---
# System prepended metadata

title: 'Thesis: Derivatives on Solana gain traction with TradFi'

---

# Thesis: Derivatives on Solana gain traction with TradFi

Options on a volitaile product are expensive - too expensive to be viable?

Most liquidity because common onchain orderbook maximises liquidity so has better price discovery compared to silo'd liquidity

## Questions
* How are we tracking this? 
    * ![](https://i.imgur.com/6cn4gwU.png)
    * https://defillama.com/chains if this thesis is true, we should see Solana increasing. As it is at the moment, Avalanche, BSC and Solana and Terra all look competitive at ~5%

* Should we try to model where value will end up. 
* How big an opportunity is this?
* Timeframe around this thesis?

Which one can't perp fix that you can on solana? look at perp V2

## Why decentralised options haven't worked before?
[Hxro network - Vanilla and exotic options](https://docs.hxro.network/#vanilla-and-exotic-options)
a viable decentralised options trading solution has yet to materialise. This has largely been due to the following:
* Prohibitive trading costs due to high network fees
* Options are extremely data intensive and require the ability for liquidity providers to mass quote a chain of options
* lack of on-chain orderbooks
* The protocol AMM is incapable of dynamically managing its liquidity while offering market takers competitive pricing and fees. 

To date  there have been multiple attempts at a viable options offering, with all projects at some point running into one of the issues stated above. This has resulted in many projects offering workaround solutions that while interesting,  do not offer a comparable liquidity source to a standard centralised market system.

By introducing an Automated Market Making Protocol capable of solving for dynamic pricing and liquidity risk management issues currently present in other defi option protocols and coupling this with traditional market making participants,   Hxro Network will be capable of presenting a commercial-grade liquidity solution that allows anybody to participate in provisioning liquidity to the network.

## Why haven't financial dirivatives taken off

[Moet finance - launch announcemnt](https://moetfi.medium.com/moet-finance-hello-world-35f991a00c0a)
Why have derivatives protocols been slower to take off on DeFi?
⛓ Slow Processing Speeds: High-frequency and high-volume trading is rendered infeasible by the high block processing times and transaction fees of current L1 blockchains.
📉 Static Pricing: Derivative platforms that utilise constant product AMMs with fixed k-values without orderbook calibration will often prices lag and dislocate from index prices.
💀💰 High Margin Requirements: Specific to options, liquidity providers (LPs) are crippled by capital-intensive, often 100% collateralization requirements, disincentivizing liquidity in DeFi markets.

## Why has Perp protocol worked?
What is Perp's vAMM? also they just released version 2

## vAMM
seems to be a hybrid AMM with oracle, the liquidity always stays around the price set by the Oracle? 
[Audaces foundation white paper on they Perps product](https://ga245xphr2gqozusv7cppabb3icnf7i3rk3ltndg6tpmnoeoq6bq.arweave.net/MDXO3eeOjQdmkq_E94Ah2gTS_RuKtrm0ZvTexriOh4M)
