SynFutures will continue to develop decentralized derivatives finance

Foreword

The author paid attention to SynFutures in 2023 because of an interview between its founder Mattew Liu and the well-known trader Jez, in which Jez disclosed his true identity for the first time. Later, I learned that its investment institutions are the top VC lineup of blockchain, so I paid close attention to SynFutures. Both founders had led the first blockchain platform version of traditional financial institutions, began to understand blockchain and became interested in it, and because they were professionally engaged in Deutsche Bank's derivatives business, the decentralized derivatives trading platform SynFutures was born.

SynFutures is a perpetual contract exchange focused on building a fully decentralized and high-performance exchange. Anyone can list and trade futures and perpetual rights of any asset. After three versions of iteration, SynFutures has created the oAMM mechanism for perpetual contracts.

1. Financing:

Pantera Capital, Dragonfly, Polychain, Standard Crypto led the investment, and Framework Ventures, CMS Holdings, Wintermute, Hashkey Capital, Mirana Ventures, IOSG Ventures, Bing Ventures, Bybit, Susquehanna International Group, Kronos Asset Management and other institutions participated in the investment. There are three rounds of public financing information, with a total financing amount of US$38 million, and the last round of financing will be in October 2023.

2. Team members:

Rachel Lin, cofounder and CEO, has held senior positions in Matrixport, Bitmain, and Deutsche Bank's global market department. Graduated from Peking University and the National University of Singapore.

Matthew Liu, cofounder and CSO, has served as a bond financial product trader at Deutsche Bank. Graduated from Peking University and Kellogg School of Management, Northwestern University.

Mark Lee, CMO, former founder of Eightfive PR.

III. Timeline:

The project was established in February 2021.

In June 2021, V1 alpha was opened and audited, deployed on the Polygon public chain, and announced a $14 million Series A financing.

In July 2021, the innovative product decentralized BTC computing power futures was launched.

In September 2021, it was deployed on Arbitrum, BSC, and Ethereum chains. In the same month, FutureX, the DAO pre-committee of SynFutures, was launched to pave the way for decentralized development and governance. The committee was initially composed of community representatives, investors, core contributors, and speakers. 19 gatherings have been held.

Three trading competitions in October, November and December 2021. SynAcademy launched to publish educational articles on blockchain.

In December 2021, we started to build partnerships with other projects and establish an ecosystem.

In February 2022, we launched a dashboard in partnership with Footprint.

In March 2022, we launched the function of users listing and trading any asset.

In May 2022, the V2 testnet was launched and audited.

In September 2022, we launched a bug bounty campaign. In the same month, the V2 mainnet was launched and a trading competition was launched.

In January 2023, NFTures, an NFT futures trading platform, was launched.

In June 2023, V2 was deployed on the zkSync public chain.

In October 2023, V3 public testnet was launched. In the same month, a $22 million Series B financing was announced.

In March 2024, V3 was deployed on the Blast public chain and passed the audit, and points activities and trading competitions were launched.

Fourth, oAMM mechanism

SynFutures adheres to the decentralized and permissionless concepts of decentralized finance. After two versions of iteration, SynFutures V3 was launched, and the groundbreaking Oyster AMM model deserves in-depth discussion.

Its main features are:

1. Derivatives single currency centralized liquidity. Each derivative trading pair has a separate liquidity pool, which will not lead to global systemic risks; when providing liquidity, you only need to add a single currency, without going through the tediousness of bilateral liquidity; centralized liquidity is based on UniswapV3, which improves the utilization rate of funds; the AMM model realizes the democratization of market access, and even provides automated market maker functions for niche assets, thereby enhancing diversity.

2. Fully on-chain order book. It can be integrated into the on-chain ecology, there will be no backdoors, no misappropriation of user funds, no cross-chain on-chain, and the system is easy to down. This function provides a more convenient environment for professional market makers. SynFutures V3 chooses to combine the AMM mode with the fully on-chain order book mode to create better trading depth.

At the same time, as a pure on-chain contract, oAMM can naturally integrate with the ecosystem of the underlying blockchain and grow together, which is precisely what many semi-decentralized exchanges currently do not have. After all, the most attractive point of DeFi is its composability, layer by layer. At the same time, all its data is stored on the chain, and anyone can verify it, and traders do not need to worry about centralized risks such as "exchange downtime, unplugging the network cable, and funds being misappropriated."

3. Unified liquidity. Oyster AMM seamlessly integrates centralized liquidity and order books in a single model. In Oyster AMM, centralized liquidity AMM (CLAMM) is represented by curves, limit orders are represented by price points, and the collection of centralized liquidity covering a certain price point and all open limit orders at the same price point is described as "pearls". Where applicable, in the presence of limit orders, they will be executed before consuming any centralized liquidity.

4. Stable mechanism for user protection. Oyster AMM introduces financial risk management mechanisms that enhance user protection and price stability. These mechanisms include a dynamic penalty system that discourages price manipulation by penalizing significant deviations between transaction prices and mark prices. The dynamic fee system also balances the risk-return profile of LPs. Another is a stable mark price mechanism that uses an exponential moving average process to mitigate the risks of sudden price fluctuations and large-scale liquidations.

The following facilitates non-order book mode LPs to understand the centralized liquidity AMM in Oyster AMM.

As an LP provider of a centralized liquidity AMM, you need to enter two parameters under the designated pool: one is the amount of margin provided, and the other is the price range of the LP provided. This price range is similar to the price range of UniswapV3. If the price floats beyond the range, no LP will be provided.

When an LP provider adds liquidity to the Oyster AMM, a long position is created for the liquidity pool and an offsetting short position is created for the LP account. The sum of these two positions is the LP's net position. When created, the long and short positions are equal, and the net position is 0. (This short position of the LP cannot be handled separately, but is managed together in this liquidity)

If the LP's price range is wide, fewer long positions are created; if the LP's price range is narrow, more long positions are created. As the price fluctuates within the set range, according to the oAMM mechanism, price changes will cause changes in the net position and changes in the remaining margin.

By analogy with the AMM model of Uniswap V3, the xyk curve in the oAMM model actually reflects the changes in the size of the long position created, with the horizontal and vertical axes being the underlying asset and the quoted asset respectively. The change in margin is defined by another formula.

Virtual price curve in Oyster AMM

Removing liquidity:

LP providers can remove liquidity from their centralized liquidity at any time and convert it into a trading position, the size of which is the implied net position and remaining margin, as well as the fees earned. When the centralized liquidity is removed and converted, the LP can manage the trading position accordingly.

When the market price falls below the lower limit of the price range, the system will automatically remove liquidity for the LP provider and convert it to a long position; when the market price rises above the upper limit of the price range, the system will automatically remove liquidity for the LP provider and convert it to a short position.

Since the risk in the pool is balanced, at a certain current price, as long as there is a long position, there will be a short position. Let's assume that the current price is 1000. The contract price will only fall when more people open short positions at the market price. An LP provider Alice opens a long position of 100 and a short position of 100. When the price drops from 1000 to 999, it means that a trader has opened a short position at the market price. Assuming that the trader trades a short position of 20 at the market price, then Alice, as an LP, has a change in position from long positions to 120 positions, and a short position of 100 remains unchanged, that is, the net position is 20 long positions at this time. Another case is that the price rises from 1000 to 1001, indicating that a trader has opened a long position at the market price. Assuming that the trader trades 20 long orders at the market price, then Alice, as the LP, will see her position change from 20 long orders to 80 positions, while her short orders will remain unchanged at 100, meaning her net position is 20 short orders.

Let us first define some parameters:

Assume that the total value of tokens added by a certain LP provider is M, and M USDC also refers to the total margin amount.

The current price of Token0 in the Token1 trading pair is Pc.

The lower and upper prices of the selected range are denoted as Pa and Pb, respectively.

α is the parameter of the LP price range, where the upper price limit Pb = α · Pc, the lower price limit Pa = Pc / α, (α > 1)

The initial margin requirement ratio is denoted as ri.

Use xvirtual and yvirtual to represent the implied x and y values of the full range constant product model, respectively.

Create an initial long position xreal for liquidity and an offsetting short position of the same size for LP.

In Oyster AMM,

Initial long position

Implicit net position when price reaches interval boundary Pb

The profit and loss of margin when price reaches interval boundary Pb is

The above formula can be replaced by Pa to obtain the implied net position and profit and loss of margin when price reaches interval boundary Pa.

Let's take a specific example. When the WBTC price is 61879, Bob adds 1000USDB of margin to the WBTC/USDB pool and sets the parameter α of the price range to 3. (The initial margin requirement ratio of this pool is set by the system to ri = 3%, which means the maximum leverage is 33.3 times)

At this point, it can be inferred that: M=1000, the current price of the trading pair is Pc=61879,

The LP lower limit price is about Pa = Pc / α = 20626, and the LP upper limit price is about Pb = α · Pc = 185637.

Initial long position xreal = 0.0119 (current value is about 736usdb)

The implied net position NetPosition(Pa)=0.0206 when the price reaches the range boundary Pa

At this time, the margin profit and loss is PnL(Pa)=-311 (so the remaining margin is 1000-311=689)

The following data is actually calculated by the platform: (Since the SynFutures front-end cannot customize α, it can only slide the price boundary, so there will be a slight difference with the theoretical value)

When the current WBTC price is 61879, the LP of the WBTC/USDB trading pair is Situation

V. Progress and Outlook

Currently, SynFutures has launched many long-tail asset trading pairs, such as $YES, $PAC, $DEGEN, $WIF, $MERL, etc., and has exceeded US$50 billion in trading volume, with daily trading volume accounting for about 15% of decentralized derivatives platforms. According to DeFillma data, its daily trading volume ranks among the top three in decentralized derivatives exchanges.

Updates are active, including the launch of mobile trading and LP functions, enhanced data range in the depth chart, optimized portfolio page, etc. User feedback is collected in a timely manner and responded to quickly.

In addition, SynFutures is also actively cooperating with major exchanges to promote, and we look forward to SynFutures' more impressive performance in 2024, pushing the on-chain derivatives market to a new level of activity.

This article is from a contribution and does not represent the views of BlockBeats.

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