As the latest headline in a busy news week, CZ of Binance will be stepping down as CEO in addition to paying over $4B in fines.
While mainstream media may be chomping at the bit to criticize crypto, many in the industry see this as a final cleansing catalyst…
Stay alert, stay informed ⬇
Breaking News: Binance
- Binance to Pay $4.3B Over Compliance Failures, CEO Pleads Guilty: Crypto exchange Binance has agreed to pay over $4 billion in fines to U.S. authorities to settle charges over sanctions violations, money laundering issues, and operating an unlicensed money transmitter.
- Binance Names Richard Teng as New CEO, Replacing CZ: Binance has appointed Richard Teng, formerly Global Head of Regional Markets, as its new CEO after founder Changpeng "CZ" Zhao stepped down in a plea deal with U.S. authorities.
- How Binance Illegally Courted U.S. Customers for Huge Growth: Court documents reveal Binance heavily relied on American users to become the top crypto exchange while evading regulations, with 30% of revenue coming from the U.S. in early 2018.
Other News:
- $30 Million Bridged to Ethereum's Layer 2 Network Blast: Blast, a new Ethereum Layer 2 solution, attracts over $30 million in ether and stablecoins within hours of its launch, offering unique yield opportunities.
- Celsius Shifts Focus to Bitcoin Mining: Following SEC feedback, Celsius is transitioning to a new company solely dedicated to Bitcoin mining, diverging from its initial reorganization plan that included staking.
Background
Dopex is a decentralized Options exchange that uses blockchain technology to provide permissionless and non-custodial access to Options trading.
Evolution of Dopex in DeFi
Dopex is a decentralized Options exchange that uses blockchain technology to provide permissionless and non-custodial access to Options trading.
Dopex played a significant role during the last bull run in the crypto market, pertaining to its innovative contributions to the options sector.
During the recent bear market in crypto and the resurgence of interest in DeFi, Dopex V2 has been an important component in the evolving DeFi sector.
There is an anticipation for options to gain traction in crypto, judging from the significant role of derivatives in traditional finance.
The complexity of options trading is a key point, in contrast with perps which are simpler and more straightforward.
Options, with features like expiration/maturity date and strike price, are more complicated and often misunderstood in terms of their volatility and management.
Capital efficiency is a major flaw in on-chain options trading.
Market makers were disinterested due to low returns on investment relative to risk.
The requirement for full collateralization limited the development of options on-chain.
The bear market further impacted on-chain options due to these capital efficiency issues.
On-chain options could compete with centralized exchanges if they improve capital efficiency, leverage security, and offer competitive fees.
Dopex evolved, starting from its initial Single-Staking Option Vault (SSOV) design, where users deposited assets and received incentives.
This system has its limitations, such as the requirement for full collateral before selling an option and the inability to sell options before maturity.
There are other products developed by Dopex, like products revolving around betting on volatility and short-term, high-leverage scalps.
These projects didn't perform well due to fragmented liquidity which suggests that consolidating products and liquidity might have improved their usage.
Exploring Dopex V2's CLAMM Options and rDPX V2
Dopex V2's main components namely consist of concentrated liquidity call AMM options (CLAMM options, AMM, and rDPX V2.
Call options are the right to buy an asset at a specified price and date.
An understanding of Uniswap V3 can help to understand the foundation of CLAMM options.
Liquidity is deposited in a specific price range on Uniswap V3, divided into ticks.
These ticks react to market price movements, converting assets based on price changes.
Dopex replicates the payoff of a call option using Uniswap V3's liquidity ticks.
This benefits both the liquidity provider (who receives premiums) and the option buyer (who gains from the option's performance).
An advantage of the CLAMM system, is its ability to utilize a broader range of ticks for selling options.
This maximizes yield by generating option premiums for ticks that would otherwise be inactive in Uniswap V3, leading to potentially higher overall returns.
CLAMM offers higher potential yields than just the Uniswap V3 LP position, by utilizing liquidity for option trading.
This would be advantageous from a user perspective.
The benefit of CLAMM depends on market volume.
While some days might yield higher fees from Uniswap V3 due to high volume, on average, CLAMM provides more consistent and potentially higher returns.
This is due to premiums earned on a broader range of ticks and increased liquidity utilization, even for ticks outside of the active trading range.
While Dopex’s initial Minimum Viable Product (MVP) saw limited use, they are partnering with entities like Orange Finance, a CLAMM liquidity management protocol.
The team is also partnering with market makers for liquidity provision.
The team is in ongoing discussions with unnamed projects to leverage various types of liquidity, including Uniswap V3, for integration into their platform.
Dopex has the ability to integrate complex decentralized exchange liquidity and its value for users managing property companies.
Because of this, market makers are enthusiastic about the project due to its potential to optimize payoffs and enhance liquidity management.
Bosslmp is an anonymous advisor to Dopex with a background in traditional finance focusing on risk management, interest rate derivatives, FX investment banking, and options in FinTech.
He is also a CFA charter holder, a DeFi trader, and an investor, and has been an advisor for three years.
Bosslmp identifies two main user groups: active and passive.
Active users with strategies on Uniswap V3, such as those using delta-neutral strategies with Aave, would find the platform beneficial.
Passive users, such as those seeking superior yields, would also benefit from say, a strategy involving depositing in Uniswap V3 and using options to manage risk.
Dopex secured 1.5 million $ARB, with a portion allocated for incentivizing users on CLAMM.
Dopex’s Incentivized CLAMM is now live
Bosslmp explains their plan to offer high APRs for three months on assets like $ETH, $CRV, and $BTC to users depositing their LP Uniswap V3 with them.
He expects to attract both liquidity providers and option buyers, hoping to demonstrate the profitability of their system and establish a loyal user base.
CLAMM's Design, Strategy, and Future
Bosslmp recognizes a major drawback of CLAMM's design: the pool-based system where deposits are pooled, and liquidity might be locked until the option is settled.
He mentions that Dopex is working on a solution for this issue.
Their future strategy includes targeting certain utilization rates, similar to Aave's model, to prevent 100% utilization and allow people to always withdraw.
Incentives and high premiums will encourage liquidity deposits.
The team is aware of CLAMM's shortcomings and are working to iterate and improve it.
Despite these issues, CLAMM remains a great product that is attractive for those aligned with its long-term vision.
DeFiDad asks about the expiry dates for future options through CLAMM and potential support for other crypto assets.
Initially, CLAMM will have a maximum maturity of 24 hours, with plans to extend to one week and one month. He says that the first markets will be $ETH-$USDC, $ARB-$USDC, and $BTC-$USDC and that more assets might be added based on demand and liquidity.
Bosslmp also hints at ongoing discussions with other protocols to potentially include their tokens in CLAMM, suggesting a flexible and expansive future for the platform.
To build complex financial products, one must start with a simple, solid base.
He sees CLAMM and Options AMM as these bases, allowing for the creation of more structured and tailored financial products.
He envisions a future where users can build upon these bases, adding their unique elements to the DeFi space.
Bosslmp explains the AMM's focus on capital vicinity, highlighting its efficiency for active traders who want to sell options immediately and control their payoffs.
The AMM allows for complex strategies involving simultaneous buying and selling of options.
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Traders can manage their risks and margin requirements using portfolio margin, mentioning the option of liquidation and liquidity dependencies for increased risk strategies.
The option AMM caters to sophisticated traders seeking to implement complex strategies.
It plays a key role in attracting volume and market makers through matching buy and sell orders, thus reducing exchange risk while earning fees.
In addition, there are plans to enhance liquidity by relying partly on CLAMM liquidity and integrating a portfolio margin system distinct from CLAMM.
The CLAMM is suitable for passive users seeking better yield, while the option AMM targets sophisticated users and market makers, highlighting the synergy between the two products.
Many players in the space are using Uniswap V3-based strategies but Dopex differentiates their approach by using tick-level strategies.
Bosslmp recognizes a trend towards portfolio margin for capital efficiency and distinguishes his protocol's unique use of tick usage.
Bosslmp comments on the challenges of the vault system in market making, pointing out the necessity of financial expertise and tools.
He says that many market makers profit more from exchange rebates and fee adjustments in other business areas than from market making itself.
Dopex Ecosystem Updates: $rDPX and $DPX
$rDPX, initially a rebate token in the Dopex ecosystem, aids option writers by compensating losses.
A new bonding mechanism has been introduced for $rDPX, involving a 25% $rGPX and 75% bond, yielding a receipt token.
This token allows holders to earn yield from various sources, including incentivizing the Curve pool.
The aim is to use $rDPX to compensate option sellers, encouraging bonding as loss compensation.
There are potential returns for $rDPX holders, including a minimum 12% return on $ETH.
The receipt token can be redeemed for $rDPX, and multiple rewards for receipt token holders and their role in the Dopex V2 ecosystem.
The $DPX token has transformed into a vote escrow token, ve token style, and its role in fee capture.
Bosslmp advises on the advantages of both $rDPX and $DPX, suggesting exposure to both for different risk and reward balances.
He highlights the systems' distinct yet synergistic nature and their potential performance in the coming months.
Bosslmp gives a heads-up about upcoming releases, including the CLAMM and the Dopex in the next 10-20 days, and the option AMM in Q1 2024.
He discusses plans to develop the Dopex ecosystem, increase liquidity, partner with more protocols, and consider new features for the second half of 2024.
Although future plans are not yet finalized, he hints at more tokens, potential presence on different blockchains, and a variety of products.
He reflects on the product development in 2023 and plans to continue or increase this pace in 2024, depending on market conditions.
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