# Panel: Derivatives

- Channel: [ETHTaipei](https://streameth.org/ethtaipei)
- Date: 2023-10-07
- Duration: 1:02:20
- Watch: https://streameth.org/watch/yt-ZPr7VjvLk1k
- YouTube: https://www.youtube.com/watch?v=ZPr7VjvLk1k

## Description

Panel Host:
・Vince (Kronos Research)
Panelists:
・Jib (Rysk)
・Aerhy (Pods)
・Gautham (Polynomial)
・Ibe (Predy)

## Transcript

welcome our horse wings from Chrono research and we have four panelists Jeep phone risk Finance are he from past Finance got them from polynomial and eBay from pretty Finance eBay are you here okay cool okay so we can see that there are two squads here option and power Perpetual I believe this gonna be a very exciting panel let's welcome them [Music] all right uh I guess they they saved the best for the last we're gonna have some fun today talking about D5 options um I'm your host for this session my name is Vincent I'm a Chronos research CEO Chronos research is a high frequency training firm we have a bunch of Traders here uh you know everyone interested in talking about trading happy to uh chat after uh I'll pass the mic over and introduce yourself and tell us what what does your team do so hey guys I'm Jeb from risk Finance I uh one of the co-founders I lead protocol engineering so risk is sort of devoted to solving the systematic uncorrelated return problem so a lot of crypto is very highly correlated so if moves Bitcoin moves the same way and so we're sort of Building Products which aim to solve this problem uh we currently do that through our Dynamic hedging Vault and around sort of making options trading uh better for normal Traders market makers and protocols alike so yeah I'm happy to talk more about it going forward but I'll pass on guys my name is Arie I'm from pods Finance so pods started back in 2020 with an option zmm but now we are doing structure products using options um so yeah hey uh hi I'm Gautam I'm from polynomial uh at polynomial we are focused on solving uh Building Products so that inefficiencies in derivatives slowly go down and we primarily have like three products at the moment one is Structured Products so called and put selling walls we also have burps and currently we are working on power pubs which are like an alternative for options yeah I'm from pretty finance a pretty Finance provide a hyper gamma trading platform composed by the UNICEF version 3. thank you all right um warm-up question can uh maybe a couple of you uh guys describe the current uh stage or status of the D5 derivative space hello so derivative space in D5 at the moment is mostly popes at the moment so I think over a trillion notional traits like fully everywhere like centralized exchange and decentralized exchanges combined in D5 perps haven't been a thing but like recently with GMX and uh and dydx like they have also been like increasing in volume a lot so the major thing at the moment is pubs and followed by that I think options are there options have like trade like 13 billion notional so that's there but like uh adoption hasn't been that much compared to like uh pubs uh so that's majorly like these are the two main products that drive the volume and traffic and in terms of like ecosystem wise most of them are concentrated on l2s and um optimism and arbitrum they're like almost everything is over there and there is also Structured Products which are kind of for retail so people who want to put money somewhere and they just have a payoff in their mind and want to earn yield and they are what I would call as like high risk high yield kind of thing and an alternative for yield farming and a lot of people use that but they've been slowly going down in the past few months because of a bear market and like the all those things that happened due to that but this is how the space is foreign of the U.S territory even you put money with Bank Central Bank and then you can get the four percent who want to go to the other or something with the usdc get right now 2.3 2.6 then around that who want to do that it's a it's a current situation even our case we provide a leveraged uh like LP position of course user must render money but we must get the record render for the liquidity pool but who want to provide that even we're using the same model with other like but we can pay the interest rate is 2.3 or something 2.6 can't reach the four but if you go to the normally Bank you can get the phone how yeah I think um D5 derivative specifically um for the vast majority of it caters towards gambling kind of behavior as opposed to what you'd see more traditionally with institutions hedging I think most of the hedging activity is closer to centralized and OTC kind of um trading whereas D5 because defy leans more towards automated stuff it tends to be much more focused on gambling and and sort of users just taking on huge speculative positions um to just bet on the price of you know a you know a small position for example uh so yeah that's why I'd say defy directives at the moment caters to quite a lot okay um then uh I guess along the same line can guys comment on the uh the biggest obstacles uh in the D5 derivative space we're gonna let's go from you and then the next question we're gonna rotate and so that everybody gets a chance yeah I think my co-founder Dan did a presentation on basically all the challenges there are and there are a lot um for me personally I think user education is a big issue a lot of users kind of don't really understand options properly they don't understand the benefits versus the perp to them sort of going 25x Leverage is fine they don't need to know what convexity is um then also uh smart contract risk I think is very under under price and not really thought about too much you know we've had maybe five or six you know major exploits in the past month um and yeah it's something that sort of keeps on happening and it's very hard to solve so that's one another thing and then user experience also is pretty huge I think See Fire user experiences far far better than than what D5 currently offers so I'd say those are kind of three things but to be honest they're they're way more I could mention so yeah yeah um I completely agree one of the biggest challenges for me whenever we're working with options mm was regarding the user education um but on top of that I think that Capital how Capital intensive the market is like whenever you have to sell an option you have to put you have to collateralize 100 that's very Capital intensive so I guess this is one of the biggest challenges in attracting new people into the market new attracting liquidity so that kind of goes along the user experience um so and also on in addition to that the fact that there's not tools like portfolio margin where you can like compose many positions that require less like far less Capital that is something very important for us to attract people into options but right now I don't I do not see venues offering that so I guess yeah hello so from my personal perspective like we've been selling options for a year with the Vault and one thing is like crypto is so unpredictable so most of the times you make uh I don't know 0.5 percentage a week for like five weeks and one week you just lose 20 percentage and that just screws you so the market is highly mispriced is what I would say so the LPS don't make profit due to a crash like very badly they lose and the Traders like Longs are always paying a higher premium than somewhere like they're a bit and on the short side you always have the what you said like the collateralization issues there and also like you are also getting wrecked so there is like a mispricing happening I don't think it's like just T5 but like in general like option pricing hasn't been that accurate there is there is a lot of what you say market makers and things like that who know the market beforehand and they take advantage of people a lot and if you see like there are a lot of option walls who sell directly to market makers and they have been also what they say like they know that there is way too much demand and they try to price it much much lower and then the retail gets screwed and then the retail is like afraid of touching any of those products and then they just go away so that has been like the general Trend which I've been seeing so there needs to be a better pricing the market is still very very inefficient for something this sophisticated to work very well I really just want to ask a question based off that so you mentioned that pricing of what you said but the example you gave was like 0.5 your gain in the 20 loss but surely you can't really use that argument if you're not if your position isn't hedged so like if you know your position ahead that would have been lower but you would and you might have collected profit on the price alone so like how can you sort of say that that's just a bad strategy that's not necessarily bad yeah like selling options weekly forever yeah that's a bad strategy but uh that is the biggest D5 product at the moment for options right I agree I agree and also like uh the issue is like you are most of the time selling at a cheaper price than a little bit that's also a big issue right like why would you like you let's say you get like a million dollars and if you're selling on sale you are getting 950 it compounds over time right that's also an issue there is like nobody really arming it most of the time like on-chain options are like like the pricing is bad so they give a token rewards to make sure like it's taken care of also but I'd argue with that specifically the it's only bad pricing because it's a bad strategy because every single Market maker knows that every week they're doing that 10 Delta option strategy so they front run the whole thing and they pull the pricing down so it's more a bad strategy than bad pricing I would say I mean you can say that but nobody's using any other thing nobody's using long dated options I mean practically speaking like who is using it that's because of the capital efficiency problem though I mean you can buy them right you can buy like a one month expiry nobody's really nobody's buying nobody's selling like I mean if there is no two-sided Marketplace who's gonna pay for it right you need someone to be willing to buy it and someone to be willing to sell it nobody wants to buy it nobody wants to sell it the pricing is obviously going to be very bad I mean it's just like that option is generally in the short term option expiries even like even if you remove the walls also generally like even in terabit also like the volume is generally on the one week experience right I mean I think that longer dated options are actually a lot better than than shortage options like at risk personally we focus quite a lot on Long data options and we actually sell do sell them quite well and the pricing is actually significantly better sometimes um but like the things I think the main issue with why you don't see long days albums that much is the capital intensity you know Capital intensity of options protocols at the moment which is kind of you know again it's it's yeah what do you think about the scenario where like uh let's take one year back it was four thousand at some time then it went to 800 and then it went into now 2000. how do you like even predict as a seller what is going to be the price like think about it from the perspective of the other side right as a seller I am selling one year option how do I know this thing is like it's like a time bomb it can go up so high it can go down so high and you are a seller and if you sell like 4 000 calls for one year from now you are losing like 60 of your Capital right I mean delicious horses yeah but the volatility is way too high for long dated options that's what I'm saying it's it's way too like it's 80 I think all right um yeah I like the discussion I'll keep it going so um like we talked about some of the obstacles you know you guys mentioned the user education or liquidity or like scalability um maybe just pick one and go down a little bit um let's talk about liquidity um you know like how what do you guys think count as the organic flow um and how do you guys uh think that you know how what's the best way to attract liquidity or organic flow um there's yeah um I guess the easiest way to do it is life through liquidity mining that is something Parts was very against because we don't believe that a protocol should maybe kind of controversial should release a token if you don't really have utility to it and you were looking we are always looking to finding pmf before is that token so that is the easy part easy path in order to attract liquidity but as I said before regarding the obstacles I guess that once you you know solve all the issues regarding Capital efficiency like portfolio margin having like features like this in the space I I tend to believe that liquidity would come more naturally and also regarding like this organic growl just like Jeep mentioned like the D5 space right now the five options people are using it for gambling but options are way more than that like just in taeyeon's um talk where he was talking about like what's the impact of hedging for Dow treasuries once we start seeing dials doing that like actively looking to hedging using these instruments for that and not just for exposure just you know just for kind of easy money um I think that that would that's what I would consider like organic growth because of course hedging is way less sexier than having leverage of course I want to get 100x and then win like that but at the same time 100x when you're losing you lose weight faster so bringing hedging into like kind of day-to-day life like you naturally consider it as part of your like treasury management strategy that's what I would see not only Treasures but you on your own portfolio like how many people do hedge here I you know I think not many people I tend to believe from previous user interviews I had so once people start using options in that way in a natural way um I think that's what I would consider like natural organic growth yeah I I second everything very sad I think really all flow is organic flow I think um on top of what Aries said um I think a big thing about um attracting liquidity is just having strong product and strong strategy uh especially the financial strategy and uh hedging does play a part in creating a good strategy and so if you have multiple protocols who are using these derivatives to hedge or using them to speculate then you suddenly have an organic market which is using each other to hedge you know their products and so that's where hedging can fit in quite nicely in D5 where users who don't normally hedge can deposit into one of these products and it basically handles the hedging for you which is a big part of sort of D5 Automation and and power that's yeah yeah the question is like how when how will liquidity come right like when will liquidity come liquidity and organic growth I think when the next bull market comes centrally this question is like what do you think will bring liquidity liquidity is a protocol is one of the issues is like as I told is initial version 3's liquidity is exactly the same it as a like an option short and then based on the calculation of the unisa version 3 infrared volatility is cheap it's a main issue chip means setting the like a shorter position uh is less premium so now uh race people want to do the liquidity provide to the initial version 3 because premium is cheap it's an issue for now us and then it's not investment advice but right now many people want to make it like uh come along against the unisa version series ivory because it's easy to make money it's not the investment otherwise but the current situation so you're saying like if you those who provide liquidity are like making the volatility on unisa very low that's what you're saying IV on UNICEF is low how much is it how much is IV thank you that's very much rational right options are 70 I think right um so you know coming from uh traffic options uh Trader uh you know I was doing that for like over eight years when uh before Chronos research um you know like you can sort of categorize you know liquidity three categories um you know you have the big institution hedging which we sort of mentioned uh then we also have um just retail speculating you know specifically on the Tesla options or GameStop you know they love the the zero day options or the short dated so you know for speculation um they can uh accomplish the same thing through perps right there's like you know 50 times leverage um and for institutions we have yet to see like really big issues come in whether it's regulations or things like that um I guess the third category will be like people chasing yields you know like a which is sort of what we've seen so far in a D5 derivative space you know people selling weekly options in a way they pick weekly rather than you know a year out because there's more Theta more decay in the front it's a bad uh you know implied Ball versus realized ball and people can see their p l sooner and everything um you guys also mentioned treasure right like the different altcoins they can work with those different divide you know weekly options selling Platforms in a way to to uh generate additional yield for their treasuries um you know like if we think that C5 is like the history or a sort of a mirror or guidance for the future for for D5 um you know I guess you know we really like we mentioned we need bull market to come back which means we need more retail so to expect speculate we already have sort of yield uh you know generation platform even though the TVO has been decreasing um maybe the next big thing is the institution adoption right and then they will um provide some additional flow and then you know going back to circles we mentioned there's a smart contract risk and all those things but yeah we'll see you know yeah liquidity begets liquidity so um yeah um okay so for next one um let's talk about uh what are the technological hurdles or maybe you guys are facing um and you guys approach to to overcome these yeah I can uh probably talk extensively about that I think I I won't I'll break it down a bit so I think like the computation on most on basically every blockchain L1 and L2 is sort of is still limited the fact you have to pay for what computation is a huge limiting factor um you know stuff like portfolio margining is essentially isn't it you know very very very difficult I mean there are some teams who are working on very cool things for enabling performance portfolio imagining on a blockchain but that's still going to be very intense uh you know other products are you know doing it off chain and then passing it onto on chain but you know that's sort of just like a bit of a middle ground um so I think that's one main reason one thing is just computation is just it's just a nightmare so that affects portfolio margining as well as like um getting actual like data on chain so uh for example like there's no real Way Beyond just pushing to an oracle to get volatility yet and that's mainly because of a lack of liquidity on chain um so it's not really viable to sort of come up with volatility purely from Unchained stuff um and then yeah I'd say those are two main things that come to mind um then obviously Securities the obvious one as well um yeah everything Jeff said and maybe [Music] um I don't know finding a way to create like under collateralized options or something like that to you know of course like portfolio margining is very complex so maybe a mid ground could be you know starting with under collectoralized options but then also you do bring some risks and stuff um and yeah yes hello I would say the major issue is like blockchains are really slow even now uh that just means that someone can just go on binance and come on Jane and then just make easy money and people do that and then those will be on the mm just get screwed so in general like a simpler answer is making an option amm is very very hard and maybe not possible that's also there and so let's see what happens but I think in the long term if volatility and things like that go down it will be possible but in the short term I feel like there is a there is a need to increase the speed of blockchain it's currently I think it should go under a second right now it's like mostly 13 seconds it's not very good and people can like often use it to their advantage and people lose money that's one of the major obstacles and mathematically it's very hard to design an amm with which which makes shows that uh like there is like uh for a for example like Traders mostly on scene who are buying options are at a loss compared to centralized exchanges who are selling options are at a loss and those who provide LP are also ultralos and so it's like the model is not very uh what you say precise like you know when you are helping like you are helping to the whole option pool and there is so many strike prices and expiries and you take all that risk into you and so at least like someone should make money and that would be good and uh that is generally like the biggest issue but nowadays people are making sure that problem is not there by giving the native tokens of the protocols as reward so that like you know some of that offset of what they're losing is taken care of but still I don't think it's like there yet uh it's it's no no it's no it's audio uh technological hurdles in D5 derivatives making the courses simple it's one of the most important for us to be honest even the Gaza shows a formula with a uni sub is a bit simple it's difficult to attack it's readable and then like even like if someone or not only us many people maybe like try to do a chart to solve some Challenge and try to do some uh something difficult but the only time is like I don't feel like we don't use much technology like a try to as much as possible like a simple for example as I say is in our case it's a pretty Finance it's at the beginning is there are a lot of like parameter like historic price or some uh even if we like provide the option of course we must have a like a historic price uh if we modify like uh Central exchange like a debit of course we must have a expired the expiry date but if we come to the default first we cut the maturity date it means a puppet show right the like uh second we don't want to have a like a parameter like a stroke price so we change like a square root or something like an index so it's a like if like we play like a center exchange they have a lot of choose but in D5 uh our option is very limited it's maybe we must understand um basically you're trying to simplify options um and make it easier like less user education yeah for example let's say is what unicep does it just cut the price on source code what I mean is UNICEF shows a price with just amount of the token A and B in the code we don't find any parameter like a price p it's a what they did it's like if like if we just using the blockchain with like a performer like a central exchange with using the changing Oracle sometimes we're using the p is a price as our Oracle in source code also we have a p but it doesn't work I I don't want to say something negative about the changing sorry sorry but like what we did is like that if parameter is many of course there are a lot of like uh some point to attack okay um I guess you know this sort of related to another um obstacles in a space with scalability um what do you guys think about scalability um are you guys like maybe also it relates to to the target audience you know I guess try to Target retail or institutions um yeah I guess scalability is the key word here um yeah scalability when dealing with I feel derivatives that like options for example they have expiry date so I don't know yeah you gotta deal with rolling the options changing positions of course like right now yes it's cheaper cheaper than it was like last year but still it adds up so it's very I feel like it's very complex to have these instruments on mainnet right now I remember that when we had the options mm Parts back in 2020 adding liquidity to the pool was around 300 dollars um so that's a lot like it's not feasible at all I've heard from some users back in Brazil that they're very scared of using protocols on mainnet because they're afraid that the price of the gas will go higher and their funds will be stuck there so scalability especially for instruments like ours that need constant like management and it's very important right now pause is only on mainnet but we do have plans to go to other Layer Two to solve these issues um but yeah yeah I agree I think l2s solve a lot of the scalability issues we see um in terms of I get we also ask about liquidity scale of those yeah so I guess l2's from like technological scalability is the main thing for liquidity scalability is actually for options specifically it's the capital efficiency is kind of the main thing that needs to be improved like if you take um you know ribbon for example uh you know they collateralize when they do a covered call they in classified as like a 10 Delta option with like one ease so that means that they're selling a nine dollar option and they're putting up like 1 800 which is it's pretty stupid so that's one example of like that's obviously like stupid stupidly scale like scalability and so just improving something like that so that it's only like 3x could like completely transform the amount of profit and exposure you can generate off uh you know a smaller amount of liquidity um so I think like in terms of the query scalability my opinion and wrist opinion I think um Capital efficiency is like the main problem to solve there because that once you solve that problem you can solve a lot of other problems like market makers will be more willing to sell on chain Mark um you know users will generate more yield uh Structured Products can use more of their liquidity to hedge as well as trade options so I think once you solve that problem you can get around a lot of the financial scalability issues of options um but yeah technological scalability I'd say l2s are doing a pretty good job it takes a long time to start up okay so on time uh in terms of liquidity right like what uh scalability issues are there it's a main question right yeah so uh in derivatives in general uh currently perps are there but they have currently a scalability issue like over a billion two billion nobody's able to do at the moment uh that's I mean it seems like a lot but when you are doing 25x leverage 100x leverage it's not a lot of capital and so the issue in there is like the model needs to be a bit more efficient because you have 100 300 million Capital loading and then you are trying to you know Market essentially the liquidity pool is trying to Market make both the sites right like the Longs on the shot and there needs to be better Risk Management Systems uh some things I've seen interesting was like uh some people are like playing around with funding rates they are trying out different ways of doing funding rates like funding velocity so that was something interesting like rather than making funding rate the difference you make it like a rate of change so that it comes back to the uh the price like eventually so that can be helpful but still like the hitting like we have perps and almost every day oi caps are hit so like there is always more people willing to trade but there is not enough volume on same like not enough like liquidity on chain to do it and uh from this point earlier like if U.S government is giving you four percent who's gonna put money in crypto a lot of people have left and most of the people who are staying are just doing it for earning yield and all so that's one other thing and in terms of option scalability like uh the issue is like the mm and the model so like people are trying a lot of new things I think there are some people trying order book model because they think that might be the right way to do I am not very sure because it depends on the market maker and market makers are known to screw people typically so so there is a lot of things that happens and so I think like uh from our perspective what we think is what worked on chain for amm is UNICEF it's not something that based on order books like that happened earlier as well so I think like there needs to be a Perpetual because most things on chain with expiry doesn't work so something that is Perpetual which works like option so that people can hedge and get convexity I mean even gamblers who are willing to gamble away right like Robin Hood yeah like did so much trading volume right so something with a large amount of can do convexity can be perpetual and can be expressed simply in an mm that would be good because like unicep is very simple as you said like it's it's doesn't take like 10 20 days to read upon it and like most of the option products that are there to read through the docs it takes three days and you don't understand what is happening you don't know there is all that stuff are happening so you just want to make a very simple product that makes people understand the thing very well and delivers the same outcome that they want I think something like that will come I'm not sure like if we are doing it but I think in the next three four years someone will do it yeah it's scalability maybe I should say something different okay so all you guys are like a liquidity or something they say and then what I feel like okay let's uh like it's not advertisement too but last week there was uh is a Tokyo and then on that time our team joined the hackathon and then what we propose is like between the D5 especially option and gaming we combine and the submit the reason why we did this one because if you see if you like heard like a game file or something like a play to um but what in fact is just like a gaming operator pays some money to the user only that but what we made is user come to the uh gaming and then they just buy the item and then this money goes to the UNICEF and then behind that on the money from unisub then items can earn like a mushroom or something like we submit that is a farm it's just idea but if is there a liquidity come from the gaming or something also like their money can improve the D5 is that what we feel as I say is a correcting the liquidity is one of the challenge so if those people is focusing too different also uh because they don't need to pay the gaming operator don't need to pay the marketing fee to the user to provide the liquidity it's a just idea but if not only is a finance guy gaming people come to this industry also they might make something change to us yeah um I actually the question of what Gotham said about scalability I I do Wonder sort of what is scalability of a power Perpetual compared to you know sort of normal options because the thing that I sort of when I initially sort of read about power perpetuals is that um and just options in general is like options are relatively easy to hedge compared to you know other drumatives and Delta one you know perps are also very easy to hedge um so like but when we look at Power perpetuals the actual replicating portfolio to hedge apart like a you know a suite or whatever is actually very complicated and I think that that does drastically affect its ability to scale um so I was wondering what your thoughts on that were you're asking how to exit sorry you're asking how to headset I'm asking about like hedging a Powerpuff it seems to like it's quite difficult and it sort of limits its scalability in my opinion I mean like you can has a Delta by using Futures right and and then like the gamma is what you're trying to get out of the power Perpetual as well so you are talking from the Long's perspective of my shorts perspective like well so from the Long's perspective you're kind of getting asymmetric upside right like you can just head with you don't really like if it goes up you make a lot more money than what you would go to it's like buying a call option right and when you are shorting it works similar to a payoff like a Dov does right you if it goes up if it stays stagnant and if it like you know if if it is stagnant or goes down you uh you make money and if it goes up you lose money so if you want ahead is a short question you can always like use a future push into heads it I mean similar to how perbs as well right you can create payoffs by combining it with other instruments like d5's main thesis is that you can combine major Legos and make cool and interesting things right so like what pretty is doing you can use a unisa V3 question you have a certain payoff you can combine it with this I mean it's still like I am I am not talking like this might be the thing I'm just saying that it can be potentially something because I don't think options are the thing that's the only thing I know at the moment but like other things are like I am like we don't know if it's going to be Paw Patrol it's like it's still a research right like it might be something else I just think like I I even think like Everlasting options are interesting it's just like something needs to be there but I don't think exp I am generally not very optimistic about the future of dated instruments on chain like it's not just options it's just even fixed lending with the term they are not getting adoption it's just too much uncertain for people to put money there I mean I'd argue that power patch was a far more concerns and than options and options you know your pair is up front if you're a seller or not if you're a buyer yeah okay but you if you don't have a seller like who where is the market but if you're a seller then you can just hedge off the risk and and then you know what you'll pay off I don't think it's a funding rate that changes so yeah funding rate changes right but it's it's more of an argument the vegetables do make it unpredictable to hedge yeah that's true but and it's true but why do you think dated Futures didn't work in crypto while Perpetual features did as I said earlier crypto is right as it is right now is heavily to get towards gamblers and they don't necessarily think about fees if you think about GMX like you know we speak track to GMX Traders so I think you know someone in our team did a talk with like 10 Traders from GMX and the vast majority of them didn't even know how many fees they paid on their last trade and so if they're not even thinking about that do you consider them sophisticated Traders or just gamblers and those gamblers aren't the same people who were trade fixed I mean if you go and ask Traders they trade they won't say most of the right but anyway like if you look at the history of power purposes on chain right sorry they tried pubs so they tried Futures related Futures on the blockchain it's just like it's perps are a better instrument than dated Futures that's why it exists right you can have 100x leverage in dated features how will you have it you need a physical delivery who is going to deliver ethereum to you right after every 30 days like it's on whether but then why is people not trading dated features right it's there in almost all the exchanges like everyone is Trading perps like it's not that binance doesn't have it people have it but people are trading posts because probes are better I mean for a Trader it is better right like you it's it's kind of easier to think about right you don't have to take expiry into consideration and think how the price will change over at that time and then how much it deviates and all those things you can pay a funding rate but the funding rate is kind of fair right it is more like you're paying premium based on the market demand if two too many people are longing not a lot of people want the thing so funding rate is like this price is increasing over time I mean it's like it's a much fairer mechanism than like buying a dated feature and it's just like all over the place yeah I think I'm sort of playing what uh what it says about um institutional beings over the next wave of things and and treasuries as well and they typically want a more predictable uh you know I actually think perps are more predictable than dated fees like liquidity is not there like you need something that can work with low liquidity and can work what is the point of buying something which you don't know will like it's it's just it's just a worse instrument I mean that's what Market has shown us one is a one is doing trillion dollars for specific users they are I agree I agree with you on that but the mark the specific Market I'm talking about which would scale it to uh so let's let's take an example okay let's take an example let's say I have a single staking pool right and I want to hedge my single staking pool with an instrument will I go and buy Futures every week dated or just will I just short a perp and then just like keep it over there like for crypto let's say you are providing liquidity to a you like a single pool like your locker token and just take it you want to hedge the risk right what would you do would you buy Futures every week or like dated futures or would you just buy perps and then just short it isn't it just easier to buy perps in terms of like mental thinking well no if I want to keep my costs no I mean you know the cost here right it's kind of fixed already and you are shorting you are actually earning money most of the time the market is positive so you are actually earning money you are shorting something you have held your risk how is the other one better in any terms let's uh yeah like I think it's a good discussion basically it's coming down to trade-offs you know like the purpose and Futures you know perhaps you have to pay funding rate so in a way that funding rate might pop at any time and then you might have some unpredictability there but for futures if you do it like you said you have to roll it every single week you know and I feel like it depends on how Hands-On you want to be um but agree you know there are definitely different trade-offs and a different uh sophisticated uh you know Target audiences will choose different different ways um but it's very interesting right like traffic you know there's no perps you know like there's a lot of volume in options in futures um like but then in a crypto space you know perhaps definitely dominates um it may be you know like Jeff says has to do with the target audience and maybe participators the the players um but you know what does that mean for the future would that you know start to change like more towards D5 or more towards traffic or um yeah you know actually like only a few minutes left you know a last question for you guys what do you guys want to see in the next couple years for the D5 options or divide derivative space uh yeah I want to see um better Capital efficiency the problem that everybody faces with options at least um and actually I want to see more um like so D5 is all about composability right so for example pods is working with risk to build our own Structured Products maybe someone like polynomial will create another product that we can build on top so I'm very excited to see these new products that allow us to build these money Legos so yeah it just happens all the time yeah we've been a big proponent of that like most of the products that we make are built on top of synthetics so like we are more into like why make something from scratch but in general like what I want to see is like better blockchains uh faster and less costly like most of the time you try to scale a product it's just gas price goes up so much it's really annoying and so better infrastructure would be something that would be really good and more Innovative stuff like you know people are not creating cool stuff this year last year it was a little bit better I think this year not enough so somebody make something really nice that would be very good maybe next uh oh five minutes okay next uh like a Competitive Edge for the research is maybe like a Perpetual between perpetual and then fixed time this like a bridging this area is uh waiting some like a genius making the paper and then we want to develop those smart contact thank you um I guess I'll add on to um you know as a Trader like you know Capital efficiency or like counterparty Risk and all those things matters um you know right now people worry about the centralized exchanges um there are different solutions such as you know the copper clear Loop fire blocks you know like Finance seifu uh maybe I shouldn't mention them together but um in a way you know people want to use their own wallets somewhere they can see under the mirror the the assets over to exchanges um maybe we'll see that in uh it will be great to see that combined with the D5 where hey imagine you have a wallet and your ass that can mirror to centralized changes and a D5 platform at the same time it's in place you know like so that if they're called at different prices you know anyone can take advantage of this and easily you know trade them um I guess goes back to Capital efficiency and make it you know uh less friction to to to trade or to speculate or to to to take advantage of the market um I guess let me squeeze in one last question uh any advice for anyone who wants to get into the derivative space in what it's developers or just new projects I'd say uh best bet is always to try and solve the hardest problem um so right now I'd say that is how we get uh volatility on chain portfolio margining and capital efficiency so um I guess so the biggest thing we learned pods learned with options amm is that you have to talk to users we we spent two years building building the options amm to then talk to users to realize that we were actually on a limbo it was too easy for advanced users to complex for new users so before you build something talk to users first learn from our mistakes has otherwise like you're gonna like not waste time because it was very fun two years building the amm but you could build something that has a better go to market that has pmf um yeah because in the end we're all looking for pmf right so so yeah talk to users I guess this is the where the most important information is has without users you don't really have a product so yeah hello yeah so I I would say uh it's the biggest issue building something on chain is that contracts are very risky you need to go through two three audits you have a very large development cycle in general so it's like five six months so most of the time people just think of an idea and they just like start building it for six months I would say like make it internally at least see how it is go to a hackathon show it to a bunch of people see if it works and make a bunch of new things right like iteration is as important like if you're trying to do the same thing and your iteration cycle is one year and if someone else's iteration cycle is like every week the person who's doing uh one week and then just like slowly improving will be better in a year than someone who's like just building in their back room because you don't know a lot of things will users like it will this be good so we need to figure out a way to do it in a very elegant way it's not done yet but there needs to be factor I make a bunch of stuff I think that would be the best thing that I would say smart contract the transaction on the metamask if any is fine because right now even I go to the investor like uh institutional people and then last month I got there and then funds money just say our minimum road is 50 million U.S current diva is too small they say to be honest one of the insurance companies just say it like that first if they used to the smart contact then if because for them 15 50 million is for us or even me I don't know you guys about for me 50 million is huge money but for them is no if they used to the smart contact they can put the money and then we have a minimum liquidity then we can develop liquidity is like a infrastructure so I hope is anyone used to the smart context is much important yeah okay all right okay so we can open for some questions for our panelists and our host dude just more like comments I think one comment was now the treasuries are paying 45 percent why why are you getting yield from D5 but in D5 like each staking is like four percent plus and I think other protocols taking reward is also High higher than that so I think it's people's mentality of you know like thinking in terms of USD all the time so if they're accumulating native tokens then it's not bad so that was just a comment for that uh and uh regarding the uh dated Futures uh what about CME Futures that's pretty popular right so the so the institutions they seem to be used to uh daily Futures even crypto data Futures and there are even ETFs built on top of it so just just uh throwing it out there it just to add to that on the USD four percent stuff I think um people put a lot of emphasis on the US dollar for some reason and uh I think a big thing about D5 is accessibility uh so like you know a lot of people while they see that four percent I personally wouldn't even know how to access that whereas with D5 it's very easy for me to know oh I need to go to Ave to get this or I need to go to you know leader Lido to get this so it's sort of accessibility is a major thing about the uh that U.S treasury argument that you hear a lot um and another thing is that a lot of you D5 users wouldn't even get out of bed for four percent so so yeah that's another thing as well thanks everyone um so one of my question is kind of like a follow-up from what you guys have been talking about one of the main main point was around GMX there's actually you know is that Mark product Market fit are those users actually the user you want in the future right because jeep was saying you know they're not that sophisticated they don't even know how much feet they were paying so I guess like my question is um to every one of you because you're coming from different teams um what are your teams trying to onboard next are you trying to you know kind of like bring massive option with you know the simplest UI Divine newbies into derivative or option trading or are you guys trying to bring the most or like more sophisticated C5 Traders on chain and why is that um so yeah retail where you know or you're onboarding it's it's they tend to be the easiest people to onboard uh just because it's much easier to educate them um when it comes to institutional what we've found typically is that they are very skeptical about regulatory issues about smart contract risk and so they tend to not sort of be harder to pitch and to get on board you can only really ever sell them you know sell them something which they don't have to hold for too long um they wouldn't like LP for example um and then um so the next for us to be honest is more around protocols and how we can sort of get uh you know build this sort of thesis of collaboration before competition so protocols hedging with each other so for risk I'd say we're mainly focusing on protocols after retail um so for pots so our strategies they are very low risk principle protected so in D5 it's not very attractive let's say but we do think that of course if I have a lot of DJ strategies Legion protocols and these kind of low risk strategies are also necessary to onboard people that are actually scared I for example I don't use power perps because it's complex to understand I would but I would and I would not recommend it to my sister for example but she that is principle protected and you know I feel like it's a very it kind of makes it easier it's like kind of lowers the entry barrier um these low risk strategies so there's that on retail and we're also focusing on dials so without treasuries because of course they have um their own talk they have their own tokens and sometimes they have USC eth and that money is is their Runway right they pay their employ like their contributors with that money so they have to like like protect protect it as much as possible so we do think that low Vis strategies principal protected is a good like it's a good strategy for them so we're also going after them um so yeah mainly downs and and Retail more for like new users into D5 so in terms of use of focus we are we are like of all the products that we have like we are majorly focused on purpose at the moment because they have a lot more adoption and uh so we built something on top of synthetics verbs and essentially it has lower fees than GMX so I think we are trying to get people from there but the product by Design is not good for people trading less than 10K so we are trying to go for users about ten thousand dollars so I think the idea is to get rid of air draw farmers and then I have to get everyone else and so that is generally the focus for us at the moment like a little bit sophisticated and we're not majorly focused on institutions because it hasn't been like a good past experience and I feel like in the long term people who become like big institutions in crypto would be crypto native people rather than bringing all these trade five people who don't even understand how these things work so like there will be some people like native funds who come up big become big and hopefully don't get liquidated foreign to be honest is our team is only three people to be honest then of course if we have a like enough money enough human resource we can consider a lot of choice but in fact we are three and then what we need to do or what we can do we must consider so right now is we are focusing the crypto trading form only what they want like only three or four companies crypto Trading Company we like a monthly we approach them we made this one we made a decent we want to trade drag design what we are doing now okay if there is no question please give big quotes to our panelists and house for giving this great panel thank you [Applause] and thanks everyone for participating in the first day of East Taipei conference one important reminder here please bring your best tomorrow you can only enter the venue with your badge see you guys