# Hegic rolluporrr (tittle pending)

## Summary

We propose a permissionless exchange, composed of financial products to conquer the markets on Web3 by solving the user experience fragmentation problem of DeFi. By leveraging some available technology -rollup stacks, protocols and UIs- there is an opportunity to boost a sustainable ecosystem and capturing the existing user base of both CeFi and DeFi markets. Recognizing the complexities and the extended timeline of this long-term project, and given Hegic's strong track record and domain knowledge, we firmly believe that togheter are best positioned to spearhead this development. By Hegic leading this initiative, the project to significantly benefit from the up-side potential, further solidifying its status as a product DeFi leader.

**New:** We propose the development of a permissionless exchange that combines the UX of a CEX with a wide variety of decentralized protocols geared towards professional traders, such as spot trading, margin trading, futures, options and more. **The idea is simple:** consolidate everything into a unified space that offers users the experience of their preferred trading platform. We will leverage existing technology, from rollup stacks, AMMs, trading protocols, to professional-focused UI. To attract a user base from both CeFi and DeFi markets, we consider this project ambitious. Therefore, we believe that Hegic is in the best position to lead the development of this initiative and benefit from its upside potential.

## The Problem

The DeFi ecosystem is going through a reflective post-hype stage where many primitives and products have been already built but are struggling to drive adoption or high volume and new users. Although there is an underlying infra available to do it right, no one has yet put all the pieces in place to have the potential we believe can be achieved.

### Lack of a good product

Everyone is working on specific products on their own, but no one is actually focused on building a complete product to have all in place. Think about all the innovations made in the last 4 years, but that have not been able to gain more traction due to remaining stuck on Ethereum or due to a lack of coordination between financial products, causing a waste of effort despite being good designs. On the other hand, this lack of coordination causes a barrier to entry and low retention of users that no one has even tried to solve, for by example, can attract users accustomed to the user experience of CEXs such as FTX.

### Past attempts

Now, with the new wave of rollup-based ecosystems, projects can rethink their applications with scaling issues already solved and stay connected to liquidity on Ethereum.

However, many of these have missed opportunities to host high-quality financial products for various reasons, for example:

- **L2-general purpose-EVMs (ARB, OP…)**: the existing teams are looking to replicate the current Ethereum L1 ecosystem, but since they are taking a neutral-dApp approach, they are not -formally- dedicated to building financial products, and thus, they are not able to move quickly to support whatever DeFi apps need to build, grow, retain users or align incentives.
- **DYDX**: has a great product but only focused on perpetual trading, limiting its expansion capabilities by also having built on StarkEx that it was not prepared to build on top of. Now, they are betting on building a Cosmos chain, breaking away from the Ethereum narrative, and spending a lot of effort and time building things from scratch without counting the subsequent adaptation process for users. (*Same first reasoning for others such as Loopring, Apex, etc.*)
- **Aevo:** taking an easier approach by building its product on top of the OP Stack but wasting potential traction along the way by falling short in every aspect, as well as taking a closed ecosystem approach.

The DeFi landscape has witnessed significant innovation, yet a fragmented approach have hindered cohesive product development and adoption. There's a clear need for a unified solution that merges past innovations with user-centric design. For us, this represents an opportunity and realize DeFi's true potential.

# The Solution

## Scope

### *FTX, but decentralized*

We propose to build an aligned financial ecosystem to have several products all in one place to recreate the CEX experience but on-chain. For this, we believe that Hegic can be responsible for this, implementing a new permissionless rollup instance and partnering with different teams or using OSS.

“*The First Permissionless Exchange”*

The key focus of this new platform is to be a rollup as a permissionless instance but hosting “enshrined” financial services inside. This sort of hub can be slightly optimized to have several products, such as:

- Spot trading
- Margin trading
- Futures
- Options
- Options Strategies

The goal is also to design and recreate synergy between each service and deploy the infrastructure required to facilitate the user experience.

<aside>
💡 **Why a Rollup?**

**Building on Ethereum is not viable for broad user adoption. That explains why rollups exist, such as Arbitrum, Optimism, and other general-purpose rollups. However, developing this project in the existing rollup ecosystem is limiting due to their non-DeFi-focused approach. For example, we would be facing negative externalities, and seeking true community support (via governance for example) can take months to materialize and with no guarantee of being perpetuated.
By building our own rollup, having we have the opportunity to has freedom to adapt additional security measures for the Rollup and within, in addition to moving quickly in how to stay oriented, connected, and incentivized the ecosystem, by concentrating all the activity in one place, without distractions.

</aside>

### Partnering with the best teams

At the **backend side** (the rollup and protocols), we propose to work with a diverse set of protocols and providers interested in this initiative and in line with launch expectations. For example, the rollup side can be performed by infra providers; as well as pursuing other infra integrations such as oracles and indexers, and protocols through a direct partnership or through contributors (OSS) who wish to support the initiative.

**We propose to partner with the following protocols:**

- Network deployment: we can partner with a RaaS provider (let’s say Caldera) since these are already offering production-ready EVM stacks such as OP Stack. This ensures that the network and related infra have guaranteed support and are up to date with updates and future changes.
- Sequencer: as a core piece of the network, with the RAAS or whatever infrastructure team that can proactively contribute to desired improvements and, of course, liveness.
- Spot trading: we will seek to partner with AMM leaders. In the particular case of Uniswap V3 / UniswapX (RFQ), we can take advantage of forking + making customizations that make sense and deploy it in the first day. Once liquidity emerges and markets are established, we can look to include other matching engines for market makers, such as partnering with 0x.
- Margin trading: We will look for protocols that allow us to provide the best service such as Gearbox and **MakerDAO* (Spark).
- Futures and perpetuals: Perennial
- Options and options Strategies: this is where Hegic and WhiteHeart as protocols take center stage.
- Oracles: Chainlink / Prophet
- Bridges: Connext / ????

** ***MakerDAO:** we can benefit from their new model and request the deployment of an Allocator Vault. This vault would be managed by the team and would allow us to offer the ecosystem a stablecoin established as a DAI. In addition, the Allocator Vault allows us to share part of the commissions generated with the vault owner.*

At the **frontend side**, a key feature of this project is the attraction of teams to build their own interfaces to interact with the Hegic ecosystem (the rollup), manage their own features and marketing. This not only reduces the workload (development and marketing) and cost on the Hegic and core/backend team, but also accompanies the decentralization narrative, the way Liquity does. Some examples of interface teams that hopefully match this initiative:

- OkuTrade for professional traders.
- DeFiSaver and SummerFi (previously OasisApp) for regular DeFi users.


## Incentives

As a baseline, we can expect revenue from two main sources:

- **Sequencer fees**: for surplus and priority fees for the inclusion of transactions. For example, last month, Base generated ~$1.2M as network revenue in the last month (*[fees paid by users] - [fees paid by the network {batching, proposing} in L1]*).
- **Protocol fees**: according to the specifications expected for each financial product integrated by this initiative.

There are a lot of possible mechanisms to design the momentum and growth of activity and volume and thus reward the parties involved. It is up to the Hegic community which could be the most appropriate, but some options (not exclusive):

- **Share revenue with partnered protocols**
- **Reward front-ends creators**
- **Incentivize user’s liquidity**

# Planning

## Hegic’s role

As expected as a Hegic product, Hegic team should take the project leadership, business and growth sides, and all the ways that the Hegic community can get involved.

## Wonderland’s role

As a *core web3 development group* we at Wonderland are willing to take charge of coordinating the development and execution of the project, either by building essential stuff from scratch or by working side-by-side with potential partners and contributors. This will keep the project on track with the expected roadmap [TBD] and facilitate support for a clean launch and subsequent improvement phases.

### Commitment

Our team will design and develop The First Permisionless Exchange. Our focus will be on rigorous testing and thorough documentation throughout development. We will also provide technical support to all partners who want to join the project.

We plan to assign X experienced Solidity developers to this work to ensure efficient development. A proper time estimate will only be possible after proper technical design, but we can roughly put it between X and X months. We are committed to delivering a high quality product that meets your needs and exceeds your expectations. You can consult our guide to excellence at the following link:mnas

[Wonderland’s guide to excellence](https://www.notion.so/Wonderland-s-guide-to-excellence-bab280f949d04aa09e393437b7cf5a39?pvs=21)

Our team is large and as we know that this is a big and ambitious project, we have the capacity to add more developers to the project in case we need more developers.

## Project estimations

Below we estimate project development time and costs. Please note that, as we cannot predict partner additions, these timelines may change significantly.

| Estimated time | Milestone | Description | |
| --- | --- | --- | --- |
| Q4 - 2023 | - Rollup POC
- Spot Trading | - Research
- Detailed Tech Design
- Clear documentation
- Full unit testing
- Internal audit report
- Deployment | |
| Q1 - 2024 | | - Detailed Tech Design
- Clear documentation
- Full unit testing
- Internal audit report
- Deployment | |
| Q2 - 2024 | | - Detailed Tech Design
- Clear documentation
- Full unit testing
- Internal audit report
- Deployment | |
| Q3 - 2024 | | - Detailed Tech Design
- Clear documentation
- Full unit testing
- Internal audit report
- Deployment | |

### **Next Steps**

Once we have the basis of the product/ecosystem (let’s say, after Q2) we can plan improvements, integrations and new functionalities so that users have a complete trading platform.

A short list of improvements and additional features could be:

- Support for ERC-4337 with relevant features
- Space for new order books engines
- Perform rollup upgrades for optimizations and improving security
- Governance experiments for value capture
- New kind of oracles

## Conclusion

## Who is Wonderland?

We are a team of top Web3 researchers, developers, and operators who believe that the future must be open-source, permissionless, and decentralized.

We partner with some of the most successful and promising protocols in Web3 – including Optimism, Yearn, Aztec, Connext, and Keep3r Network – to find solutions to complex engineering challenges and help them reach their full potential.

We focus on building deep, mutually beneficial partnerships with protocols. We do not clock out to simply “get the job done”. We are an extension of our partners’ teams, delivering unparalleled guidance and support over the long-term, and standing by partners as they navigate the exciting (and sometimes challenging) world of Web3 and decentralized finance. The experienced Wonderland team has seen it all – the good and the bad – and believes being in it together is the way forward in Web3.

**Links**

[Who is Wonderland?](https://www.notion.so/Who-is-Wonderland-62af22819d3345d3937fee07b69f37ab?pvs=21)

Web: https://defi.sucks/

Twitter: https://twitter.com/DeFi_Wonderland

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