[Deri Protocol] LTIPP Application - FINAL

SECTION 1: APPLICANT INFORMATION

Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.

Applicant Name: [Deri Protocol]

Project Name: [Deri Protocol]

Project Description: [Enter Project Description (1-3 sentences)]

As the first Layer 3 and the first Orbit-powered blockchain, Deri is reshaping DeFi derivatives.

Deri Protocol is the DeFi way to trade derivatives: to hedge, to speculate, to arbitrage, all on chain. Deri supports four derivative types: Futures, Options, Power Perpetuals and Gamma Swap.

Team Members and Roles: [List team members and their roles/responsibilities]

  • 0xAlpha: Co-founder
  • Alex: Architect
  • Jason: BD Lead
  • Yvonne: Marketing Lead
  • Daniel: Product Lead

Project Links: [Enter Any Relevant Project Links (website, demo, github, twitter, etc.)]

Contact Information

Point of Contact (note: this should be an individual’s name, not the name of the protocol): [forum handle]

0xAlpha (Profile - 0xAlpha - Arbitrum)

Point of Contact’s TG handle: Telegram: Contact @im0xAlpha

Twitter: https://twitter.com/0x_Alpha

Email: 0xAlpha@dfactory.tech

Do you acknowledge that your team will be subject to a KYC requirement?: [Yes/No]

Yes

SECTION 2a: Team and Product Information

Provide details on your team’s past and current experience. Any details relating to past projects, recent achievements and any past experience utilizing incentives. Additionally, please provide further details on the state of your product, audience segments, and how you expect incentives to impact the product’s long-term growth and sustainability.

Team experience (Any relevant experience that may be useful in evaluating ability to ship, or execution with grant incentives. Please provide references knowledgeable about past work, where relevant. If you wish to do so privately, indicate that. [Optional, but recommended]):

Deri Protocol is designed and developed by Defi Factory, a team of experts of finance, math and computer science. The core members have PhD degrees in science and come from the derivative business of Wall Street. The team has in-depth experiences of derivative pricing/trading/structuring. The team members have been in the crypto trading and solidity programming for several years.

0xAlpha:

  • Physics BS & PhD

  • Worked in Wall Street on derivative pricing/trading/structuring/risk management

  • Co-founded a quantitative hedge fund focused on traditional and crypto derivatives

  • Crypto nomad

Alex

  • Expert C++/Python architect/developer

  • Experienced solidity/vyper programmer

  • Experienced quant strategy developer

  • Math and technology enthusiast

Jason

  • Computer Science BS from University of Washington

  • Former Software Engineer at Amazon, AMD

  • Early crypto investor

  • Co-founder of a crypto marketing service agency

Yvonne

  • Holds a BA and a Master’s in Management

  • Worked at a consulting firm, focusing on risk management

  • Formerly on the operations team at a leading public blockchain

Daniel

  • Holds a PhD in Physics, with post-doctoral research experience at a renowned international university

  • Worked on risk management, quantitative strategy in leading fintech companies

  • Seasoned Defi player and enthusiast

Further details could be shared in a private setting to the Arbitrum DAO upon request.

What novelty or innovation does your product bring to Arbitrum?

1.The first Orbit-powered blockchain and the first Layer 3.

The innovative Deri V4 architecture, with the Orbit-powered DeriChain at its core, is set to expand Arbitrum’s influence across different layer 1s and layer 2s, connecting and shaping a more extensive Arbitrum ecosystem.

For detailed information, please consult the whitepaper for details.

  1. The One-Stop Derivative Shop

Deri Protocol offers a comprehensive suite of both standard and innovative derivative products, including futures, options, power perpetuals, and Gamma swaps, to accommodate all kinds of demands of the trading community. Our vision is to make Arbitrum the go-to place for derivatives trading (not just futures, but all kinds of derivatives).

Is your project composable with other projects on Arbitrum? If so, please explain:

Absolutely. Composability has been prioritized in our protocol designing–DeFi lego is in the spirit.

On one hand, Deri Protocol adopts AAVE as “external custodian” and Uniswap as swapper.

On the other hand, Deri Protocol can be “composed” by other projects both with the liquidity staking function or the trading function. That is, other projects can very easily stake liquidity into Deri Protocol or carry out trades and hold positions with Deri Protocol.

Additionally, Deri Protocol supports integration of many ERC-20 tokens as base tokens, including widely recognized project tokens like wstETH, ARB, LINK, WBTC, and others. Especially, Deri Protocol is one of the most important use-cases for some stablecoins, such as LUSD.

Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?

No

How do you measure and think about retention internally? (metrics, target KPIs)

We continuously analyze diverse metrics such as page views, unique visitor counts, event interactions, cumulative users, active users, the ratio of old to new users over time and on-chain transaction records. This strategic approach empowers us to decode our users’ core trading objectives and patterns. Leveraging these insights, we continuously refine and enhance our platform’s user experience, directly contributing to a notable increase in user retention.

Relevant usage metrics - Please refer to the OBL relevant metrics chart 1. For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section:

General Metrics:

  • Daily Active Users
  • Daily User Growth
  • Daily Transaction Count
  • Daily Transaction Fee
  • Daily ARB Expenditure and User Claims
  • Incentivized User List & Gini

Perpetuals

  • TVL
  • Trading Volume: Notional value measured in USD
  • Open Interest
  • List of Traders
  • List of Liquidity Providers
  • Trader Net P&L Improvement
  • Funding Rate Stability
  • Liquidations

(Note: while Deri provides more than perpetuals, the metrics for other derivatives are similar to that for perpetuals.)

Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan: [Yes/No]

Yes

Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest (Note: this does NOT disqualify an applicant):

No, we don’t.

SECTION 2b: PROTOCOL DETAILS

Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.

Is the protocol native to Arbitrum?: [Yes/No, and provide explanation]

Yes

On what other networks is the protocol deployed?: [Yes/No, and provide chains]

zkSync Era, Linea, Scroll, Polygon zkEVM, Manta Pacific

What date did you deploy on Arbitrum mainnet?: [Date + transaction ID. If not yet live on mainnet, explain why.]

Deri V3: May 3th, 2022: Arbitrum Transaction Hash (Txhash) Details | Arbiscan
Deri V4: Nov 26th, 2023: Arbitrum Transaction Hash (Txhash) Details | Arbiscan

Do you have a native token?: [Yes/No/Planned, link tokenomics docs]

Yes
Tokennomics: Tokenomics | EN
Deri on Arbitrum:$0.02 | Deri (DERI) Token Tracker | Arbiscan

Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?

Yes, after launching on Arbitrum, we kicked off a campaign to boost Deri Protocol’s visibility within the community.

Campaign details:

  • Name: Deri Festival on Arbitrum
  • Link: Galxe
  • The Metrics are in Galxe: Deri Festival on Arbitrum by Deri Protocol | Galxe
  • Offer: Users completed tasks are eligible for Deri exclusive NFTs.
  • Outcome: The event saw over 2,500 participants, significantly drawing in most of our active traders.

Current Incentivization: How are you currently incentivizing your protocol?

Ongoing Liquidity mining for Liquidity providers.

Referral Program: up to 40% of transaction fees will be allocated to contributors as rewards for their contribution efforts. Fees are refreshed daily, allowing contributors the flexibility to claim their rewards at their convenience.

Referral Program Smart Contract: Rebate | Address 0x65F475527BC0B2eE4d4e1C0b5d3ac9db883f0580 | Arbiscan

Please refer to deri for details.

Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program? [yes/no, please provide any details around how the funds were allocated and any relevant results/learnings(Note: this does NOT disqualify an applicant)]

Yes. We received a grant from the Arbitrum Foundation.
Total amount: $ 100,000.
We’ve already received an upfront payment of 20k, and the rest will be distributed via 4 milestones. These funds will be allocated towards the development and marketing promotion of Deri.

Protocol Performance: [Detail the past performance of the protocol and relevance, including any key metrics or achievements, dashboards, etc.]

Deri V4 Statistics: deri

As Feb 27th, 2024, Deri V4 has:

  • Number of total transactions on the Orbit-powered Deri Chain: 150,457
  • Total Trading Volume: over 140 billion
  • Accumulative Users: more than 28k users
  • Currently, we only support ETH on the Orbit-powered Orbit chain (Bridge URL: deri)
  • Every four hours, data on the Deri Chain is settled to Arbitrum One. Gas Fees generated can be viewed at: Address 0x02c903F5c76F3f00c1F659702Bd76DF30470bBEE | Arbiscan

Arbitrum as iChain

Protocol Roadmap: [Describe relevant roadmap details for your protocol or relevant products to your grant application. Include tangible milestones over the next 12 months.]

Q1: Enhancing Trading Mechanics and Introducing New Derivatives
Functionalities: Limit and stop orders to refine trading strategies.
Innovative Derivative Types: Gamma Swap to expand our offerings with unique derivative products.

Q2: Architectural Advancements and Community Engagement
Optimization & Modularization: Enhance the architecture of Deri V4 for improved performance and scalability.
Referral System Upgrade: Revamp the referral system to foster a robust referral/brokerage community, rewarding collaboration and growth.

Q3: Expanding Asset Support and Tokenomics Revamp
Launch Inno-Zone: A dedicated space for supporting a wider array of underlying assets, fostering innovation.
Upgrade Tokenomics: Further align with user and ecosystem incentives.

Q4: Empowering User Participation and Diversifying Offerings
Permissionless Pool Launching: Enable users to launch pools autonomously, promoting decentralization and variety in trading options.
Product Expansion: Introduce more derivative products, aiming to establish Deri as a comprehensive one-stop derivative shop.

Audit History & Security Vendors: [Provide historic audits and audit results. Do you have a bug bounty program? Please provide details around your security implementation including any advisors and vendors.]

Audit reports: Code Audits | EN

Bug bounty: Deri Protocol Bug Bounties | Immunefi

Security Incidents: [Has your protocol ever been exploited? If so, please describe what, when and how for ALL incidents as well as the remedies to solve and mitigate for future incidents]

Yes, The attack was exploiting a design vulnerability of our margin system in Deri V3: maintenance margin failing to cover the loss due to trading-caused mark price change.

This attack resulted in a total loss of 143,622 USDC on Deri Protocol’s trading pool on Arbitrum.A fund was set up by the Treasury to fully compensate for the loss of liquidity providers directly due to this exploitation.

Cmpensation Announcement: https://twitter.com/DeriProtocol/status/1589907464123994112

For more details, please read the post-mortem analysis:

This issue has been addressed and resolved immediately after the exploitation.

SECTION 3: GRANT INFORMATION

Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.

Requested Grant Size: [Enter Amount of ARB Requested]

USD equivalent: 700k

ARB amount: 350k at $2

Justification for the size of the grant 6: [Enter explanation. More details are better, including how you arrived at the required funding for individual categories of expenses covered by your grant plan]

The justification for the size of our grant request is anchored in the comprehensive promotion of our innovative cross-chain decentralized derivatives trading, Deri V4.

User acquisition and retention: Implementing a robust incentive program to attract, educate and retain users.

  • Increase overall derivative trading volume while ensuring sufficient TVL

    1. Currently at 1M daily volume and $2M TVL
    2. Targeting $10M daily volume (900% growth) and 5M TVL
  • Increase overall derivative trading volume while ensuring sufficient TVL

    1. PooL: incentivize APR
    2. Incentivize fee rebate → less cost to trade → more trades → more volume → more real yields for liquidity providers.
  • While we are achieving $1M daily volume with $2M TVL, we expect to require less than 900% growth in TVL to sustain a 900% growth in volume. Using our internal expertise, we predict a 150% growth in TVL is required. Therefore, we are targeting a $5M TVL and $10M daily volume, equal to a 2 volume/TVL ratio.

  • For each incentivization mechanism:

    1. We target an average of 20% APR in ARB in our pool. To achieve this level of rewards for LPs on $5M TVL across 12 weeks, it would require the following:

    USD equivalent = $5M * 20% *12/52 = $230,769
    ARB amount = $$230,769/$2=115,385 ARB at $2

    1. Deri applies different transaction fee ratios to different trading symbols. We would like to rebate 100% of all transaction fees paid to Deri Protocol back to traders. Currently, our daily transaction fee is $550. To achieve this, at a target of $10 M daily volume and 350 daily transactions, across 12 weeks, it would require:

    USD equivalent = $55010365*12/52= $463,269
    ARB amount = $463,269M/$2 = ARB at $231,635

Total Grant Amount is USD equivalent: 700k; ARB amount: 350k at $2

Grant Matching: [Enter Amount of Matching Funds Provided - If Relevant]

No matching funds

Grant Breakdown: [Please provide a high-level overview of the budget breakdown and planned use of funds]

We have a clear goal for our budget: to expand Arbitrum’s influence widely by drawing in trading users from other ecosystems.Deri V4 initially launched on Arbitrum One. Powered by Arbitrum Orbit, Deri extends to other blockchains while all trades will be smoothly settled on Arbitrum One. This elevates Arbitrum to a more central role among all public blockchains.

Below is our plans to use the grant effectively on Arbitrum(iChain).

  1. 70% of the grant will be allocated to reducing trading fees for Deri V4.

The objective is to boost user adoption and trading demand, referencing organic market trends.It is important to note that our proposed trade rebate will be based on the users’ actual fees spent, ensuring that the total rebate doesn’t exceed the fees paid.

  1. 30% of the $ARB rewards will be used to increase yields for the liquidity providers on Arbitrum(iChain).

This serves as an incentive for liquidity providers who act as counterparties to traders. Currently, liquidity providers earn real yield in the form of USDC from traders’ transaction fees. By introducing additional $ARB token incentives for LPs, we aim to grow the pool size, accommodate more trading demand, and initiate a positive feedback loop with trading incentives.

Our overall plan is to build a comprehensive ecosystem that attracts and retains both traders and liquidity providers. All ARB grants will be exclusively directed towards developing and enhancing the Arbitrum ecosystem. The Deri Protocol team is committed to creating a sustainable and robust on-chain derivative trading platform on Arbitrum, ensuring its long-term success.

Funding Address: [Enter the specific address where funds will be sent for grant recipients]

Funding Address Characteristics: [Enter details on the status of the address; the eligible address must be a 2/3, 3/5 or similar setup multisig with unique signers and private keys securely stored (or an equivalent custody setup that is clearly stated). The multisig must be able to accept and interact with ERC-721s in order to accept the funding stream.

Multisig with 2 of 3 signing weight

Treasury Address: [Please list out ALL DAO wallets that hold ANY DAO funds]

Contract Address: [Enter any specific address that will be used to disburse funds for grant recipients]

SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES

Clearly outline the primary objectives of the program and the Key Performance Indicators (KPIs), execution strategy, and milestones used to measure success. This helps reviewers understand what the program aims to achieve and how progress will be assessed.

Objectives: [Clearly state the primary objectives of the grant and what you intend to achieve]

The adoption of Orbit Chain as the core of Deri v4’s cross-chain Dapp (xDapp) model stands as a groundbreaking advancement in the blockchain domain, poised to reshape the landscape of DeFi.

By boosting trading volume and guiding traders from various ecosystems to Arbitrum ecosystem, the grant objectives encompass:

  • Championing the adoption of Orbit Chain: Elevating Orbit Chain’s presence and utilization within the blockchain community
  • Extend Arbitrum’s reach beyond its ecosystem by pioneering innovation in cross-chain DeFi derivatives trading.
  • Make Arbitrum the one-stop go-to place for derivative trading.

Execution Strategy: [Describe the plan for executing including token distribution method (e.g. farming, staking, bonds, referral program, etc), what you are incentivizing, resources, products, use of funds, and risk management. This includes allocations for specific pools, eligible assets, products, etc.]

Execution Strategy for Grant Plan: Deri V4 Festival on Arbitrum

Objective: The objective of this grant plan is to drive user engagement and trading activity within the Arbitrum ecosystem following the launch of Deri V4.

Products: Deri V4

Use of Funds:

  1. 70% $ARB rewards for traders on Arbitrum
  • Rebates will be based solely on actual trading fees incurred by traders during the week.
  • The rebate amount will not exceed the fees paid by traders, ensuring fairness and discouraging any trade-to-earn activities.
  • ARB tokens will be distributed as fee rebates to traders every Friday, reflecting their trading fee expenditure for the week.
  • The fee reduction will be applied to all markets on Deri.io.
  1. 30% LP rewards on Arbitrum iChain
  • Currently, LP on Arbitrum iChain can earn DERI mining rewards and 20% transaction fees from traders.
  • To incentivize liquidity providers, $ARB incentives will be integrated into the rewards structure.
  • ARB tokens will be distributed to liquidity providers through a smart contract on a linear basis at an average of 20% APR .

Financial Transparency:

  • All grant funds received will be meticulously allocated for the growth and development of the Arbitrum ecosystem.
  • The Deri team is steadfast in adhering to the outlined plan and will not divert grant funds for any purposes outside of the specified allocation.

Risk management:

The Deri Protocol team will closely monitor and prevent wash trading and sybil-attack-related activities from this campaign and ensure the proper usage of funds.

What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric? [Provide relevant design and implementation details]

Achieving the target TVL and trading volume on Deri should serve to greatly increase traders from other ecosystems. These newly acquired traders, if retained, are likely to continue pushing volume and driving fees on Deri for LPs. As referenced above, this KPI achievement will grow transaction fees allowing for a strong return of LPs incentivizing future deep liquidity.

Our platform rewards loyal and returning users by applying a referral program based on historical trading volume traded.

Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy. [Please also justify why these specific KPIs will indicate that the grant has met its objective. Distribution of the grant itself should not be one of the KPIs.]

  • TVL
  • Daily Active Users
  • Daily Transaction Fee
  • Trading Volume

Source: deri

Grant Timeline and Milestones: [Describe the timeline for the grant, including ideal milestones with respective KPIs. Include at least one milestone that shows progress en route to a final outcome. Please justify the feasibility of these milestones.]

From Apr 29th - July 15th, 2024

MileStones 1: Accomplishing milestone at Week 2

Description: Boost derivative trading on Deri

Deliverables:

  • Achieve 2M daily trading volume
  • Reach $3M TVL on Arbitrum One

MileStones 2: Accomplishing milestone at Week 8

Description: Boost derivative trading on Deri

Deliverables:

  • Achieve 6M daily trading volume
  • Reach $5M TVL on Arbitrum One

MileStones 1: Accomplishing milestone at Week 12

Description: Boost derivative trading on Deri

Deliverables:

  • Achieve 10M+ daily trading volume

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem? [Clearly explain how the inputs of your program justify the expected benefits to the DAO. Be very clear and tangible, and you must back up your claims with data]

Securing this grant will significantly propel our growth and innovation within the Arbitrum ecosystem. This funding will enable us to:

  1. Promote the adoption of Orbit Chain: By the integration of Orbit Chain in Deri V4 cross-chain decentralized derivatives trading, it providing more possibilities and liquidity for decentralized derivatives trading within Arbitrum ecosystem
  2. Expand Arbitrum’s influence across other blockchain ecosystems: Through the cross-chain model, we aim to broaden the impact of Aribtrum across various blockchain ecosystem, establishing a more interconnected and cooperative network
  3. Incentivize participation: Through incentive programs, we will attract and retain users from more eocsystems, thereby enhancing the trading volume within Arbitrum ecosystem.

Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream? [Yes/No]

Yes

SECTION 5: Data and Reporting

OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: Onboarding Checklist from OBL 3. Along with this list, please answer the following:

Is your team prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?

Yes, Deri is prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO.

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard? [Please describe your strategy and capabilities for data/reporting]

*First Offense: In the event that a project does not provide a bi-weekly update, they will be reminded by an involved party (council, advisor, or program manager). Upon this reminder, the project is given 72 hours to complete the requirement or their funding will be halted.

Second Offense: Discussion with an involved party (advisor, pm, council member) that will lead to understanding if funds should keep flowing or not.

Third Offense: Funding is halted permanently

Yes

Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains. (NOTE: No future grants from this program can be given until a closeout report is provided.)

Yes

Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?: [Y/N]

Yes

2 Likes

Hello @DeriProtocol ,

Thank you for your application! Your advisor will be SeedLatam Gov @SEEDGov

Please join the LTIPP discord and ping your advisor in the general chat so they can create a new channel and start communicating with you.

3 Likes

Let’s get to work. We are waiting for you at discord

2 Likes

Hey @SEEDGov , Please note our application is complete and ready for the title to be changed to Final. Thank you very much!

1 Like

You need help from the forum moderators

cc @cliffton.eth

Hey there! I’ve marked this as FINAL. All the best!

1 Like

Requested Grant Size:

USD equivalent: $230,769

ARB amount: 115,385 ARB at $2

Justification:

To determine the size of the grant we should request, we chose to benchmark against the current TVL increases that we’ve seen so far with our DERI incentives program. As detailed below, we expect to see at least a 250% increase in TVL heading to Arbitrum during the lifetime of this grant.

We target an average of 20% APR in ARB in our pool. To achieve this level of rewards for LPs on $5M TVL across 12 weeks, it would require the following:

USD equivalent = $5M * 20% *12/52 = $230,769
ARB amount = $$230,769/$2=115,385 ARB at $2