Introduction
Orbital is an entirely Arbitrum-native dual layer Decentralized Exchange (“DEX”), which aims to align incentives among participating protocols and users in a way that promotes sustainable and sticky liquidity.
Layer 1 is a custom DEX that employs variable weight pools, stableswap pools, and dynamic swap rates.
Layer 2 is a direct options integration, allowing for efficient liquidity provision while providing impermanent (IL) loss protection .
By adding a derivative layer to traditional designs, Orbital is able to utilize the parameters within option contracts to its advantage by deploying its collateral as AMM liquidity infrastructure, creating a more flexible, and efficient AMM market that is highly composable.
With Orbital’s design we aim to solve that problem, introducing a unique model that draws inspiration from existing Decentralized Finance (“DeFi”) primitives.
Let’s take a closer look! 🔽
Orbital’s AMM Design
Variable weight pools
The primary pool type of Orbital is a volatile AMM that uses the weighted math formula from Balancer. Variable weight pools offer much greater flexibility for users and protocols, allowing pools to be built around different weights, a feature used by many protocols for vetokens, which are increasingly holding 80/20 LPs.
Stableswap
The secondary pool type of Orbital is a stableswap AMM that uses the stableswap formula from Solidly. As opposed to the weighted math model, the stableswap formula allows for far greater trading efficiency when swapping between alike assets.
Dynamic Swap Rates
Typically, swap rates within a liquidity pool are constant and non-discriminatory. Orbital’s swap fees are modifiable on a pool-by-pool and sell-side vs. buy-side basis within predefined parameters. This allows trading fees to be adjustable via governance. This also allows for novel implementations such as volatility-derived swap rates.
Tokenomics
Orbital uses a three token model centered around our native token with incentives distributed via gauge emissions.
Our vanilla native token is $ORB which is distributed via liquidity mining on Orbital. $ORB can be locked for veORB, our governance token.
A component of liquidity mining rewards will be distributed as dORB, a decaying version of $ORB. The decay rate can be reduced or even stopped by providing value to the protocols. This can include maintaining liquidity on the platform or locking dORB for veORB.
Liquidity mining system
Orbital will feature 2 types of LP pools, base pools and reward pools. Both pool types are able to receive:
- $ORB and dORB Emissions: These are controlled by votes by veOrb and dOrb
- Bribes: These may be arbitrarily added and go to voters
- Token rewards: These may be arbitrarily added and go to LPs
Base pools
Base pools are traditional liquidity mining pools. They are permissionless to deposit in, have no withdrawal restrictions, and any LP may deposit in the base pool for a token pair to earn emissions and rewards.
Reward pools
Reward pools are base pools with specified entry requirements for LPs (e.g. minimum TVL or duration requirements). Reward pools can be incentivized by token deposits, allowing external protocols to reward LPs that, for example, are willing to lock for a minimum of 6 months. This permits a high degree of flexibility for protocols, allowing them to reward LPs that meet requirements on top of standard base pool rewards.
Option Layer
Orbital’s options market design will utilize covered calls and cash-covered puts. Typically, this design results in capital inefficiency where collateral lays idle during the epoch.
Our option layer and DEX layer are the key building blocks for our core Options Market-Making (“OPS-MM”) product. This will allow liquidity providers to provide collateral, purchase options, and borrow option collateral to LP.
The benefit for LPs is up to 2x capital efficiency, allowing them to earn twice as many rewards from Orbital’s base and reward pools as well as standard option payoffs.
The benefit for option writers is higher utilization (resulting in higher premiums) as well as an additional layer of yield from interest paid by OPS-MM LPs.
