A Year in BUIDL
We aim to be the decentralized market for volatility. A liquid and composable on-chain derivatives exchange for the DeFi primitive. The year 2021 was a remarkable beginning. We saw high interest and strong support from a diverse community of everyday users and institutions. To serve everyone, we are preparing to deliver the finest product of its class, and nothing less.
Six months since we shared our vision, we have two iterations of our upcoming DEX. Our beta version was first deployed on Ethereum Kovan and later on Arbitrum Rinkeby.
Divergence in Numbers
2021 saw massive growth of Divergence on all fronts:
- $420m in cumulative notional volume recorded at the two-week mock trading battle of our beta on Arbitrum Rinkeby. Close to 1500 traders participated.
- 1,400+ unique wallet addresses registered and participated in our Ethereum Kovan beta testing. $2.4m notional volume was generated in less than a week.
- 5700+ unique wallet addresses become Diver tokens, since their circulation at the end of September.
- 3,000+ NFTs from our specially designed series with Project Galaxy have been distributed.
Our Mission in Progress
A liquid and efficient decentralized prediction market has been called for over the years. Our own obsessions over it predate the DeFi summer of 2020. It is not until then that we discover the practical requirement for a decentrally run market to price the idiosyncratic risks of digital assets within different ecosystem layers.
While binary options are long considered for use cases in prediction markets, they are also a simple hedging instrument. The initial conceptualization of Divergence revolves around the idea of using them as financial legos. The odds of their payouts are binary, however trading positions composed of them need not have binary results. In fact, they can be construed as building blocks of a vanilla option.
To engineer these options for volatility hedging, we’ve taken leaves out of the TradFi playbooks, and the best of DeFi. To adapt to the existing decentralized infrastructures, we’ve designed AMM pools automatically rolling over options expiries. From the outset, we are making our options composable. Each pool comes with its own customizations, and uses a single quote asset for options “virtual tokens”. These options are collateralized by fungible ERC-20 assets issued by other decentralized protocols. With such, LPs can capture fee streams on Divergence while retaining access to yields at other protocols.
Where We Are
We’ve learned a lot from our beta launches, and are at the final yard with some of our research and testing efforts. Among these, a focal point is to address the adaptability of our AMM for pricing various types of options.
Our approach diverges from the convention, ie, direct use of Black-Scholes-Merton (BSM) for pricing options. Using BSM for the real-time quotation requires a continuous update of inputs, which sometimes results in a tradeoff between decentralization and usability. To have a viable product with efficient price discovery, we are developing a variation of the constant product AMM mechanism. This takes into account LPs being passive market makers — subject to potential impermanent loss — as well as the requirements for capital and pricing efficiency. We will detail many of the products and features we have in planning over the coming months. And we look forward to working with all of our community members on this exciting journey.
Making User Experience Easy, and Even Easier
With each iteration of our beta, we are learning from community members about how to improve their experience. Among the updates, the newer, visibly better version will: 1) Simplify expiration and strike choices for ease of interactions; 2) Offer fairer option premium distribution among the LPs; 3) Improve navigation and accessibility to data and analytics. The majority of these optimizations have been completed and are ready to be rolled out with our updated product structure.
A Glimpse Forward
The year 2021 provides us with foundations for exciting new products and initiatives, many of which are well underway.
Structured Products and More
The TradeFi playbook is full of use cases for binary options in structured products, many of which are yet to be understood by the DeFi users. We see our current product as a base for many such products to be built. The growing sophistication of the ecosystem will call for diverse sources of return. This opens up yield-generating opportunities beyond lending and liquidity farming. We are glad to be part of this development and a pioneer in this journey. Our team is open to discussions of collaboration on all fronts, as we look forward to providing a layer for managing risk and enhancing yield.
DeFi is also Gamefiable
NFTs can be proven more than just a user loyalty program in DeFi, and we are doing it:) Much is already underway in our Diver-Gence universe, (which is set in 2030.) After months of research and design, the pieces of our plans are coming together. The possibilities are limitless.
One thing is for sure: if you haven’t got the chance to mint one of the above, the opportunities will present themselves:) Our NFT series has been growing with our release of Genesis DIVΞRs, Non-fungible Spears, and upcoming (you’ve guessed it) non-fungible Shields. We’ve been planning for a lot of pleasant surprises for our NFT holders and are excited to share more in the coming months.
We are dedicated to realizing our vision, and look forward to having everyone join in our journey!
About Divergence
Divergence is a decentralized platform for hedging, trading DeFi-native asset volatility, with its flagship product being an AMM-based marketplace trading synthetic binary options.
Follow us
🔔Website: https://www.divergence-protocol.com/
🚀Twitter: https://twitter.com/divergencedefi
💬Telegram: https://t.me/divergenceprotocol
📢Telegram Announcement: https://t.me/divergenceannouncement
📺Youtube: https://www.youtube.com/c/DivergenceProtocol
👓Discord: https://discord.com/invite/v96fhsPfRa
