Diving Deep: Understanding the SynFutures’ Oyster AMM Design 🦪
Learn more about the most capital-efficient AMM in DeFi derivates ever released.
SynFutures V3 arrived earlier than anticipated, bringing our most advanced AMM model to traders everywhere! The public testnet is now available for trading, with the mainnet launch to follow in the coming months.
Our vision for V3 is a revolutionary decentralized finance protocol that embraces the trust and transparency of blockchain technology while catering to a wider range of traders and liquidity providers (LPs). With experience working in traditional finance (Deutsche Bank), fintech (Ant Group), centralized finance (Matrixport), and now DeFi, the SynFutures team is well-equipped to tackle a remaining hurdle in the Web3 space: creating a market-making model that works for all market participants, from everyday traders to professional investors.
So, how is this vision reflected in the new Oyster AMM? Let’s dive in.
Order Books vs. AMMs
To understand the innovation behind Oyster AMM, it’s important to understand how liquidity and depth are distributed via different market maker designs.
Order books are the most efficient and established trading mechanisms in traditional centralized securities markets, and they’re used to list everything from stocks and bonds to Bitcoin and other cryptocurrencies. As its name suggests, the order book lists the number of shares being bid on or offered at each price point. Because the liquidity of a security or other asset is dependent on the distribution of these bids and offers, third-party individuals or institutions may come in and place their trades to close the gap between the ask and the bid, increasing the liquidity of an asset and thus, increasing the liquidity of the market.
While the order book model is geared toward professional traders and LPs, Automated Market Makers (AMMs) have a lower entry barrier, contributing to its prevalence in the DeFi space. In an AMM model, the market maker acts as an LP and only has to deposit two or multiple different tokens to the liquidity pool. However, this process can be a little advanced, depending on the AMM. For every transaction in the pool, the LPs make small fees.
The Evolution of AMMs
AMMs have become the go-to models for some of the most prominent DeFi protocols, including Uniswap, Curve, and Balancer. Rather than enabling users to trade directly against each other, liquidity is locked in the smart contracts, enabling any entity to become a liquidity provider (LP).
In 2021, when V1 was launched in Closed Alpha, SynFutures introduced a synthetic AMM model, sAMM, which lets LPs supply one asset of a trading pair (such as a stablecoin), where the smart contract automatically synthesizes the other asset within the pool. In 2022, V2 introduced an upgraded version of sAMM that doesn’t require LPs to set the initial price for a new expiry date, allocate margin to maintain a hedge position, or periodically rebalance margin to meet margin requirements, decreasing the nuisances traditionally faced when listing an asset pair.
How Oyster AMM Works
With Oyster AMM, SynFutures V3 is taking the AMM model to another level by combining concentrated liquidity (range liquidity) and limit orders to maximize capital efficiency and open up SynFutures’ decentralized derivatives trading infrastructure to a broader range of traders and investors, both professional and recreational — all while remaining permissionless.
In Oyster AMM, the Concentrated Liquidity AMM (CLAMM) is represented as a curve, and limit orders are represented as price points, as shown in the diagram below. The collection of concentrated liquidity covering a price point and all open limit orders on the same price point is described as a “Pearl.” When applicable, at a point where limit orders exist, they are filled before any concentrated liquidity is consumed. The order follows the price curve until the next pearl is reached and the swap is fulfilled.
This revolutionary design further simplifies the concentrated liquidity process users have learned with AMMs while enabling traders to take advantage of the features of the order book, which has been mostly used in traditional finance.
For more details on the Oyster AMM design, read the V3 whitepaper draft.
As mentioned, our vision for SynFutures V3 is to attract a wide range of traders and LPs to our perp DEX. We believe every market participant has skills and can play a role, and while AMMs have their advantages, professionals are still necessary in the current and future decentralized finance markets.
The Oyster AMM, along with the updated interface and new features on SynFutures V3, are the latest milestones in our mission to democratize derivatives trading and bring the world of DeFi to the next one billion users.
Start trading on the V3 testnet and provide your feedback. Have questions? Refer to our V3 video tutorials for step-by-step instructions on trading and providing liquidity.
About SynFutures
SynFutures is a leading perp DEX that creates an open and trustless derivatives market by enabling trading on anything with a price feed anytime. SynFutures democratizes the derivatives market by employing an Amazon-like business model, giving users the tools to freely trade any assets and list arbitrary futures contracts within seconds.
Deployed on multiple blockchains, SynFutures is currently the largest derivatives exchange on Polygon and is among the top three most actively used decentralized derivatives exchanges. Backers include Tier 1 Web3 institutional investors Pantera Capital, Polychain Capital, Susquehanna International Group (SIG), Dragonfly Capital, Standard Crypto, and Framework Ventures, and team members have extensive experience at global financial institutions, fintech companies and blockchain technology companies such as Alipay, Bitmain, Credit Suisse, Deutsche Bank, Matrixport, and Nomura Securities.
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