It’s been a fair few months since Dopex v2 has been in development and RDPX v2 undergoing active audits — and finally we’re right at launch.
While we’re undergoing an exciting phase sunsetting v1 and transitioning to v2 — quite a few changes were made to how Dopex as a protocol functions, as well as how the rDPX mechanism works.
Based on a feedback loop from what we’ve learned with Dopex V1 and thousands of eyes looking at the rDPX codebase, internal reviews of the mechanism and so forth — we’re finally ready for launch!
Why v2?
Dopex initially launched its’ first flagship product, SSOVs in late October 2021. Over the first 6 months it displayed PMF with constantly growing TVL over this time period, peaking at about $130M TVL on SSOVs and cumulatively doing over $400m in volume.
Then Luna, 3AC and FTX happened draining DeFi TVL along with a crash in overall market volatility — this lead to an overall risk-off environment across the market with the ETH volatility index (DVOL) dropping from highs of 160 to a low of 30 over the span of 1.5 years.
Over this time period, Dopex launched multiple products aimed at profiting from long volatility — insured perps, straddles, scalps, 0dte — however with volatility decreasing as sharply, demand and TVL for on-chain options dropped off a cliff and none of these products really took off despite initial demand.
This lead us back to the drawing board. Based on what we had learned over the previous year — we needed an anti-fragile product suite with consolidated, not fragmented liquidity. As well as access to product(s) and tools catered to both retail and professional option traders. Superior LP returns, composability, portfolio margin, easy to purchase options, anytime exercise, multi-legged strategies etc.
Keeping the above factors in mind and countless hours brainstorming eventually lead to the culmination of the 2 main products being offered under Dopex V2:
1. CLAMM
2. Option AMM
CLAMM
Despite Univ3/Concentrated Liquidity being around for ~2 years, no real product had been built on it that tackled trading volatility.
Concentrated liquidity LPs seemed like the perfect LP profile for Dopex to use as LPs since:
- Depositors would earn AMM fees when liquidity is not used to write options
- LPs do not face any additional risk vs LPing on Univ3
- Purchasers get the same payoff as an option holder.
- Options could also be exercised at any time, unlike v1.
- Composability on CLAMM positions would allow for integrations with other vault products, automated liquidity managers etc.
- Out-of-range liquidity also earns fees with CLAMM, which would be impossible on Univ3.
Over the past few months, the idea was iterated on and we ended up with the CLAMM v1 product for launch. We ran a successful MVP for close to a month and submitted the contracts for audits immediately after.
Based on real data from the MVP, users earned about 300% of what Univ3 LPs had made in the same duration (30% vs 110%) — mainly due to liquidity being used across a wider range of ticks compared to active ticks from vanilla univ3 LPing. CLAMM initially supports deposits from Univ3 and it’s forks (Sushi v3, Pancake etc.)
End user LPs could simply come in and deposit single sided assets or their existing Univ3/concentrated liquidity positions. Purchasers could purchase options with quote assets for the pair in 1 click. CLAMM markets are focused on short term expiries — upto 24h.
LPDFi and ALM projects such as OrangeFi, JonesDAO, DefiEdge, Curvance, Concentric have committed to building on CLAMM.
CLAMMs’ architecture also allows multiple other products to be built on it’s liquidity using custom hooks and handlers — while driving in fees to Dopex. We expect to see community initiatives that take advantage of this 👀
At launch, Dopex will be allocating 200,000 ARB as incentives per month (from the Arbitrum STIP) until January 31 across WETH/USDC, WBTC/WETH and ARB/WETH pools.
Rewards will be distributed across all pools initially at a 40%/35%/25% ratio between WETH/WBTC/ARB and will be dynamically adjusted based on TVL and utilization metrics for each pool.
Post-Arbitrum STIP this would be replaced with DPX incentives — which were previously distributed to SSOVs and other v1 offerings.
The incentives coupled with premiums collected would allow for high net premium/fees for LPs as well as best in class option pricing on Dopex versus both on-chain and off-chain venues.
After the Arbitrum STIP, CLAMM pools would be prioritized and deployed for multiple high liquidity pools across the DeFi ecosystem.
Option AMM
Unlike CLAMM, Option AMM is more catered to sophisticated option traders — offering partial collateralization, portfolio margin, rebates and LP level delta hedging.
LPs in OAMM simply deposit single sided liquidity per market. Where as traders deposit margin into their portfolios and can instantly trade against OAMM liquidity with portfolio margin enabled.
This allows for traders to open positions with a fraction of the margin required, as well as long/short option positions matching collateral requirements against each other.
As long as maintenance margin for a users’ portfolio does not go >80% and the LP doesn’t hit it’s liquidity cap — users can open positions in a far more capital efficient manner in comparison to Dopex v1.
Option AMM will provide weekly and monthly expiries, however positions could be exercised anytime (at a fee + spread)
Options AMM however isn’t slated for launch in November and should go live in Q1 ’24 post audits.
rDPX V2
After going through OpenZeppelin, Code4rena, yAudits and multiple internal reviews, rDPX has gone through multiple changes in its system design.
Inspiration for the current design were mainly obtained from sustainable models that were largely unaffected with what the market went through over the past year and a half, such as FRAX.
rDPX v2 key factors and changes:
- rDPX has a token level 10% sell tax, which’s redistributed to stakers, backing reserves and veDPX holders.
- rDPX bonding now results in users receiving receipt tokens i.e rtETH.
- Bonding results in DPXETH minted against 25% of the bonded value in ETH, which is added to DPXETH/ETH Curve LP. This LP is held in backing reserves.
- 50% of the bonded ETH is held in backing reserves and staked. This can also be deployed on AMOs for increasing protocol backing reserves over time.
- The bonded rDPX is held in backing reserves and can be deployed on Univ2 for liquidity and Univ3 AMOs at out of range positions.
- New AMOs can be deployed for market operations aiming to increasing the overall backing reserve collateralization. For example, A Dopex V2 AMO could be used to deploy excess ETH from backing reserves to LP on CLAMM.
- Receipt tokens can be redeemed for assets in the backing reserves aiming for 75% ETH and 25% rDPX even if the system backing is over-collateralized.
- A redemption fee is collected by the system on redemptions, initially this is set at 3%.
- ETH and rDPX can still be delegated, however a 2% delegation fee is collected by the system
- Re-LPs now are performed as synthetic buy-backs via AMOs when needed and do not happen with every bond. This was imperative considering rDPX circulating supply being high and cases where: 1) rDPX is bonded high and 2) rDPX is sold into the liquidity pool, reducing backing and leaking value from the system.
- rtETH can be staked to receive the following:
- 675,000 in ARB Incentives until January
- 25% of the rDPX sell tax during the STIP and ramped up after
- A portion of all redemption fees
- ETH staking APR from ETH backing reserves being staked
- Convex rewards distributed to rtETH stakers (not the curve pool)
- DPX Incentives - Put pools deposits are now similar to 4626, not NFT’d — allowing for composability. Put pool stakers will receive 225,000 ARB until January 31. After which a funding rate is paid out weekly from protocol revenue until their options are settled.
- Decaying bondable rDPX, dbRdpx, are distributed to veDPX holders as bonding fees at 12.5% of total bonded volume.
- dbRdpx will be distributed to option writers on Dopex v2 — CLAMM and Option AMM as rebates.
- dbRdpx rebates would allow for Dopex v2 premiums to be best-in-market for traders, increasing protocol utilization and then fees.
- Higher fees collected on Dopex would lead to more DPX buybacks during fee distribution and increasing incentives APR across the ecosystem.
Post launch:
- rtETH/ETH LP will be incentivized with 10 DPX/day and earns rtETH staking rewards. This allows for anyone to enter/exit without having to pay fees or wait for their bond to vest.
- DPXETH/ETH LP is incentivized with 5 DPX/day. This would be the initial steps in adding a use case for DPXETH.
- Single sided locked rDPX staking will be added, initially earning 25% of all protocol revenue
- rtETH markets will be deployed on Dopex v2 — CLAMM and Option AMM.
Based on launch parameters and Convex pointed to rtETH and a market average of 6% APR the projected supply would be about 15,000–18,000 rtETH before more Convex would have to be rented and pointed to stakers. This model allows the rtETH supply to scale up with more protocol revenue being bought into the system — by renting/accumulating more Convex.
Market demand for rtETH would come from:
1. ETH stakers looking for staked ETH derivatives with additional sources of yield.
2. rtETH option writers on Dopex v2, which would earn them rebates as well as better option premiums making it a superior collateral to ETH on Dopex V2.
At current market rates, all circulating rDPX would be out of circulation at about 75,000 rtETH. This of course changes dynamically based on the rDPX/ETH ratio.
The new design is resilient against value extraction/leakage in comparison with the older design, and long term scales with demand.
Rdpx v2 brings rtETH into the growing staked ETH derivative market — while providing DeFi yield alongside staked ETH yield aiming for market leading staked ETH APRs. rtETH will also be the premium options collateral on Dopex V2.
rDPX v2 Launch Parameters:
- DPXETH/ETH Curve LP A Factor: 10
- Bond discount factor: 0
- rtETH monthly staker incentives in ARB (until Jan 31 ‘24): 225,000
- Put pool incentives in ARB (Until Jan 31' 24): 75,000
- Convex pointed to rtETH stakers: 400,000
- Convex rewards for rtETH stakers: 70%
- Convex rewards compounded into protocol owned CVX: 30%
- rDPX sell tax: 10%
- rDPX bonding fees (in dbRdpx): 12.5%
- % tax revenue to stakers: 25% (during the STIP and ramped up after)
- % tax revenue to veDPX: 15%
- % tax revenue to backing reserves: 60% (during the STIP to accumulate CVX and ramped down after)
- rtETH redemption fee: 3%
- rtETH bond delegation fee: 2%
Note that the above parameters are for launch and will be adjusted dynamically based on market dynamics, bonding metrics etc.
Wen launch?
Both Dopex v2 products are slated for launch in the coming days. More details will follow prior to actual launches along with instructions on how to use CLAMM and rDPX v2.
And finally keep in mind that starting with both CLAMM and rDPX v2 launches, your activity is being tracked on Dopex for a future retroactive [redacted].
