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:
- Dan: co-founder. BD.
- Jib: co-founder. Eng/ Tech lead / Smart contract
- Gerry: co-founder. Eng/ Data analysis
- Degeneral: Quant Lead
- Josh: Smart Contract Dev
- Tim: Front-end Lead
- Atomist: Lead Marketing
- Jack: Full stack dev
- Shuri: Quant
- Thatboi: Quant
- DeKay: Quant
- Proofofjake: Head of Community
Project Links:
- website: https://www.rysk.finance/
- app: https://app.rysk.finance/
- docs: https://docs.rysk.finance/
- github: rysk-finance · GitHub
- blog: https://blog.rysk.finance/
- twitter: https://twitter.com/ryskfinance
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
