Introducing DerivaDEX — a Next-Generation Decentralized Exchange for Derivatives

After months of research and development, it is thrilling to finally take the covers off DerivaDEX. The project has raised $2.7 million for technical development and built an all-star team of partners — Polychain Capital, Dragonfly Capital Partners, Electric Capital, Coinbase Ventures, CMS Holdings, Three Arrows Capital, Calvin Liu (strategy lead at Compound), and Phil Daian (cryptocurrency researcher). Together with the wider DerivaDAO community, DerivaDEX is poised to revolutionize the future of trading, bridging performance, security, and usability in a way that will bring decentralized finance (DeFi) mainstream.

DerivaDEX is a decentralized exchange for derivative contracts built on top of Ethereum. It’s a community-owned exchange with a (sane) liquidity-mining token model that puts control directly in the hands of users. The native DerivaDEX token (DDX) allows users to participate in the governance and operations of the exchange. While a mainnet proposal-ready release is anticipated in Q3 of this year, in the coming weeks deep dives will be shared about DerivaDEX’s economy, technical architecture, and roadmap, so stay tuned for those updates.

You can also expect a series of programs that will be made available for early partners, including testnet competitions, insurance mining, and other opportunities to get early access to the testnet exchange product.

Sign up to make sure you’re first in line for these programs once they go live.

Who we are

At DEX Labs, we’re traders. We’re also blockchain engineers. But mainly, we’re traders. So far, DeFi has, for the most part, been led by teams with very theoretical mindsets. These projects sound nice on a white paper, but ultimately don’t lead to material adoption and user acquisition. We owe a lot to the pioneering teams that have come before us in our space. But one thing has been clear — DeFi has a glaring problem converting crypto-enthusiasts from centralized venues, much less winning over the masses. I’ve spent the majority of my career as an institutional quant trader at DRW (home of Cumberland, for all you crypto folk), trading pretty much everything under the sun. My co-founder has been running his own biotech and crypto fund for the past 10 years. Simply put, we are the end user of our platform; our trader DNA means we understand institutional and retail customers better than anyone else.

What we are building

We realized there is a huge void at the intersection of trading and blockchain engineering, so we decided to build DerivaDEX — a decentralized exchange for derivative contracts built on top of Ethereum. Traders want to speculate on and hedge with leveraged derivative products in a secure, censorship-resistant way, without taking custody risk. But what options do they have at the moment?

Centralized exchanges have strong UXes and lots of liquidity, but they have weak security and cumbersome regulatory constraints. On the other hand, you have decentralized exchanges, which provide cryptographic security, but offer few products, are very illiquid, and have terrible UXes.

We think there is a third way. By leveraging trusted hardware and garnering our decentralization on the base layer, DerivaDEX will be a next-generation exchange. We have three key properties above derivative platforms today:

• Decentralized autonomous organization (DAO): solves for censorship-resistance and single point of failure concerns.
• Open order book, no AMMs; on-chain settlement: offers traders a familiar, performant, and capital-efficient UX, as opposed to the common automated market maker (AMM) design used by most DeFi projects. Off-chain price feeds, matching engine, and liquidation operators solve for speed and efficiency, allowing us to synthetically represent any asset and offer a tighter bid/ask spread.
• Liquidity-mining: carefully-engineered and robust model highly incentivizes participation in the governance and operations of DerivaDEX.

The Next Evolution of Crypto Trading

To understand why we’re so excited about building with DerivaDEX, let’s take a step back and look at how crypto trading has evolved over the past 10 years.

Bitcoin trading began with centralized spot exchanges like Mt. Gox and Coinbase, dating back to the early 2010s. These exchanges let traders buy and sell bitcoin which was directly custodied by the exchange.

This first stage gave way to margin trading/lending platforms such as Bitfinex that gave traders more flexibility and capital-efficiency with their strategies. But after the ICO craze ended in 2018, volumes and liquidity dried up. This has since led to a mad rush towards derivative products in the last year or two, led by perpetual swaps on venues like BitMEX and FTX, along with dated futures and options. From mid-2019 onwards, the demand and volumes for derivatives have far outweighed spot since they make it easier for traders to lever up their capital and devise more targeted trading strategies.

We’re seeing a similar story now play out in DeFi — and even faster than it did the first time! From the initial spot platforms of EtherDelta and 0x-based relayers to margin trading/lending-enabled protocols such as dYdX, DeFi has now evolved its own basic perpetual swaps, options, and other derivatives.

It’s an exciting inflection point, but none of these early derivative protocols fully addresses the needs of serious traders.

DerivaDEX is different.

DerivaDEX approaches decentralization pragmatically, with the aid of trusted hardware, prioritizing performance, liquidity, and UX without having to trade off against decentralization. DerivaDEX is uncompromising in a focus on the final experience of trading.

Let us know you’re interested by signing up, and you’ll be first in line for DerivaDEX’s testnet competitions, insurance mining, and other opportunities pre-launch!

DDX enables users to participate in the governance and operations of the exchange. It is not a fundraising device nor an investment opportunity. U.S. residents are not permitted to trade on the exchange or participate in some programs.