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RiskSwap — A Leading Solution for Decentralized Derivatives — Serum Stories #15

Welcome to Serum Stories #15

Derivatives on Serum and Solana are hot, and for good reason. The ability to hedge, speculate, and lever up across positions is critical for modern finance as we know it today, and the same tenets carry over to the crypto realm. The derivatives space is a ripe and promising space to build in. Strong teams with industry backgrounds and ambitious visions for DeFi abound.

This week’s feature guest is no exception. This week, we are joined by RiskSwap, a new team in the ecosystem building a suite of DeFi products including decentralized derivatives. RiskSwap recently announced the start of their Solana-based perps demo trading. Many have also been watching their performance throughout the Ignition Hackathon. What has RiskSwap, the multichain decentralized trading platform, been up to in the Serum and Solana domain? The team gives us the rundown.

What’s up Next

1. — What is RiskSwap?

2. — Why build on Serum?

3. — Founding story

4. — Multi-chain support

5. — From CEX to DEX

6. — Offerings!


1. First, would you like to give people some background on what RiskSwap is, what you have built so far, and what your plans are for the Serum and Solana ecosystem?

Long story short, RiskSwap is a multichain DEX that makes decentralized crypto futures and options trading more efficient by providing traders with advanced risk management and strategy-building tools, as well as a superior Central Limit Order Book execution model combined with a liquidity pool.

On one hand, we’re building a platform that will meet the needs of professional traders. RiskSwap’s development and business strategy is backed by our extensive background of over 5 years in asset management, algorithmic trading, risk hedging at Algalon Capital — a hedge fund that combines algorithmic, DeFi, and stock market strategies. In other words, we perfectly understand what we do, why, and how.

On the other hand, are also striving to welcome more newbie traders into the platform and onboard them with the help of user-friendly, low-entry point UI/UX to the underappreciated advantages of financial derivatives on the decentralized infrastructure of the blockchain.

At the moment, we have already released a fully operational spot engine based on Serum and a perpetual futures demo with some basic functionality that was developed as a part of Solana’s Ignition Hackathon. The current version of perpetuals trading is our first step in making decentralized derivatives trading comfortable and efficient. In the near future, we will start adding new features including but not limited to price chart display, multiple markets (now only BTC/USDC market is available), funding rate engine, liquidation engine, Central Limit Order Book integration, information about recent trades and orders, and other GUI improvements.

Later, we will implement quarterly futures, options, portfolio management, isolated margin, risk hedging, and other features — everything will be available on a single platform thus making the process of decentralized derivatives trading easy and accessible.

2. That sounds great and exactly what futures and options traders need. Why did the RiskSwap team choose Serum to build a derivatives DEX? How did you make this decision and what were the key considerations?

Serum is the central liquidity hub in the Solana ecosystem. Most trading activities on the Solana blockchain go through Serum, thus its users can be sure that the possible slippage is minimum, available trading pairs are many, and the liquidity level is high.

Serum succeeded in creating an on-chain order book — a crucially important DeFi development that was so desired by the community but could not be implemented on the Ethereum blockchain due to low throughput. Solana succeeded in offering sufficient speed for an on-chain trading experience that is equally comfortable to that of CEXes.

We believe that the Serum agnostic order book perfectly matches the goals of RiskSwap: to provide seamless, fast and, convenient derivatives trading for all user groups. For us, the main advantages of Serum based architecture are:

  • The team’s success in spot order book development;
  • High liquidity levels;
  • The team’s progress in developing the agnostic order book that will support derivatives trading.

3. Speaking of the team. You mentioned that you have a solid history of building derivative trading strategies. How did you form RiskSwap and what led you all to build a decentralized derivatives exchange?

Well, as we are traders ourselves and have some background in asset management. We understand that the current derivatives market infrastructure can be improved by more sophisticated tools on one hand and decentralized trading on the other.

Globally, the market of derivatives outperforms that of spot trading by several times and currently processes over $2 trillion. At the same time, the decentralized trading market grew as well with Ethereum based protocols alone boasting over $80 billion TVL. This signifies a huge potential for decentralized derivatives trading: Ethereum-based dYdX protocol, for example, already has over $7 billion in daily trading volumes.

We know perfectly well that some other DEXes are moving in this direction, and we will cooperate with many of them (cooperation is always better than the competition, you know), but our biggest advantage is that we realize what tools and features the end customer needs.

Let me give you a quick example of our approach to options trading specifically: options and futures are commonly segregated; few platforms offer trading these instruments in one place. But options, being a hedging instrument, perform much better if they operate in the same environment as futures. Right now, market makers have to operate on several platforms to delta hedge the position by an underlying asset, which is inconvenient. For delta-neutral traders (volatility traders), it’s also not sufficient, which results in non-market pricing and low liquidity on many platforms.

4. You have plans to support multiple chains, with Solana of course being the first. What led you to Solana first and why build on other chains?

We started our development with Solana due to its high speed, throughput, and low fees. These are exactly the features traders need for comfortable interaction with dApps. Additionally, we see much potential in Solana because of the speed of its development.

RiskSwap will ultimately support multiple chains. Multi-blockchain support allows us to offer the protocol to more users, overcome the liquidity issue by transferring funds from one chain to another, and get access to all assets within a single platform. In other words, a multichain approach is the future of the blockchain industry.

5. The decentralized derivatives trading industry is still nascent but indeed very promising. How do you plan to grow trading activity on your platform? What do you think will push centralized derivatives traders into trading on RiskSwap?

Let me start with the second question. Most people who trade derivatives on centralized exchanges nowadays are simply unaware of the decentralized alternatives that would help them gain full control over their funds.

The main advantages of blockchain usage are actually clear to most market participants. They include permissionless operation and full control of funds. Even today, with stricter regulation and improved security on most CEXes, traders still bear counterparty risks and are deprived of full control over the funds. Namely, they may have their assets blocked by regulatory request, the exchange may be hacked, or the funds may be simply stolen as a result of malicious actions from the management side.

Furthermore, CEXes have to obey regulatory rules; Binance, for example, recently had to delist tokenized stocks. Derivative DEXes have much more freedom from this point of view and gradually will start offering one-app access to trading crypto and traditional financial assets.

We will combine features which are widespread in traditional finance with DeFi features. For example, our users will receive market maker incentives for adding liquidity to the USD staking pool, which is impossible on centralized exchanges. And at the same time, people will use the order book for settling transactions. The order execution speed, thanks to Solana’s advantages and throughput, will be sufficient for CEX-competitive trading speeds.

Speaking of one-app trading, RiskSwap will allow traders to interact with all the necessary tools through a single interface. You will be able to transfer ERC-20 tokens to SPL thanks to our integration with Wormhole and use them as collateral for trading RiskSwap futures and options. The performance of various options strategies can be immediately evaluated using our position builder interface, and even delta hedging can be set up to minimize risks. No one else in the DeFi world has implemented this yet.

With regards to the first part of your question, we will offer the community a wide range of opportunities to get incentives for adding liquidity or trading actively. All of these activities will be DAO initiated, e.g. the RiskSwap DAO will suggest some ideas for voting and further implementation, and it will use funds allocated for the DAO to incentivize the audience. We are considering a few interesting activities on the list including fee discounts, gamified onboarding with challenges and rewards, loot boxes with bonuses for different activities, trading contests, and more.

6. What kind of products or risk management features do you think traders are most excited about in crypto?

The development speed of new features is the most exciting for traders. Compared to the ossified TradFi sector, cryptocurrencies move much faster. Of course, traders like high volatility assets, which allows them to quickly increase (or lose) their capital. In general, we can say that the blockchain offers a huge list of tools, and everyone can choose what interests them. Deposits, venture capital, liquidity provision, insurance, market speculation, long-term investing, and much more.

To offer instruments for efficient derivatives trading, RiskSwap will offer proprietary management tools that include:

  • A position builder –A powerful instrument that helps to assess PnL by simulating your futures and options positions, visualizing profits and losses, and exploring Greeks charts.
  • Portfolio Overview — A portfolio analysis tool that allows the trader to see consolidated trading results that include all futures and options trades.
  • Delta hedger –A tool for creating delta neutral trading strategies by utilizing a proprietary delta hedging mechanism and interface. It’s a very important instrument for every options trader, and no one in DeFi has created this before.
  • Singleblock — A tool designed to build up options and futures strategies with multiple different “legs” to mitigate position risks such as severe price movements by simultaneous bids executed as FOK orders.
  • Cross-margin and isolated margin — Traders will be able to choose if they want to use their entire margin for all trades or if they want to isolate it.
  • Multi-asset margin — Traders will be able to use different types of collateral for their trades. This feature may be very useful for people who do not want to exchange their crypto for USDC. Also, it may facilitate the creation of different positions. For example, if the funding rate rises, traders can use their BTC as collateral for shorting BTC perp. Generally, they will have a market-neutral position that earns a funding rate.

All these instruments are designed to provide traders with better control over their risks and get exposure to more efficient trading.

We hope you enjoyed the interview!

We would love to continue having these kinds of conversations with all the incredible teams building on Serum and sharing them with you. Just let us know who you want to read about next!

You can keep up with the RiskSwap team and development through their Twitter, Discord, Telegram, and of course, their website.

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Serum Stories is a community driven initiative that aims to showcase teams behind some of the up and coming projects on Solana

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