capital worth $82,048,080 USD, the project seems to be getting momentum overnight. Keep3r, has been under audit since October, and so is Deriswap as of yet.
Another project dubbed Eminence Finance was rolled out on October 13th and was being built for research purposes. The project is still in the finishing stage.
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