First Experience With the Beta Version of DeFi Derivatives Platform DFuture: How Do Traders & Liquidity Providers Profit?

In addition to trading, dFuture users can also make profits through trading mining, FOMO reward pool, and dynamic trading fees and interest rewards.

The rapid development of DeFi has contributed to the improvement of DEX in the past six months. Top decentralized exchanges such as Uniswap have shown the potential to threaten centralized exchanges, but are subject to high on-chain transaction costs. At present, spot trading, or to be precise, the direct exchange of one currency for another currency is still the main application scenario of DEXes. The considerable scale of futures derivatives has not found a sufficiently good decentralized solution, and dFuture is trying to pry open the door behind this huge market.

dFuture is a decentralized derivatives exchange created by Mix Labs under the MIX Group. Unlike other decentralized exchanges, it does not use AMM (Automatic Market Maker) with “algorithmic price determination”, but instead uses external quotations for prices, so a “no slippage” transaction is realized.

dFuture is a financial derivative trading protocol based on external price quotations and dynamic trading fees based on constant sum formulas. Its QCAMM protocol uses multiple external oracles to obtain the latest comprehensive quotations of trading assets from multiple exchanges.

Since it is a decentralized exchange, the platform’s users are naturally divided into two roles: traders and liquidity providers.

For traders, dFuture is to directly complete long or short taker orders based on the quoted price, no limit orders and no slippage; for liquidity providers, since dFuture only provides collateral for a single stable currency USDT, there is no impermanence loss.

Next, the author will gradually analyze how to use dFuture and how users will arbitrage the two roles.

Receive test tokens from Faucet

According to an announcement, the governance token DFT of the dFuture platform has been issued on December 28, 2020. Anyone who participates in the public beta version and meets the conditions can receive an airdrop of DFT tokens. Since dFuture is currently in its beta version, it will be using Ethereum test network Kovan, 100,000 USDT and 0.1 ETH worth of testing tokens can be issued to testers thru the Faucet feature.

Testers need to adjust Metamask or other wallets to the Kovan testnet before they can connect to the dFuture platform:

Special attention should be paid here. Testers need to receive the test version of USDT and ETH in order to use dFuture, because the platform and smart wallet interaction require ETH as the GAS fee.

User interface makes it not difficult to get started

The dFuture platform currently provides 4 types of derivative cryptocurrency trading pairs, namely BTC/USDT, ETH/USDT, LINK/USDT, YFI/USDT. Unlike other decentralized exchanges that require traders to keep an eye on the platform price quotations and pay attention to slippage. Since dFuture obtains the latest comprehensive quotations of traded assets from multiple exchanges through multiple external oracles, traders will directly trade when opening a position, and there is no slippage.

Take the opening test order as an example. The author opened a position of 0.1 BTC at 27,588 USD, with a leverage of 15.4 times. Not only did the price have no slippage, but the transaction fee was only USD 0.59.

In fact, due to the relationship between trading and mining to earn DFT tokens, the trading fees will theoretically be even lower, and it will even lead to a scenario where “the more transactions you make, the higher your profit”.

It’s worth mentioning that dFuture’s trading interface is quite straightforward and easy to use. It operates just like a general centralized exchange. It only takes a few steps to open a position: select a trading pair, then choose to go long or short, and enter the quantity or amount of the position, set the leverage and click the “Open Position” button to complete.

Trading rewards and arbitrage methods

In addition to trading, traders can also use these three ways to profit on the dFuture platform.

· Trading mining: Trading mining DFT reward is based on the proportion of trader’s effective trading volume from the previous day compared to the total effective trading volume of the platform that day.

· dFuture FOMO Reward Pool: If the FOMO pool has no users trading on the platform for more than (including) 120 blockchain time periods on the Ethereum blockchain, all DFTs in the FOMO pool will be rewarded to the last trader.

· Dynamic trading fees and interest rewards: In order to encourage trading to tilt toward the direction of reducing naked positions, traders can obtain additional USDT rewards by countering the direction of naked positions transactions; to encourage positions to tilt toward the direction of reducing naked positions, traders can hold open positions in the direction of naked positions to receive additional USDT rewards.

In summary, traders on the dFuture platform can obtain additional funding rate income by trading against the naked position direction, which allows traders to obtain additional USDT rewards in addition to hedging.

In addition, traders can also receive trading mining rewards in DFT, holding DFT tokens can reduce trading fees. In the future when more and more traders use the dFuture platform to trade, DFT tokens will become more valuable. In other words, trading on dFuture not only do not incur trading fees, but also return trading fees to traders as profit.

Liquidity provider rewards

dFuture is a decentralized exchange and naturally needs liquidity providers. The liquidity provider obtains some trading fees and platform tokens by depositing USDT into the liquidity pool.

The LP deposit process is also quite simple, just click the “Liquidity” button, and select the amount of USDT to deposit.

The LP rewards are as follows:

1. According to the proportion of USDT deposited in the liquidity pool, LP tokens (liquidity shares) are obtained, which are used to track the proportion of liquidity contributed by each liquidity provider (LP) in the total liquidity pool.

2. Liquidity providers (LP) will receive USDT rewards from trading fees/position interest, and DFT mining rewards from the liquidity pool in proportion to their deposit ratio;

It should be noted that although dFuture can redeem liquidity to obtain USDT at any time, LP needs to pay a 0.5% handling fee. If a large amount of USDT is redeemed, LP will need to pay attention to whether the handling fee will exceed the earned profit.

Self-contained economic model

For traders, the dFuture platform allows users to keep their own funds, and only “authorizes” the access to obtain the user’s funds in the wallet during trading, which avoids many security and hacking incidents associated with centralized exchanges.

On the other hand, no slippage and low trading fees also meet the needs of traders. In addition, trading mining allows users to earn platform tokens when opening positions. The only drawback is that there are currently only 4 trading pairs. However, as the platform grows, there will be more and more trading pairs.

Interestingly, because holding DFT can reduce trading fees, high-frequency traders may choose to stake DFT, thereby reducing DFT’s selling pressure to prevent DFT price drop.

For liquidity providers, dFuture’s trading mining mechanism will attract a large number of traders to come to mine. Coupled with the FOMO pool mechanism, it will rapidly increase the trading volume of the platform, which will also enable liquidity providers to earn more and more USDT rewards.

DeFi has proven its potential, but there is currently no decentralized derivatives trading platform like dFuture that solves the pain points of existing AMM. Just like the early days of Compound, Synthetix, and Yearn, dFuture solves existing pain points in a decentralized way.

dFuture’s derivative platform is an alternative to hedge besides lending and spot trading. Leverage futures trading can maximize the financial efficiency in a decentralized way and complete one of the important missing pieces of the DeFi puzzle.