Markets
Pioneering Infinite Possibilities For Unlimited Assets
Virtue's markets are purpose-built for scalable implementation of Decentralized Finance (DeFi):
by supporting creation of an infinite number of markets derived from the continually expanding list of assets being developed or on boarded onto the blockchain,
engineered to adapt to shifting trends, hypotheses, and theoretical frameworks,
retains all essential risk management features inherent in DeFi, ensuring a robust and secure environment and
maintaining maximum decentralization and autonomy for the end-users, preserving the core principles of the decentralized finance paradigm.
Built from the ground up, Virtue's architecture has been carefully designed to optimize asset utilization and facilitate deep on-chain liquidity for the execution across a comprehensive range of financial instruments such as Perpetual Futures. To achieve this, the platform employs a permissionless design that allows any user to create isolated markets and enable trading of the market by deploying their own frontends. This approach enables greater flexibility and customization, allowing users to tailor their trading experiences to their specific needs and preferences.
Current Scenario
DeFi has tens of thousands of assets but currently there are very limited markets supporting such assets. Hence, while the total market capitalization is more than $2T, the total on-chain DeFi liquidity stands close to $165B only [Source: Defilama].
DeFi at its core has following market types:
Crypto Market with Crypto Assets
In this type of market, the reference assets (assets available for trading or transaction) and collateral tokens (supplied assets for trading or transaction) are crypto assets ie. BTC, ETH etc.
Examples: Uniswap, GMX, etc.
This type of market is most common in DeFi.
Hybrid Market with Crypto Assets
In this type of market, the reference assets are often synthetic assets i.e. FX, Commodities etc along with crypto assets and collateral tokens are crypto assets i.e. BTC, ETH etc only.
Examples: Gains, Synthetix, etc.
This type of market is second most common in DeFi.
Hybrid Market with Hybrid Assets
In this type of market, the reference assets can be any type of asset i.e. FX, Commodities, NFT floor, etc and collateral tokens are also any type of asset i.e. BTC, ETH, USDC, stETH, NFT collections, in game tokens etc .
Examples: Virtue
This type of market is what we believe is much needed in the DeFi and we are building this market to support and drive liquidity to other types of markets and products.
Infinite Possibilities
Virtue allows complete autonomy to the end-users when it comes to market creation. We envision following possible examples out of the infinite possible markets that can be created by DeFi users:
Crypto Futures Market with Liquid Staking Assets
Reference Asset Volume: $213B
Collateral Asset Market Cap: $44B
Possible Asset Listings:
Reference: BTC, ETH, BNB, SOL, XRP, ADA, AVAX, DOGE, TRX, LINK, DOT, MATIC etc.
Collateral: wstETH, rETH, wbETH, wmETH, wSTONE etc.
Trades: Long BTC with wstETH, Short BNB with wbETH etc.
Real-world Futures Market with Any Crypto Assets
Reference Asset Cap: $714T
Collateral Asset Market Cap: $1.96T
Possible Asset Listings:
Reference: BRENT, XAG, XAU, JPY, EUR, OIL, US5Y etc.
Collateral: WBTC, WETH, WBNB, WSOL, WXRP, WADA, WAVAX, WDOGE etc.
Trades: Long XAG with WETH, Short JPY with WXRP etc.
Forex Futures Market with Crypto Assets
Reference Asset Daily Volume : $7.5T
Collateral Asset Market Cap: $1.96T
Possible Asset Listings:
Reference: JPY, EUR, AUD, INR, CAD, etc
Collateral: WBTC, WETH, WBNB, WSOL, WXRP, WADA, WAVAX, USDC etc.
Trades: Long JPY with WETH, Short CAD with USDC etc.
Commodities and Forex Futures Market with Liquid Staking Assets
Reference Asset Daily Volume : $9T
Collateral Asset Market Cap: $44B
Possible Asset Listings:
Reference: JPY, EUR, AUD, INR, CAD, OIL, US5Y etc
Collateral: wstETH, rETH, wbETH, wmETH, wSTONE etc.
Trades: Long CAD with wstETH, Short OIL with wmETH etc.
Index Futures Market with Crypto Assets
Reference Asset and Collateral Asset Market Cap: $1.96T
Possible Asset Listings:
Reference: AMKT, INDEX, DPI etc.
Collateral: WBTC, WETH, WBNB, WSOL, WXRP, WADA, WAVAX, USDC etc.
Trades: Long CAD with wstETH, Short OIL with wmETH etc.
Market Structure
Any asset whitelisted in the protocol can be used to create markets. Any asset could be on the long side or short side if the asset is whitelisted to be used on that side.
At its core, each market has been built to scale without issues. A market can start as a swap market and later on switch to futures market at any point of time. Similarly, a futures market can enable swap markets at any point of time.
Markets by default will be enabled and created in isolated mode to ensure smoother risk management and functioning of the protocol overall. This prevents systematic risk in an event of market collapse.
Market Governance
Each market can either have an independent DAO or will be governed by a community of verified liquidity providers in the market to ensure that the market functions as per its stakeholders requirements. In an event of dispute, the protocol's DAO or in an early stage of the protocol, core contributors will act as mediator and resolve the dispute. In such cases, the decisions of the core contributors or DAO would be considered final.
Risk Management
The market creator at the creation of the market defines the most important risk parameters to enable trading or liquidity addition. Some of the important parameters are:
Max Leverage
Max Borrowing Fees
Max Funding Fees
Max Position PNL Factors
Max Trading Fees
Max Discount/Premium Fees
Buffer Amounts
Max Reserve Amounts
Target Weights
These parameters apply to all the assets that a market creator wants to add in his/her market. In case, the market creator doesn't configure all the parameters required, default values will be used for the assets in the market as defined in the Asset Manager to ensure the newly created market operates as it was designed for. These parameters have to be carefully monitored and adjusted periodically. One can find more details on Market Pool Protection Mechanism.