SynFutures v3, Unleashing Derivatives for Everyone

 

Table of Contents

1. The Evolution of On-Chain Futures Exchange Continues

1-1. Perpetual futures trading: The new standard in crypto

1-2. Today’s Perp DEX adopts a hybrid structure

2. SynFutures v3, Maximized Leverage and Minimized Risk with OysterAMM

2-1. Single-token concentrated liquidity: Liquidity provision only requires adding a single token

2-2. AMM + Orderbook: Fully on-chain integrated liquidity provision

2-3. Concentrated Liquidity AMM (CLAMM) to minimize slippage

2-4. Price stability and user protection mechanisms

3. Positioning as the Next Generation Perp DEX through Community and Institutional Adoption

3-1. v3 Key metrics and performance comparision to v2

3-2. Securing performance and liquidity through Blast Chain and Oyster Odyssey

3-3. Growth strategy to surpass dYdX through enterprise adoption and community building

4. Final Thoughts: SynFutures Path Forward

 

1. The Evolution of On-Chain Futures Exchange Continues

1-1. Perpetual futures trading: The new standard in crypto

Futures trading involves transactions that promise to buy or sell an asset at a predetermined price (strike price) at a future date. Investors open a long position when they expect the asset's price to rise above the current price by the expiration date, and a short position when they expect it to fall. On-chain futures trading leverages blockchain technology to predict and trade the future prices of digital assets. Unlike traditional financial markets, it supports perpetual futures trading with no expiration date.

Perpetual futures have no end of trade and no settlement date, offering more leverage than traditional futures trading and expanding trading possibilities. Perpetual futures trading is characterized by leverage, automatic rollover, and funding rates:

• Leverage: Allows opening large positions with a small amount of capital, potentially leading to high returns but also high risk.
• Auto Rollover: Automatically extends your contract instead of letting it expire, keeping your position open.
• Funding Rates: A mechanism where funds are exchanged at regular intervals to maintain a balance between long and short positions.

These features make perpetual futures trading highly attractive to investors by offering a broader range of investment options than traditional finance. The flexible use of leverage allows investors to adjust their long and short positions according to market conditions, and the high liquidity ensures they can execute their trades at any time, enhancing potential returns and capital efficiency.

1-2. Today’s Perp DEX adopts a hybrid structure

Perpetual futures trading can occur on both decentralized exchanges (Perpetual DEX) and centralized exchanges (Perpetual CEX). While both platforms facilitate the trading of crypto assets and related derivatives, they differ significantly in terms of transparency and operational structure. On a Perpetual CEX, trades are brokered by a centralized entity. Users deposit assets on the exchange to perform trades. This centralized approach offers advantages in terms of speed and liquidity but can be vulnerable to transparency and security issues.

In contrast, Perpetual DEXs operate on a decentralized system that enables peer-to-peer transactions without a central authority. Users connect their wallets directly to the platform to submit trade orders, and smart contracts on the blockchain execute the exchange of assets. This ensures that transaction histories are transparent and publicly accessible, allowing users to directly verify the reliability and integrity of the exchange.

There are two main types of DEX trading methods: the Orderbook model and the Liquidity Pool-based Automated Market Maker (LP AMM) model. Perpetual DEXs vary based on their trade execution methods, allowing us to categorize representative projects.

The orderbook model is a trading method primarily used by centralized exchanges or traditional financial systems. It functions as an electronic ledger recording all orders from buyers and sellers in the market, processing them chronologically. This method ensures trades are executed only when the desired price is reached, eliminating slippage (the difference between the expected price and the actual execution price). However, it can be challenging to execute trades in less liquid assets.

The LP AMM model, on the other hand, executes trades from a liquidity pool without a centralized orderbook. Liquidity providers deposit assets, and a mathematical algorithm determines the price. Trades are always executed, but slippage can occur. An evolution of LP AMM is the oracle LP AMM, which uses an oracle to pull in external price feeds to determine asset prices in the liquidity pool. Oracle-based LP AMMs are capital efficient as prices are not changed or rebalanced based on a mathematical algorithm and they handle large trade volumes without requiring a fixed mix of assets.

Hybrid Perp DEXs combine elements of both the orderbook and LP AMM methods. SynFutures is an example of a Perp DEX that uses this hybrid approach to provide optimized liquidity. SynFutures combines an LP AMM model with an orderbook utilizing oracles to leverage the benefits of a liquidity pool with the sophisticated trade execution mechanisms of an orderbook model. This hybrid approach maximizes capital efficiency and offers users a trading experience with minimal slippage, addressing the liquidity and price volatility challenges often encountered in DeFi.

2. SynFutures v3, Maximized Leverage and Minimized Risk with OysterAMM

2-1. Single-token concentrated liquidity: Liquidity provision only requires adding a single token

SynFutures is dedicated to revolutionizing the decentralized derivatives market by offering a trustless platform where any asset with a price feed can be traded.

Source: SynFutures DEX (Oyster)

SynFutures is developing perpetual futures trading protocols for both coins and NFTs, utilizing a hybrid mechanism evolved from LP AMMs. They have launched several versions, including SynFutures v1, v2, and the latest v3, along with NFTures, an NFT futures investment platform. The SynFutures team has successfully raised $38M in funding. This includes a highly anticipated $14M Series A led by Polychain Capital in 2021, followed by a $22M Series B led by Pantera Capital.

SynFutures is a hybrid Perp DEX that combines LP AMMs and orderbooks. The LP AMM model used by SynFutures, known as the synthetic automated market maker (sAMM) model, allows liquidity providers (LPs) to provide liquidity with a single token. This significantly lowers the barrier to entry for LPs and facilitates easier liquidity provision.

For example, a liquidity provider can contribute 3000 USDC to a Perp DEX using the sAMM model. Of the 3000 USDC, 1500 USDC remains as is, while the other 1500 USDC is converted into a synthetic asset representing 1 ETH. This 1x ETH futures contract allows the liquidity provider to add liquidity without needing to provide both assets. Furthermore, the impermanent loss minimization mechanism enables LPs to provide liquidity with reduced risk.

SynFutures v3 introduces OysterAMM, an evolved version of sAMM, to optimize liquidity pools. The integration of a Concentrated Liquidity Automated Market Maker (CLAMM) with an orderbook concentrates liquidity in specific price bands, providing enhanced liquidity with minimal slippage on trades. This approach maximizes capital efficiency and ensures an optimal trading experience for both liquidity providers and traders. Additionally, SynFutures uses external oracle data, such as Pyth, processed through an exponential moving average (EMA), to mitigate the risk of liquidation due to price fluctuations, ensuring a safer trading environment.

As a Perp DEX offering capital efficiency and stability through single-token liquidity provision, SynFutures has garnered significant attention in the DeFi market. SynFutures v2 became the largest Perp DEX on Polygon, and the recently released v3 set a record by surpassing Uniswap and dYdX in daily trading volume.

2-2. AMM + Orderbook: Fully on-chain integrated liquidity provision

SynFutures v3 introduces OysterAMM, a hybrid approach that merges the benefits of Automated Market Makers (AMMs) and orderbook models to provide integrated liquidity. Traditional AMM models automatically execute trades through liquidity pools, but they have limitations in terms of liquidity dispersion and trading efficiency. The orderbook model, conversely, offers high capital efficiency by executing trades via orders at specific prices but demands complex infrastructure and risk management. OysterAMM combines these two models, significantly improving trading efficiency by leveraging the automated trading capabilities of AMMs and the price efficiency of orderbooks.

SynFutures' fully on-chain orderbook offers several advantages, particularly when compared to traditional orderbook-based Perp DEXs and Perp CEXs. Platforms like dYdX, which use off-chain orderbooks, require all orders to go through an intermediary, with only the final transaction being recorded on the blockchain. While this allows for faster transaction processing, it reduces transparency since not all transactions are committed on the chain, and the involvement of third parties means it is not fully decentralized.

SynFutures' on-chain orderbook model ensures that all buy/sell orders and trade executions are recorded on the blockchain, enhancing transparency and trust. Operating without a centralized administrator minimizes the risk of centralization-induced fund theft, such as backdoors or key mismanagement. It also reduces security vulnerabilities associated with the separation of on-chain and off-chain systems. Despite being fully on-chain, transaction speeds remain fast due to the DEX’s optimized model structure.

The integrated liquidity model combining AMMs and orderbooks maximizes leverage, offering an attractive investment opportunity for those seeking high returns. Traditional AMM and orderbook models struggle to provide high leverage due to liquidity dispersion and capital efficiency issues. However, with integrated liquidity, OysterAMM can offer up to 100x leverage by simultaneously maximizing liquidity provision and capital efficiency. This allows investors to efficiently utilize their capital to take larger positions. For example, with 100x leverage, an investor can trade 100,000 USDC worth of assets by investing just 1,000 USDC.

Additionally, the unified liquidity model offers high incentives for liquidity providers by combining the strengths of AMMs and orderbooks. Anyone can list new assets on the DEX, and the Limit Order Rebate is set at 0.01%-0.03%, providing higher rewards for liquidity providers compared to other DEXes. This structure encourages more liquidity providers to participate, ensuring that SynFutures offers competitive pricing on trades.

2-3. Concentrated Liquidity AMM (CLAMM) to minimize slippage

SynFutures v3 's OysterAMM stands out among AMMs by combining a Concentrated Liquidity AMM (CLAMM) with an orderbook to minimize slippage. Slippage, the difference between the actual trade price and the expected trade price, often occurs in less liquid markets. Traditional AMM models, like Uniswap's CPMM, distribute liquidity across all price ranges, making slippage more likely. OysterAMM, however, employs CLAMM to reduce slippage by concentrating liquidity within specific price ranges.

In CLAMM, concentrated liquidity is referred to as a "Pearl," ensuring high liquidity within a set price range for predictable and stable trading. This approach allows traders to execute trades at more predictable prices, reducing impermanent losses, improving the user experience, and enhancing capital efficiency.

This concentrated liquidity model incentivizes liquidity providers (LPs) to supply liquidity within the Pearl zone, maintaining high liquidity when trades occur within that range. For instance, if a liquidity provider offers 1 ETH for 2,000 USDC, slippage is minimized when trades are executed within this price range. This setup enables traders to execute trades closer to their expected prices, increasing trade predictability. By concentrating liquidity within specific price ranges, LPs can utilize their capital more efficiently, thereby boosting the capital efficiency of the entire trading ecosystem.

This approach benefits both liquidity providers and traders. LPs can deploy capital more effectively to maximize potential returns, while traders experience less slippage, increasing trade predictability and stability. This enhances the efficiency of the entire ecosystem, increases market liquidity, and facilitates smoother trade execution.

Here's how order is executed in OysterAMM that leverages order book and CLAMM:

1. Checks limit orders (Orderbook): When a trader places a new order, OysterAMM first checks the orderbook for limit orders at that price point.
2. Takes limit orders (Orderbook): If the liquidity of the limit order is sufficient to fill the market order, the trade is executed directly from the orderbook.
3. Takes liquidity from the AMM curve: If there is not enough liquidity in the limit order, OysterAMM will draw liquidity from the AMM curve to fill the gap.
4. Price increase: During this process, the price moves up or down along the AMM curve.
5. Checks additional limit orders: If the price change reaches another Pearl (liquidity concentration zone), the limit orders in the orderbook within that zone are prioritized for execution. If the trade still fails to execute in that zone due to insufficient orderbook liquidity, it will attempt to execute using the Pearl's AMM liquidity.
6. Repeat: This process continues until the entire order is filled.

By processing limit orders from orderbookbefore tapping into AMM liquidity, OysterAMM reduces slippage for traders. The complementary usage between limit orders and AMM liquidity ensures efficient use of concentrated liquidity, providing the best trading experience.

2-4. Price stability and user protection mechanisms

Perpetual futures and derivatives allow for leveraged investment beyond the initial capital, but liquidity and market conditions can create a gap between the expected and spot prices, resulting in unexpectedly large losses for investors. The OysterAMM model in SynFutures v3 introduces various financial risk management mechanisms to maximize capital utility while enhancing user protection and price stability.

First, the Dynamic Penalty Fees system is introduced to prevent sharp price fluctuations and protect users' positions. This system discourages price manipulation by imposing penalties when there's a large difference between the trade price and the mark price (Pmark). The larger the difference between the Pfair (the price that combines trading and liquidity) and the Pmark, the higher the penalty. This motivates liquidity providers to adjust their prices to minimize penalties, encouraging a rational price equilibrium and discouraging market manipulation and abnormal trading patterns.

In addition to dynamic penalties, OysterAMM uses the Smoothed Spot Index Price to stabilize prices. By utilizing various price indicators such as Pspot (price obtained from the oracle or spot DEX market) and Psettlement (time-weighted average price for final settlement), it mitigates price volatility through an exponential moving average (EMA) process rather than directly using prices from the oracle. These adjustments reduce the risk of large liquidations due to rapid external price changes.

OysterAMM also reduces price differentials in the perpetual futures market through ongoing funding fees on a daily cycle. The Funding Fee mechanism maintains a balance between long (long positions) and short (short positions). In SynFutures, funding fees are designed to reduce the difference between the Pfair (the price that combines trading and liquidity) and the Pspot (the price obtained from an oracle or spot DEX market). Depending on market conditions, long position holders may pay a fee to short position holders and vice versa. This reduces the gap between the two prices, preventing price manipulation and allowing the market to function stably.

Additionally, OysterAMM incorporates Liquidations to efficiently manage positions that fail to meet maintenance margin requirements. The liquidator takes over the target position and replenishes additional margin as needed to meet the initial margin requirement. When a position fails to meet maintenance margin requirements, a mechanism forces the position to close by trading directly with the AMM, protecting users from unexpected market fluctuations.

3. Positioning as the Next Generation Perp DEX through Community and Institutional Adoption

3-1. Key metrics and performance of v3 compared to v2

As of May 31, 2024, SynFutures v3 has achieved a cumulative trading volume of $71.78B and a total value locked (TVL) of $69.51M. The platform boasts a user base of 115.9K, with 28.10K active users in the last 7 days. Additionally, the total number of trades has reached 3.265M.

Launched on the Blast chain on February 29, 2024, SynFutures v3 has shown continuous growth, outperforming its predecessor, v2. SynFutures v2, which operated from September 2022 to March 2024, had 111,913 total users, $23.35B in total trading volume, and 8,122,591 total transactions. The performance metrics clearly indicate that v3 has achieved significant improvements in a shorter timeframe.

As of the end of May 2024, SynFutures v3's user base has grown to approximately 115.9K, reflecting steady growth. Weekly active user numbers fluctuate, with peaks reaching up to 46,756, but overall engagement remains strong and growing. These data indicate that user engagement with SynFutures v3 continues to be active and growing steadily.

The platform has recorded a cumulative total of 3.265M transactions, with daily trading volumes surpassing those of dYdX and Uniswap in May. For instance, on May 1 and May 24, ETH-PERP trading volume exceeded $1.1B, positioning SynFutures at the top of the Perp DEX market, ahead of Hyperliquid. TVL has also remained consistently high, placing SynFutures in the top 10 of overall Perp DEX rankings shortly after its launch.

These milestones are largely due to SynFutures v3's enhanced performance and liquidity improvements on the Blast chain, the rapid user base expansion through the "Oyster Odyssey" loyalty campaign, and robust community building efforts, particularly in Asia. Moving forward, SynFutures aims to further expand its user base and trading volume through both community and B2B adoption strategies, rather than relying solely on airdrop events.

3-2. Securing performance and liquidity through Blast Chain and Oyster Odyssey

SynFutures v3 is powered by the Blast chain, which delivers significant performance and liquidity enhancements. Blast, an Ethereum Layer 2 solution, maximizes processing speed and scalability, offering users a faster and more efficient trading experience. The existing Layer 1 Ethereum network often frustrates DeFi users due to high transaction fees and slow processing speeds. However, Blast uses Optimistic Rollup to address these scalability issues significantly.

In addition to its technical advantages, the Blast chain offers users something to look forward to with an airdrop scheduled for June 26, 2023. The Blast airdrop will be conducted in two forms: Blast Points and Blast Gold. SynFutures deployed its services early in the Blast ecosystem to maximize the benefits users can gain from both the underlying ecosystem and the product itself.

First, Blast Points are automatically allocated to users based on their wallet balance (ETH, WETH, USDB), updated in real-time with every block. Then, Blast Gold is distributed to several Blast-based DApps, including SynFutures v3, which can use the Gold to grow its user base. Blast Gold is distributed manually every two to three weeks. SynFutures v3 leverages Blast Gold to drive user engagement by offering additional incentives to users, such as liquidity providers and traders. These users continuously accumulate points to qualify for airdrops of the Blast chain's native coin.

Source: The Oyster Odyssey Interface

SynFutures v3 is also actively acquiring users through its own loyalty program called the Oyster Odyssey (O_O) program. The main objective of the Oyster Odyssey program is to expand the SynFutures community and drive user engagement by providing unlimited liquidity boosts to help users maximize their profits. The O_O program allows users to earn Odyssey Points by providing liquidity, placing limit orders, and more, with both takers (traders) and makers (liquidity providers) receiving separate O_O Points in addition to Blast Points and Blast Gold, respectively. The program is expected to have its own airdrops and economic incentives, similar to other DeFi projects, for adding liquidity or trading on the DEX.

In addition to traditional DeFi trading and liquidity contributions, the O_O program includes a more engaging system. Users can sign up and invite friends to receive mystery boxes, which contain randomized points. Users can also lock up assets for a period of time and earn additional points through spins, where the points earned from spins are determined by a certain "Luck" factor. The goal is to make the experience more than just a "points game" and to add a fun element for users.

By significantly improving its performance and liquidity with the Blast chain and expanding its user base with the Oyster Odyssey program, SynFutures v3 is positioning itself to gain a competitive edge in the market. The choice of Blast Chain is likely a strategy to aggressively capture the user base of Blast, a narrative L2 ecosystem, to become the leading Perp DEX. As most DeFi projects are moving towards multi-chain due to the diversification of mainnet and layer solutions, SynFutures is expected to pursue a chain-agnostic strategy that supports new mainnets or multiple ecosystems with sufficient potential.

3-3. Growth strategy to surpass dYdX via enterprise adoption and community building

SynFutures has a strategic plan to evolve into a Perp DEX surpassing dYdX through targeted enterprise adoption and robust community building across both B2B and B2C sectors. This approach aims to attract more assets and trading volume to the platform, thereby securing a competitive edge in the DeFi ecosystem.

One of SynFutures v3's enterprise adoption strategies is the introduction of an SDK to offer derivatives. The primary targets are crypto VCs, algorithmic quant investors, and DeFi platform developers, who face challenges related to technical integration complexity and derivatives trading efficiency. The SynFutures v3 SDK addresses these issues by providing a user-friendly solution that simplifies integration and utilization of SynFutures' products. The SDK can be easily installed using familiar npm or yarn commands, allowing developers to quickly set up the necessary environment variables and integrate SynFutures-based trading, deposits, withdrawals, order management, liquidity provision, and more into their platforms.

The SDK offers extensive functionality, including viewing instrument and trading pair information, executing trades, adjusting positions, withdrawing margin, placing and canceling orders in bulk, adding and removing liquidity, and more. Example code is provided to facilitate easy integration and utilization by platform developers and algorithmic quantitative investors, enabling them to leverage SynFutures' comprehensive features. This integration capability is designed to attract more assets and trading volume, advancing enterprise adoption, which is a medium-term goal for the development of new DeFi metas and platforms.

On the retail side, SynFutures has recently focused on building regional user communities. In particular, SynFutures is actively gathering early user feedback and expanding communities for DeFi users to interact with each other in Asia, including Vietnam, Korea, and Japan. Building such a community strengthens networking among users and enables quick product improvements at an early stage. The company also aims to onboard Web2 users and grow the overall DeFi market by targeting marketing and outreach efforts towards those who are new to DeFi or blockchain.

For example, in the Korean community, a recent offline event was organized to teach the basics of DeFi to those unfamiliar with it and provide an easy introduction to the product. In global Twitter AMAs, regular users were invited to share their investment strategies and testimonials to provide feedback on SynFutures' products. This outreach helped reach a broader audience of potential users who may not be familiar with DeFi, demystifying the product's features. In the Telegram community, users are engaged with activities such as chat kings and gaming events and kept updated on various market news.

4. Final Thoughts: SynFutures Path Forward

SynFutures has evolved significantly through its various versions—v1 (BNB), v2 (Polygon), and now v3 (Blast + OysterAMM). The platform's chain-agnostic strategy, which supports multiple chains, is expected to continue driving user influx. The Blast Gold airdrop and Oyster Odyssey loyalty program are positive drivers of liquidity and user engagement, with various reward schemes attracting new users.

However, addressing the potential decline in transactions post-airdrop will require additional strategies. Building regional communities and targeting DeFi newcomers to gather user feedback and improve the product is crucial. Additionally, maintaining liquidity and expanding the overall DeFi market through continuous marketing programs and a multi-chain strategy will be essential. The most important aspect for any blockchain product is to build a superior platform, regardless of the underlying blockchain. We hope SynFutures will continue to enhance its platform, bolstering its competitiveness in the DeFi market and achieving sustainable growth.