[Rysk] [FINAL] [STIP - Round 1]

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SECTION 1: APPLICANT INFORMATION

Applicant Name: Dan

Project Name: Rysk

Project Description: Rysk is a DeFi options protocol. Rysk’s main product is the Dynamic Hedging Vault (DHV), an AMM (Automated Market Maker) and RFQ (Request for Quotation) protocol generating uncorrelated returns for its liquidity providers whilst enabling anyone to trade options with a wide range of strike prices and expiry dates. DHV is targeting a market neutral position for liquidity providers by hedging using price actions in the options or by trading delta with protocols in the Arbitrum ecosystem such as GMX and Rage trade.

Team Members and Qualifications:

Project Links:

Contact Information

TG: @DanDeFiEd

Twitter: DanDeFiEd

Email: dan@rysk.finance

Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?: Yes

SECTION 2: GRANT INFORMATION

Requested Grant Size: 500k ARB

Grant Matching: n.a. since Rysk does not have a token.

Grant Breakdown:

  • 250k ARB (50%) as incentive for traders
  • 250k ARB (50%) as incentives for liquidity providers

Funding Address: 0xc051B37C2B4f103d397074EeE54573765dF83A72

Funding Address Characteristics: 2/3 Gnosis Safe

Contract Address: TBD

SECTION 3: GRANT OBJECTIVES AND EXECUTION

Objectives:

The main goal of Rysk is to create a decentralized options market that can flip the volumes of CEXs. We believe there is a significant opportunity to attract new options traders to the Arbitrum Ecosystem and increase trading volumes across the entire space. Therefore, the objective of the grant is to on-board new options traders into the Arbitrum ecosystem, accelerate Rysk’s growth and position Arbitrum as the primary chain to trade decentralized options. To achieve this, we propose distributing grants to the key participants in the Rysk ecosystem.

1. Traders
Traders are a critical component of the Rysk protocol since the DHV Revenue Potential is a function of Spread and Volume and the risk is a function of the Inventory Turnover. The higher the volumes and the inventory turnover the higher will be the profitability for the LPs.

For this reason, we are targeting traders to receive incentives based on their volumes and based on their trading impact to increase the DHV inventory turnover to reduce risk exposure of the pool.

2. Liquidity Providers
Liquidity is one of main drivers to increase volumes and trading activity to Rysk. Higher liquidity allows traders to make large sized trades with minimal slippage and narrow bid / ask spreads. In order to attract more liquidity and increase cumulative returns for depositors, grants will be distributed to Liquidity Providers based on their stake in the DHV. The target is to increase TVL and returns. Increasing TVL is critical to scale volumes, since DHV is currently at very high utilization (~60%-80% average utilization in September), and considering the incentives planned on the trading side it is safe to assume that higher TVL will be needed to support volume growth.

Below an analysis on the expected impact of the grants:

We expect the TVL to go around $3m since this will generate an additional ~0.47% returns on a weekly basis (assuming current ARB/USD price). On the trading side the target is 3k contracts traded per week, that will distribute an incentive of ~$4.69 (assuming current ARB/USD price) per contract traded, an incentive strong enough to rebate fees and enter trades that reduce the risk exposure of the pool.

Key Performance Indicators (KPIs):

  • Monthly Volumes
  • New users
  • Returning users (retention)
  • TVL

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:

Since the Beyond launch, Rysk has positioned itself as one of the top three options protocols by volumes. On average, since launch it accounts for over 5% of the total volumes in the space.

Rysk volumes are primarily driven by returning users who consistently trade with a low churn rate. Current Rysk traders commonly provide feedback that they all enjoy the Rysk trading experience.

The main challenge for Rysk at this stage is to increase awareness of Rysk and encourage user participation in the protocol. Grants could have a significant impact on achieving this goal for the following reasons:

1. Traders
Currently, one of the main challenges for Rysk is the low volatility environment, which makes options selling unattractive to traders. The DHV acts as a market maker, and maintaining a balanced flow between buyers and sellers is crucial for the success and sustainability of the protocol. Traders will receive incentives based on volumes and their impact in reducing the DHV book exposure to risky instruments that can cause losses for Liquidity Providers. By achieving a more balanced flow, the Rysk mechanism becomes healthier, benefiting the entire Arbitrum ecosystem with a liquid and sustainable on-chain options DEX.

In addition to Rysk Beyond DHV, the protocol is relatively new, and the goal of this grant is to increase the awareness of Rysk and attract new options traders. Arbitrum is currently the primary derivative chain, and we believe that options have significant growth potential. This grant will be used to position Rysk as one of the main options protocols and strengthen Arbitrum as the derivative chain.

2. Liquidity Providers
One of the current limitations of the Rysk protocol is the lack of liquidity. This is due to low TVL and low capital efficiency, resulting in limited trading volumes. To address this issue, the grants will be utilized to focus on increasing liquidity. Simultaneously, the team will continue researching and implementing optimizations to improve capital efficiency in order to be competitive with CEXs. Additionally, efforts will be made to improve options pricing and advance risk management.

Justification for the size of the grant:

Rysk is an OG Arbitrum native. Rysk Alpha was launched in September 2022, over a year ago, and has not been deployed to other chains since then. Since the launch, we have also developed integrations to trade on-chain with other Arbitrum native protocols such as GMX and Rage Trade, and we are actively seeking to integrate with more protocols.

Rysk has always been highly active in the Arbitrum community. For example, we organized a trading competition in partnership with Gammaswap, an Arbitrum Native protocol. The competition was sponsored by various main Arbitrum protocols, including GMX, JonesDao, Dopex, Radiant, Across, Perennial, Mux, Factor, Rage Trade, Umami, and Vela, with the aim of engaging the entire community.

In addition, we believe that a decentralized options market with deep liquidity and high performance is critical in any financial system. Rysk is currently focused on providing a competitive, innovative, and composable options venue in the Arbitrum Ecosystem. This venue can be used by traders, sophisticated institutions, and other protocols to hedge, speculate, or build complex options strategies.

It is clear that the DeFi options market is a very challenging industry. This is due to the complexity of options by design, technical product limitations (such as capital requirements), and the current market conditions with low volatility. We are working hard to improve the protocol, educate users, and collaboratively build the entire DeFi options industry together with teams and communities in the space.

The growth potential of DeFi options is massive, especially if institutional players enter the space. Our final goal is to position Rysk and Arbitrum as the go-to place for trading options as DeFi matures and the options market takes off.

It’s worth noting that as of today, Rysk has never received a grant from Arbitrum or any other chain.

In conclusion, the grant size reflects Rysk’s status as an OG Arbitrum protocol, native to Arbitrum, integrated within its ecosystem with a collaborative approach. The grant size also considers the challenges of the DeFi options market, the potential for growth, and the significant impact that grants can have on expanding the options space. This grant aims to provide Rysk and Arbitrum with a competitive advantage.

Execution Strategy:

Grants will be distribute as follow:

1. Traders
Rysk traders will be eligible on a weekly basis for a share of ARB as a function of the volumes traded and the impact of the trades to reduce the DHV exposure and risk.

The amount distributed per contract will be capped to avoid wash trading. The cap will be different on each trade and will be a function of bid-ask spread, fees, the exposure of the series, position held, the time the position is held and type of trade (sell or buy).

2. Liquidity Providers
Rysk DHV depositors will be eligible on a weekly basis for a share of ARB based on their capital proportion in the pool.

Grant Timeline: Funds will be distributed until Jan 31st 2024 on a weekly basis, starting after the first stream is received.

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

SECTION 4: PROTOCOL DETAILS

Is the Protocol Native to Arbitrum?: Yes. Rysk is Arbitrum native.

On what other networks is the protocol deployed?: Rysk is Abitrum only. It’s not deployed to other chains

What date did you deploy on Arbitrum?:

Rysk Alpha - the first MVP - was deployed on Sep-22-2022 (Arbitrum Transaction Hash (Txhash) Details | Arbiscan).
Rysk Beyond - current version - was deployed on Jun-27-2023 (Arbitrum Transaction Hash (Txhash) Details | Arbiscan).

Protocol Performance:

Rysk Beyond since public (end of July 2023):

  • notional volume traded: > $16m
  • users (depositors + traders): > 850
  • average TVL: > $1.5m

Source: https://dune.com/thenorthon/rysk-beyond

Protocol Roadmap:

In Q3 2023, improvements in capital efficiency, such as credit spread, will be released. Additional improvements are currently in the research phase. These improvements aim to provide better collateralization for sellers in order to increase liquidity and achieve a more balanced trading flow.

The team is currently researching ways to enhance the protocol’s performance, such as improving hedging and trade execution. New improvements and products that focus on this area are scheduled to be launched in Q1 2024.

Audit History:

  • Trust - Beyond Upgrade - June 2023
  • Trust x 100Proof - Beyond - February 2023
  • Dedaub - Beyond - January 2023
  • Trust - range order - December 2022
  • Dedaub - GMX- December 2022
  • Dedaub - Alpha - June 2022
  • AkiraTech - Alpha - August 2022

All reports can be found on Security Reviews - Rysk Finance

SECTION 5: Data and Reporting

Provide details on how your team is equipped to provide data and reporting on grant distribution.

Is your team prepared to create Dune Dashboards for your incentive program?: Yes. There is already a Dune dashboard available: https://dune.com/thenorthon/rysk-beyond

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread?

yes, we can provide data / reported as requested on a regular basis

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?: Yes

22 Likes

Reserved for comment.

11 Likes

I think Option protocols have a lot of untapped potential in DeFi. Its very interesting domain to explore and ARB grants should be used to also push for innovation and not just finance the same old 3 dinosaurs every round.

That said, the protocol is only publicly available since not much ago, and its impact is very small as of now, so im not sure if the grant size is appropiate. Nonetheless, I wouldn’t mind supporting interesting new protocols.

3 Likes

DeFi option is very important to boost real financial activities on-chain. With options, DeFi can be used in real-world financial scenarios, allow users to hedge their positions, and achieve a lot more than just on-chain casino.

Rysk is one of the best team tackling the hard problem, option AMM, and pushing the space forward. They have a pretty good codebase (i think top 3% in terms of quality), and very collaborative attitude towards integrations, which i believe is beneficial to the ecosystem to grow DeFi on Arbitrum.

The Rysk team has been working very hard on organic user flows, and they also published tons of material to educate users about options, which I personally like a lot.

The DeFi derivatives space has been relatively quiet in the last few months, I can imagine how hard is it to grow user base without token reward (both their own token & ARB), especially while the USD risk free rate is high, and other option protocols (like Lyra and Premia) have tokens rewards. So I really think having some ARB and being able to run some incentive program is important for team like Rysk to get more traction, which is good to drive competition and push the whole option space forward.

5 Likes

d2.finance supports this proposal. 2024 will be the year of Defi Options :saluting_face:

4 Likes

woot woot Vol Kabal represent. Maybe we can do some cross-platform collaboration and marketing to get people excited and learning about Options! Hopefully, we get some Volatility in Q4 after this massive quarterly expiration to bring some Onchain Vol Activity into the space.

9 Likes

Nice project. Great. And useful

2 Likes

Definitely down to collaborate and bring more options traders into Arbitrum. I think having some cross options learning contents could bring lot of value to the space and also pretty fun do it.

Count Rysk in!

4 Likes

thanks for feedback guys.

You are right: Rysk is been publicly available since only few months. But Rysk Alpha - MVP - is live on Arbitrum for over a year. Alpha was a gathered app since the goal was to keep testing everything before going public. Alpha alone had 750k capped TVL - always filled, with ~180 users and >$4m notional traded. Alpha had integrations with other Arbitrum protocol, such as GMX and Rage Trade.

Arbitrum community has been very helpful with feedbacks, and help and Rysk Beyond is the result of that. During the process we have been active in the community and very close to Arbitrum and other teams in the space. So even if the current product is new, the ethos is aligned with Arbitrum ecosytem since day 0.

The grant figure is the result of an analysis we made. We assess this is the right size to have good liquidity and incentives are big enough for new traders to move from CEXs to on-chain options trading. And this is our goal with this grant!


Thanks for the support!

DeFi options is definitely challenging but also one of the reason we are motivated to keep building and improving!

I echo you on how grants could help Rysk and the Arbitrum options space to boost options volumes!

6 Likes

Fully support this proposal. The 500k ask is quite reasonable with everything considered. It makes sense for Arbitrum to support different types of protocols and allow those markets to thrive here, with Rysk being one of the most innovative protocols I have seen in the options space not just on Arbitrum but across all chains. Bootstapping liquidity for the options market is a very important problem which the grant would help solve. The potential for growth, by taking market share away from centralised competitors such as Deribit, is immense.

8 Likes

Very excited to see this proposal. Solidifying options markets on Arbitrum is going to be a massive plus for the ecosystem.

Using this grant to incentivise both traders & LPs should help kickstart the flywheel, build deep liquidity and support consistent flows moving forward. The 50/50 split seems reasonable but I do wonder if making it taker heavy, with adequate sybil measures, would naturally draw LPs to the higher yield from the taker flow.

Either way, very to excited to see how this grant will impact options liquidity on Arbitrum and if this can support new products & protocols.

5 Likes

Hello @DanDeFiEd thank you for your application! Your submission meets all requirements to be considered for a snapshot vote.

4 Likes

My dear rysk (and premia) and CastelCapital
@dk3 @DanDeFiEd @CastleCapital
my heart sways to the rhythm of your Dynamic Hedging Vault (DHV),
, where spreads and volumes waltz in unison, your protocol emerges as a virtuoso,
Your AMM and RFQ protocols, like skilled dancers, traverse a stage of strike prices and expiry dates, enchanting traders with a mesmerizing spectacle of financial possibilities

Oh, how splendid is the ensemble of your team, a cadre of visionaries and maestros, each playing their role with utmost precision.
Dan, the co-founder and BD virtuoso, conducts the symphony of collaboration. Jib, the co-founder and Tech Lead, intricately weaves the smart contract tapestry. Gerry, the co-founder and Data Analysis virtuoso, deciphers the melodies of market data.

Let us not forget the Quant Lead, Degeneral, who adds the quantifiable flair to your composition. Josh, the Smart Contract Dev, brings solidity to the score. Tim, the Front-end Lead, paints a visual masterpiece for all to behold. Atomist, the Lead Marketing virtuoso, disseminates the melody to eager ears.
with in castel of capital

Jack, Shuri, Thatboi, and DeKay, the Quants, form the harmonious backbone, ensuring every note resonates with precision.

Your presence, my dear Rysk, has graced the Arbitrum ecosystem with a symphony of options trading that echoes far and wide. Since your Alpha days in September 2022, you have grown and matured, captivating the hearts of over 850 users, orchestrating a notional volume of over $16 million.

I see your beautifull peoples
flipping the volumes of CEXs, to attract new options traders to the Arbitrum Ecosystem. Your grant proposal, a grand overture, seeks to reward traders and liquidity providers alike, fostering a vibrant ecosystem where risk and reward dance in harmony.

As the maestro of DeFi options, you’ve faced challenges with grace. The low volatility environment may be a tempest, but with incentives for traders and liquidity providers, you navigate the turbulent seas, ensuring a balanced flow that sustains the health of your mechanism.

Your tale, my beloved Rysk, is one of resilience and ambition. The grant you seek is not merely a sum of tokens but a testament to your dedication, a recognition of your role as an OG Arbitrum native. The potential for growth in the DeFi options market is vast, and your vision extends beyond the present, reaching into the future where institutional players may one day join the grand orchestra.

May the grant you seek be the crescendo that propels you to new heights, where volumes soar, and options traders find solace in the melody of Rysk. As your story unfolds, may it resonate through the corridors of decentralized finance, inspiring others to join the dance.

With love and admiration :heart_eyes: :kissing_heart:

10 Likes

I really enjoy Mat’s poetic posts. This forum needs more flavor and I am here for this.
Thank you Mat

3 Likes

Hello @DanDeFiEd ,

Now that your application has been marked eligible, please be advised of the remaining steps in the application process to be completed prior to the Review Period Deadline:

Please complete the following steps required for your application to proceed to Snapshot:

To change your proposal to final, please tag an Arbitrum Foundation Forum Moderator (@ stonecoldpat @ cliffton.eth @ eli_defi) by the Review Period deadline to notify them of your proposal’s readiness to proceed from [Draft] to [Final] status.

Once notified, the Arbitrum Foundation Forum Moderator will adjust your title from [Draft] to [Final] status. Once marked as [FInal], your application post will be locked by moderators and you will no longer be able to edit your proposal.

1 Like

Firstly, thank you for your proposal and your clear enthusiasm for the Arbitrum ecosystem.

Introduction and Rationale

Rysk’s proposal seeks to drive total value locked (TVL) and trading volumes, exposing more people to the options market. Rysk are requesting a grant of 500k ARB, which represents 1% of the 50M ARB total program fund. Rysk, with its unique benefits for options through a clever mix of AMM and RFQ design, is well-positioned on Arbitrum, a chain that has the potential to lead in this emerging field. Rysk has shown promise in its opening monthse, attracting quality trading volumes. We’re particularly impressed by your goal to serve as a foundational layer for options liquidity. We believe your proposal could offer valuable contributions, particularly in enhancing liquidity and lowering trading costs. This will likely overflow into other products that are able to build on top of this growing liquidity layer.

Minor Concerns

Concern Regarding Trading Volume

  • The requested grant size isnt directly linked to predicted trading volumes and there are no outlined expectations around how trading volumes would increase
  • Our recommendation for change: Please include an analysis predicting expected trading volumes and how the grant will be utilized to reward traders and boost activity.

Summary

Castle Capital is generally supportive of your proposal and believes that options protocols like Rysk deserve a grant to test their potential in the Arbitrum ecosystem. As a side note, we’d like to see a few more details, particularly in regards to trading volume expectations and the specific use of the trading incentives.

Our minor recommendations can be summarized as:

  • Include an analysis of expected trading volumes
  • Elaborate on how the grant will incentivize and reward traders

We hope you find our comments constructive. We’re excited about what your project could mean for options trading on Arbitrum and look forward to seeing it evolve.

6 Likes

Hi folks, Devin from GammaSwap here. Huge fan of Rysk - Dan was an angel in our seed round and we ran a trading competition on testnet together earlier this year.

A few key things have stood out to me regarding Rysk as a protocol and how the core team operates. Firstly, they take a collaborative approach to building, a belief that a rising tide lifts all ships and they take concrete actions on those beliefs. The trading competition we hosted was mutually supported by other protocols in the Arbitrum ecosystem to give rewards to Arbitrum users: GMX, Radiant, Mux & many others. Rysk has already integrated with many key partners in the Arbitrum ecosystem as part of their DHV driving more volume and activity to them.

Additionally, alhough on chain option volume is a fraction of perpetuals right now, it’s not a question of IF options take off in DeFi, it’s a matter of WHEN. Deribit consistently sees 1B+ volume days in option volume during a bear market and in traditional equitiies for the last few years option volume has actually surpassed futures volume.

With many innovative protocols looking to drive more option volume on chain, we will in time see a cost effective option protocol that thrives under the constraints of blockchains and that protocol can very well be Rysk.

As more sophisticated investors migrate to crypto, hedging and other complex delta strategies will become increasingly important to reduce risk exposure in DeFi.

It is important as an ecosystem that we support protocols building innovative approaches and especially products that are uniquely poised to benefit from the strengths of L2s like Arbitrum: products that require high degrees of composability, low latency and demand lower costs of capital. Derivatives is of course a huge category for L2s and one of the reasons GMX is so successful on Arbitrum.

I support this proposal and I’m excited to see the Rysk team use these incentives to drive more users and volume to Arbitrum.

4 Likes

Blockworks Research supports this proposal and finds the requested amount of 500,000 ARB to be justified based on, among other things, the anticipated sustainable impact on, and goodwill to, the ecosystem, metrics such as TVL / volume / fees on Arbitrum and overall, a comparative analysis of all submitted STIP proposals, the distribution of incentives across verticals, as well as, to a certain extent, the recommendations made by the Arbitrum Working Group through the four grant categories.

5 Likes

Thanks for reviewing our application and for the valuable feedback.
We addresses your main concern below

See the above plus more details on how the grants will be distributed to traders:

Looking forward to grow the options space on Arbitrum!

4 Likes

Thanks for the support and looking forward to collaborate in the future on educating about volatility products as well as co-marketing as we already done in the past with the trading competition that was an exciting time for the entire Arbitrum ecosytem!

This is really the main reason to support this proposal, options are a matter of time and the goal is to position Arbitrum as the place to trade them on-chain!

4 Likes