<aside> 💡 We see current solutions focus more on decentralized technology, instead of user experience and the balance between users, liquidity providers, and customer acquisition channels.

We are looking to invest in new Derivatives DEX solutions, and help them work through the key issues below. We have access to subject matter experts from a top derivatives exchange.

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What the the user requirements?

• Liquidity - users can enter 100k notional position with less than 0.2% price impact.
• User deposits and margin are managed by smart contract.
• Payout pool is managed by smart contract.
• Payout pool has some guarantees or time locks so that users are not auto deleveraged.
• Mechanics which allow the perp or futures price to converge on a market standard index price.
• If solution is on layer 2 or sidechain, it must be convenient and seamless for users to deposit and withdraw to ETH Layer 1.

What are the mechanisms for attracting liquidity providers? are their risks-returns sufficiently protected and incentivized? are they incentivized to quote tight spreads?

For AMM models

• How do we incentivize the most loyal LP over those who add and remove liquidity frequently, especially during high volatility periods when liquidity is most needed? possible ideas include: quota, seniority, minimum LP periods

For order book models

• How effectively can LPs hedge or arbitrage their positions?
• What is the fee structure and is it effective in driving LPs to quote tighter spreads?
• Does system performance allow LPs to control risk?

What are the mechanism to balance long and short trades over time? Are these mechanisms effective? Do the mechanisms allow for arb?