Research Summary
The research report discusses the current state of derivatives in the crypto market and introduces Valorem, a new protocol designed to enhance options trading. Perpetuals are currently the most popular derivative, accounting for over 90% of trading volume on derivative DEXs. In contrast, options trading is less popular due to its complexity. Valorem aims to change this by combining on-chain and off-chain designs, including an on-chain order book and settlement, and off-chain Request-For-Quotation (RFQ).
Actionable Insights
- Understanding the dominance of Perpetuals: Perpetuals are currently the most popular derivative in crypto markets, accounting for over 90% of trading volume on derivative DEXs. Options trading, on the other hand, accounted for just $2 million in volume compared to decentralized perpetuals’ $1 billion in a 24-hour period.
- Valorem’s unique approach: Valorem combines on-chain and off-chain designs, including an on-chain order book and settlement, and off-chain Request-For-Quotation (RFQ). This allows it to tap into professional market maker liquidity while mitigating on-chain computation and latency issues.
- MEV resistance: Valorem Trade’s Request-For-Quote (RFQ) system is designed to be resistant to Miner Extractable Value (MEV), with quote requests and responses visible only to the involved parties.
- Permissionless option creation: The protocol allows users to create new option types in a permissionless way, and due to its composable nature, it can serve as a foundation for more complex derivative structures.
