Derify Protocol Documents

About Derify protocol


Derify protocol is an innovative decentralized derivative trading protocol. Traders can engage in leveraged trading up to 10x on exchanges based on this protocol.
Derify protocol supports a programmable liquidity pool for various assets. Third-party smart contracts can implement more advanced, professional, and complex Defi applications based on this protocol.
Derify protocol allows for the creation of derivatives freely (provided that there is a qualified index oracle). It supports on-chain assets such as spot/futures price indices for any token or off-chain assets such as spot/futures price indices for commodities like gold and oil.
In response to the characteristics of derivative trading, Derify protocol has created a hedged automated market making mechanism(HAMM) and position mining rules.
Traders can directly trade with the liquidity pool without the assistance of market makers or centralized matching systems, and holding any position can receive position mining incentives.
Note: In the future, higher leverage ratios such as 20-100x will be supported, and the supported leverage ratio depends on our risk tolerance assessment for each derivative liquidity pool, with specific values referenced in the system parameters.

Our Vision

Our goal is to become the safest, most widely applicable, and supportive infrastructure for derivative trading, with a focus on innovative products.
With the existence of the Derify protocol, we hope to see the emergence of more innovative Defi applications and financial strategies.
We firmly believe in the decentralized autonomous organization(DAO) concept and as the project progresses, the Derify protocol will ultimately achieve complete community ownership and self-governance. Every DRF holder can participate in governing the Derify protocol ecosystem and reap substantial financial rewards through the project's thriving development.

What is hAMM

The key objective of AMM is "price discovery," which is represented by a price curve (Uniswap's AMM) or a price surface (Balancer's generalized-AMM) using the key formula x*y=k.
The key objective of hAMM is "position hedging," where we define "balance" as X+Y=0, and this is ultimately reflected in the total position of a derivative long position (X, always positive) being equal to the total position of a short position (Y, always negative).
The path to achieving the objectives of hAMM and AMM is the same, which is the system state transition caused by each transaction in the system, creating reasonable arbitrage opportunities to attract external arbitrageurs to conduct risk-free arbitrage and restore the system state to equilibrium (in AMM, this refers to the internal price being consistent with the external market).
We refer to the automatic market-making mechanism of the Derify protocol as "hedging market-making," or hAMM for short.

What is position mining

In Derify protocol, all long positions provide liquidity for short positions, and vice versa.
Therefore, we have established that holding a position provides liquidity.
The incentive rule for holding positions in any direction is known as position mining - all holders (including regular traders, arbitrage traders/robots, yield farmers/aggregators, etc.) can receive risk-free returns as position mining rewards.
The rewards for position mining are distributed based on the proportion of the holding amount of any position to the total positions (single derivative variety).
Currently, rewards are fixed at 30% of all trading fees received by the exchange, distributed in stable coins.
The reward is a fixed percentage (30%, paid in stablecoin) of the platform's trading fee income, as well as the platform's token, DRF.
Last modified 2mo ago