DerivaDAO

What is DerivaDEX?

DerivaDEX is a noncustodial decentralized exchange specializing in derivative products, with an initial emphasis on perpetual swaps. The exchange operates on the Ethereum Mainnet, employing a custom off-chain operator network for matching and trade execution, complemented by on-chain Ethereum contracts handling deposits and withdrawals. Owned and governed by DerivaDAO, composed of DDX holders, the exchange mandates community voting for any alterations to its framework. Currently, DerivaDEX is in a limited-access Pilot release, and a testnet is available on Ethereum Sepolia.

Key Features

Liquidity and Order Book:

• Highly-liquid central-limit order book.
• Real-time secure price feed for quick liquidations.
• DAO-governed insurance fund ensuring solvency and enhancing user experience.

Leverage and Trading:

• Cross-margin leverage for flexible capital usage.
• Off-chain, high-performance matching with trusted-hardware enabled nodes.
• Liquidity mining program enhancing voting power in DerivaDAO.

Frequently Asked Questions (FAQ)

1. What does the funding rate show? The funding rate in the header estimates the rate assessed at the end of the payment epoch.
2. What is a payment epoch? Payment epochs occur every 8 hours for funding rate payments, trade mining, and PnL settlements.
3. What is a PnL Settlement? Every 8 hours, open positions are settled against the mark price.
4. What is trade mining? Liquidity mining ensuring active traders receive DDX for governance participation and fee discounts.
5. Amount per payment epoch: Makers receive 20%, Takers receive 80% of a DDX allotment.

Trading Features

Perpetual Swap: DerivaDEX offers perpetual swaps, allowing users to buy or sell the value of the underlying asset without holding it. Perpetual swaps offer advantages like no expiry date, no custody issues, close tracking of the underlying asset price, and simplicity in shorting assets.

Collateral Strategy: All collateral is deposited into a specific strategy, initially defaulting to "main." Cross-margining ensures collateral is shared across positions in a strategy.

Cross-Margined Leverage: DerivaDEX utilizes cross-margined leverage, preventing liquidations by using all funds in a Strategy Value as collateral.

Security Mechanisms

DerivaDEX ensures execution security through economic incentives, trusted execution environments, and checkpointing with an auditor. Operators post a bond, code runs within trusted execution environments, and an auditor monitors discrepancies, providing transparency and grassroots remediation.

DerivaDAO

DerivaDEX protocol is governed by DerivaDAO, a decentralized autonomous organization. Community governance calls facilitate discussions, and anyone can propose contributions. Areas for contributions include analytics dashboards, UI improvements, educational content, technical support, and product research.

Voting Process:

• Proposals submitted by >1% circulating supply.
• 3-day voting period; success requires >4% quorum. Queuing and Execution:
• Successful proposals queued for 3 days before execution.
• Delegated voting enabled after the governance cliff is lifted.

Team Background and Partnerships

Aditya Palepu, a Duke University alum and former algorithmic trader with a background in software engineering, established Deriva DAO. Leading a team of nine, Palepu collaborates with co-founder Frederic Fortier, a San Francisco-based software engineer with over a decade of expertise in constructing distributed systems.

Deriva DAO has garnered substantial support through successful funding rounds, securing a total of $2.7 million. Notable investors in the project include Polychain Capital, Coinbase Ventures, Electric Capital, Dragonfly Capital Partners, CMS Holdings, Three Arrows Capital, Calvin Liu (Compound's strategy lead), and crypto researcher Phil Daian.

Project Development

DerivaDEX has received an update from the DerivaDEX Foundation. The Foundation deems the latest release on the testnet to meet performance and security criteria. Advocating a launch strategy focused on safety, compliance, timeliness, and transparency, the Foundation proposes a phased approach:

Stage 1: Pilot The suggested initial proposal involves a mainnet "Pilot," summarized at forum.derivadex.com. The release on testnet.derivadex.io features exact contracts and execution code, but access is limited to select testing partners for safety. Partners testing on Pilot commit to directing earned DDX to a DAO-controlled account.

Stage 2: Guarded Launch This proposed upgrade aims to remove early partner limitations while maintaining existing parameters, unless modified by DerivaDAO or new insights emerge.

Stage N: Beyond a Guarded Launch This stage permits platform scaling via individual proposals, adjusting limits, introducing features, or modifying parameters.