Dialogue with the decentralized derivatives exchange "Zeta" on Solana: becoming the DeFi infrastructure layer
according toaccording toJump Crypto predictions
, 2022 will be the year of crypto derivatives. Although currently compared with centralized trading platforms, the decentralized derivatives market for futures and options is significantly underdeveloped. But in the new year, we will most likely witness the rise of decentralized options infrastructure and decentralized perpetual contracts.ZetaRecently, Odaily has paid attention to the DeFi futures and options trading platform in the Solana ecosystem
On January 17, Epsilon Sized, the co-founder of Zeta, was invited to visit the Odaily Chaohua community to explain Zeta's team background, product details, development route and future vision in detail.
The following is a transcript of the community conversation:
The following is a transcript of the community conversation:
Epsilon Sized：Odaily: Since most users are still a little unfamiliar with Zeta, could you please introduce yourself first, tell us about your previous experience with the main team members, and when did you start to form a team and start Zeta.
Zeta Markets is a Solana-based distributed platform that facilitates liquid, non-custodial and undercollateralized derivatives trading.
Zeta brings together the best and brightest in the community, as well as contributors who have been operating at the forefront of the derivatives market and technology industry for many years. Our team was formally formed last June, after winning the "Szn Hackathon" in Solana. The expertise in the team has all been used to create an intuitive and friendly front-end experience designed to cater to traders of all backgrounds. With the recent boom in on-chain derivatives exchanges, Zeta can harness user demand for futures and options products.
Epsilon Sized：Odaily: Judging from the official website, Zeta’s product positioning is options and futures DEX on Solana. Why did you choose the subdivision of decentralized derivatives trading? What are the existing service gaps or pain points in the market?
Today, crypto derivatives account for about 57% of total monthly crypto trades, which sounds healthy, but crypto options account for about 2% of total spot trades; 35 times. 35 times is a huge number!
The three factors holding back this development are infrastructure, composability, and user experience - and we also targeted these three issues.
Zeta's products themselves are designed and manufactured by engineers and traders from the world's most successful technology and trading companies. The full range of services it provides will make users feel the difference between Zeta and Deribit. Product highlights include portfolio-wide cross-margining, order-trading experience, and seamless trading and settlement processes.
Thanks to Solana, our infrastructure is best-in-class with low cost and high throughput. Our emphasis on composability, allowing other projects to build on top of us, will have a huge benefit - each time another project builds on top of us, he can effectively evolve its engineering, product and Marketing Team - This is a win for the entire ecosystem. Put all of this together in a user experience that works across devices and you have a powerful combination for success.
Epsilon Sized：Odaily: With Solana as the bottom layer, it is natural to consider its strong performance support (high TPS, low handling fees, etc.), but the Solana ecology is relatively independent from other EVM chains, and cross-chain and EVM compatible solutions (such as Neon) are yet to mature stage, will the choice of the bottom layer restrict our development ceiling?
When it comes to building an option DEX, there are many complex issues to face, (many of which) may not be visible at first. Some of the core foundations that underpin a good options trading platform are order books (buying and selling options), margin and clearing systems, options pricing models, and settlement systems.
From a technical standpoint, we concluded that Solana was the best fit for the needs of these features we wanted to build due to its inherent performance advantages. The design of our products relies heavily on Solana's existing infrastructure, such as Serum DEX, otherwise many ideas would not be possible on other EVM compatible chains. For example, undercollateralization requires a liquidation system, and being able to update this system in near real time is critical to ensure the platform remains solvent during periods of high market volatility.
When choosing other chains, there are two main options: either bridge users on the chain, or build directly on the chain. We haven't explored this in detail yet, but we're definitely keeping the door open for all of our options.
Epsilon Sized：Odaily: From the perspective of business lines, which product segments have we currently opened up, which currency pairs are supported, and whether the richness of products can satisfy potential users?
With the launch of our mainnet, we are pleased to launch Zeta DEX, our derivatives exchange; we have launched a series of functions that traditional institutions can find in CEX, including undercollateralized trading (the opposite of overcollateralized), Portfolio cross margin, sub-second market value updates and instant settlement, etc. Currently, users can deposit USDC as collateral and trade SOL options and futures. We've built the platform in such a way that it's very easily scalable, so we hope to be able to roll out more assets soon.
In the future, we can look forward to BTC, ETH, and other popular products such as LUNA and ADA.
Epsilon Sized：Odaily: From the perspective of users, under what circumstances (or which type of users) would they prefer to use Zeta instead of a centralized exchange (such as FTX, which supports spot, options, and futures at the same time)? What is the core advantage of decentralization? In terms of customer acquisition, what marketing or operation strategy do we have?
There are mainly the following reasons.
1) DeFi native investors who do not want to use CEX. Keep using DeFi and don't worry about slow exchange deposit/withdrawal processing;
2) Options trading in cryptocurrencies remains generally underserved;
3) Composability - it is conceivable that in one place, multiple decentralized products can be accessed through a decentralized interface;
4) Better UI/UX. Only a public key is needed to start a sub-account, "login" by connecting a phantom wallet.
Epsilon Sized：Odaily: Both are derivatives DEX, but dYdX, Perpetual, Deri Protocol, Injective, dTrade and other products located in different ecology are also different. What are the product highlights of Zeta in terms of functionality and user experience?
What we have built is a complete derivatives exchange with institutional-grade functionality, deployed on Solana Layer 1. This means it is fast and can easily connect to other Solana native DeFi applications. What sets us apart is the functionality mentioned earlier, as well as the user experience - Zeta allows you to conduct complex transactions in just a few clicks, whether on a computer or a mobile device.
Zeta provides a complete derivatives service. This means that options and futures are not just traded separately – users can open buy positions, sell positions, futures positions and a range of derivatives using a single account. This enables leveraged trading and on-chain liquidation for a secure undercollateralized trading experience. Importantly, trading derivatives on Zeta will feel like trading on most other CEXs (but hopefully better).
At the same time, Zeta is able to launch new base and derivative products with incredible speed, like a CEX in efficiency, but at the same time retain all the benefits of decentralization in DeFi applications.
Epsilon Sized：Odaily: A detail of the market-making mechanism is that we have adopted OMM. Can you briefly introduce the mechanism and advantages of OMM? And what are the benefits of Zeta integrating Serum's verified on-chain orders?
Zeta's integration with Serum includes the ability to pair margin accounts on the Zeta platform with multiple underlying Serum markets for derivatives trading. This enables leveraged trading and on-chain liquidation to achieve a secure under-collateralized trading experience (closer to CEX).
We are excited to host a suite of crypto derivatives on Serum, and plan to list long-tail bonds, exotic derivatives, and more native DeFi yield products in the future.
Epsilon Sized：Odaily: In terms of cooperation, LedgerPrime and Pattern Research have recently become Zeta’s LPs. Please briefly introduce these two partners and their strategic significance.
We are excited to have two leading market makers in DeFi providing liquidity and price discovery for the first time on Zeta. We firmly believe that exchange liquidity is critical to anyone's trading experience. Having this liquidity basically guarantees that someone is always ready to trade with you - whether you are buying or selling.
We also believe that liquidity begets liquidity > more liquidity > more traders > more liquidity > more traders. It gets better and better as time goes on. This is actually our concept of the positive cycle of liquidity and how we try to guide it. LedgerTime and Pattern Research are the perfect partners to provide liquidity on Zeta, which will encourage more and more people to trade.
Epsilon Sized：Odaily: We saw Zeta’s roadmap on the official website. Q1 includes launching products on the mainnet, opening code examples to traders, integrating with other products, and supporting more asset classes. Can you introduce the importance of the above actions to Zeta one by one? meaning, and a more specific timeline.
Going to mainnet has been a lot of work, but we are finally here! This is our biggest goal, and we've achieved it. Other important timings in the first quarter include:
1) Integration/Composability
This is our biggest theme this quarter after the launch of the mainnet. We want Zeta to be one of the core contributors to the DeFi ecosystem. Apparently we've announced integrations with Katana and Friktion, two of the largest options libraries on Solana, and we've got a lot of partners (including a very large one, so stay tuned) over the next few weeks .
2) Very excitingly, we just announced our bounty program, where anyone using our open source Github repository can build on top of Zeta and get rewarded. We're really looking forward to seeing what we build.
3) Support more assets. This is an obvious problem, and we hope to expand after the mainnet launch and gather feedback. We have already built such a platform, the latter (adding currency pairs) is very easy for us to do, hopefully we will release BTC/ETH in the next few weeks. Once these are out, we look forward to community input on the assets we list next; eventually, we hope to list the assets that the community is most interested in, so we may vote on them.
Epsilon Sized：Odaily: In Zeta's longer-term planning, it seems that it is not satisfied with just derivative DEX, but will also become the infrastructure layer of DeFi. In order to achieve this goal, what are the necessary steps to be completed, and what does the endgame of DeFi composability look like in your vision?
DeFi derivatives provide a base layer for other applications to compose and create their own products. A DeFi Options Vault (DOV) is a great example of a combinatorial application that allows users to easily earn sustainable yields from their assets. In our opinion, these applications face many operational challenges that could be improved with better software services. Zeta provides developers with tools and resources to create scalable financial products.
Epsilon Sized：Community question: How does Zeta generate profit and what is its revenue model? How to make investors and platforms win-win?
Currently, all of Zeta's expenses go to its insurance fund, which helps keep the platform safe and secure in the event of bankruptcy. This way, as people continue to trade, Zeta becomes a safer platform and everyone wins in the end.
Epsilon Sized：Community question: Can Zeta guarantee the safety of our assets when Solana has a downtime problem?
The Solana blockchain is currently facing some difficulties with TPS. There are strong risk measures on Zeta, users can cancel orders and cannot trade on expired orders. There are also measures to halt the platform in case the underlying public chain crashes.
Epsilon Sized：Community question: Zeta provides tools and resources for developers to create scalable financial products - where can we get resources? SDK? How to test? Need a test coin or is it free?https://github.com/orgs/zetamarkets/projects/2
