Light Paper - Make DeFi great again

Make DeFi great again

From Bitcoin's inception, the cryptocurrency market has evolved over a decade, with digital assets displaying volatility that surpasses traditional financial products, such as stocks, commodities, and foreign exchange. This volatility also carries notable risks. As the landscape of cryptocurrency trading has matured, there's been a shift beyond basic spot trading. This has led major exchanges to introduce a variety of derivatives.

Options, a significant facet of DeFi derivatives, have proven resilient and pivotal in the DeFi landscape. Yet, traditional DeFi options inherently present certain risks. With this in mind, we've pondered: Can we refine the DeFi options structure to present a more risk-averse product for DeFi enthusiasts?

Three primary risks associated with traditional DeFi options are:

1. Non-Perpetual Nature: Traditional DeFi options often have set expiration dates, unlike perpetual contracts. This means investors are time-bound, having to act before an option's expiration or see it voided. This can limit their flexibility in decision-making, especially as an option's time value diminishes nearing its expiration.

2. High Leverage Risks: While high leverage in the DeFi options market can amplify potential returns, it also escalates the scope of potential losses. If market movements are unfavorable, investors leveraging heavily might incur losses that even exceed their initial investments.

3. Liquidity Concerns: The relative novelty of the DeFi market can lead to liquidity challenges. Investors might find it hard to execute swift buy or sell orders for options contracts, leading to potential drastic price swings or increased transaction costs.

In response to the first challenge, we have embarked on a path less traveled: perpetual options. Gaining traction among DeFi aficionados, perpetual options stand apart from traditional options contracts by eliminating set expiration dates. This innovation offers investors unparalleled flexibility, allowing them to exercise or trade options without the constraints of time.

Traditional options contracts often curtail strategic flexibility for investors, especially as expiration nears and the option's time value diminishes, leading to potential rapid devaluation. The design of perpetual options addresses this by allowing investors to respond to market dynamics and individual strategies without concerns of imminent expiration or rapid time-value erosion.

For the second challenge, our competitive mechanism substantially mitigates the immense loss risks of high-leverage options. Drawing upon Nash Equilibrium concepts, we've constructed a fully non-cooperative decentralized blockchain network. By integrating a dual liquidity pool mechanism, we introduce limitless liquidity into the decentralized finance realm, crafting a risk-free, secure, stable, and open perpetual options market.

Under our framework, users maintain their positions by simply covering a daily funding cost, insulating them from short-term price downturns and potential liquidation risks. Thus, even if short-term market performance is lackluster, as long as there is a long-term appreciation, the holders might still reap substantial rewards. Our perpetual options platform, built on a decentralized blockchain network, genuinely limits losses while offering boundless potential gains.

As mentioned, we've integrated a dual liquidity pool to navigate the liquidity challenges in traditional DeFi options trading. Unlike the prevalent single Peer-to-Pool liquidity pool trading model, our dual pool not only ensures direct trades with the liquidity pool but also reduces market-making risks for professional market makers by simplifying hedge calculations.

Our liquidity framework classifies providers into two categories: public and private liquidity pools. The former serves all users, while the latter, typically institutional market makers, demands superior capital strength, quoting capacity, and position management. In operation, orders primarily tap into the private pool, relegating to the public pool only when liquidity falls short or orders are liquidated. While private pools receive primary liquidity mining rewards, the public pools are incentivized with secondary rewards.

Built upon the foundation of the premier liquidity mega-pool by professional market makers and the secondary insurance pool formed by the wider DeFi community, and further invigorated through platform token incentives, this mechanism fortifies the "limitless liquidity" bastion.

With these three pillars in place, we forged ahead to manifest our vision: Fufuture. Beyond its promise of limiting losses and offering infinite gains, Fufuture is a key to unlocking the future of DeFi. We are confident that, in a DeFi market nearing saturation, Fufuture can rekindle its fervor.

Fufuture isn’t merely the future; it’s the future of the future.

Let's make DeFi great again!