Introduction
๏ปฟTypus Finance is a real yield infrastructure on Sui Blockchain (Sui) that enables users to obtain superior risk-to-reward returns, all in one click.ย
Typus combines swap, lending, and derivatives protocols to create an options marketplace for long-tail assets. This approach not only improves risk-adjusted returns for Liquidity Providers (LPs), but also deepens liquidity in Decentralized Finance (DeFi), making it a win-win situation for everyone involved.
Many excellent DeFi protocols such as Uniswap, Curve, and Aave are well-known post the DeFi Summer in 2020, but some issues on DeFi services are still difficult to be overturned nowadays.
Typus believes that to improve the experience for DeFi users, it is necessary to cover more long-tail assets on-chain and improve the liquidity of these assets. To achieve this, LPs need to transfer part of their risk to those who are willing to take the risk, while Options are the missing puzzle.ย
Options are a powerful instrument to hedge and speculate Cryptocurrency (Crypto), but mass users are still not playing an outsized role in Crypto Options. To this end, Typus is building a series of retail-oriented, user-friendly, and one-click products for Crypto Options, aiming to increase market participation in crypto options for retail investors and solve on-chain liquidity problems.
Whether it is perpetual or options DEX, it is very difficult to onboard professional market makers providing liquidity on-chain. It is caused by multiple factors, including a limited DeFi user base, system integration costs, and high gas fees to quote orders, etc.ย
It is especially challenging for market makers to provide liquidity for long-tail assets as these assets are highly volatile and insufficient historical data to help market makers build arbitrage models.ย
To solve this, Typus invented a Modified Dutch Auction mechanism to discover volatility on-chain.
It is a pay-for-quoting model for market makers to provide liquidity on Orderbook-based DEXs, which produces huge gas fees, so some LPs may turn to Automated Market Makers (AMM)-based DEXs, but those in AMM-based DEXs will face the impermanent loss risk. In this regard, professional market makers may build perpetual positions on-chain or off-chain, and dynamically hedge for those to meet risk control requirements.ย
Retail investors may:ย
- Try to learn programming to achieve dynamic hedging (but only a few retail investors can do this),ย
- Provide liquidity but take enormous impermanent loss risk (this will lead to an unfavorable risk-reward ratio), orย
- Give up to provide liquidity on-chain (this will hurt the DeFi ecosystem).
To solve this, Typus Auto Rebalancing Tool and Sharpe Optimizer are designed to improve the risk-adjusted return for LPs. LPs can easily hedge their gamma risks with Typus Vaults, and auto-rebalance on the price range based on volatility discovery.
Lending protocols are now unwilling to accept long-tail assets as collateral, because altcoins are volatile and too risky for lending protocols and inefficient for borrowers. For example, the Loan-to-Value (LTV) ratio of SUSHI tokens on Aave is 20%, that is, SUSHI with a total value of 100 USDC can only borrow 20 USDC from Aave. Other long-tail assets with higher volatility even have zero LTV, which means that lending projects do not accept these long-tail assets as collateral at all.
To solve this, Typus DeFi Option Vaults will bundle altcoins with put options as collateral to increase capital efficiency and relieve the liquidation risk of lending protocols.
๐ Read More: Why DeFi on Move/Sui๏ปฟ
