Note: This introductory blog post outlines a proposal and a vision of what Filament could be and evolve into. It should not be seen as a promise or a guarantee of feature, roadmap, or timeline. Please feel free to follow the progress here and stay tuned for more updates.
The history of Decentralised Perpetual Exchanges is a relatively recent but rapidly evolving story within the broader crypto and decentralised finance (DeFi) landscape. With the growing emphasis on self-custody, Perpetual DEXes are becoming the epicentre of on-chain user activity.
Pioneered by dydX’s Expo, Perp DEXes evolved from basic brokerage platforms to full-fledged margin trading exchanges leveraging order book model. In 2021, GMX introduced an oracle-based model initiating a Perp DEX revolution.The recent developments have sparked the interest in Perp DEXes but their volume contributes only to ~2% of total crypto derivatives volume due to complex UX, high fees and limited asset listings.
Enter Filament
Filament is an oracle-based Perpetual DEX, designed to help traders and liquidity providers extract the most out of perpetual trading. We are laser-focused and dedicated to one clear mission: Simplifying Perpetuals for All.
For long, on-chain users have to choose one of seamless experience, liquidity or asset listings. Filament is complimenting the most powerful and battle-tested mechanisms with novel trading models.
Filament embodies the fusion of simplicity and innovation, making perpetual trading accessible to all. Trust is at our core, which will reflect in our unwavering reliability and sincerity, all without losing our inclusive touch. As early contributors to DeFi and the interchain ecosystem, we are determined to redefine possibilities.
Yet, we're not solo players. We believe in collaborating with fellow builders and protocols, co-creating the future of DeFi and interchain.
What’s in the oven?
We are thrilled to unveil Filament's long-term vision and the forthcoming features it is poised to deliver. Currently, we are focused on development and rigorously testing our theses. We will be creating a comprehensive roadmap, which will be revealed in due course.
Leveraging Proven Mechanisms: The Technical Advantage
In the development of Filament Finance, we have taken inspiration from the best-of-breed protocols in the crypto space, including GMX, Gains Network and Synthetix. Our commitment to technical excellence is evident in our approach to incorporating proven mechanisms and innovations from these industry leaders.
GMX's Resilience and Stability: GMX's robust architecture for perpetual trading has been a source of inspiration. We have studied and incorporated key elements that ensure the resilience and stability of Filament's perpetual markets. This includes mechanisms for funding rates, liquidations, and risk management, all informed by GMX's successful model.
Gains Network's Liquidity Efficiency: Gains Network's focus on liquidity efficiency has guided our approach to designing Filament's liquidity pools. We have adopted strategies and mechanisms that optimise liquidity utilisation, ensuring competitive funding and borrowing rates for our users.
Synthetix's Asset Diversity: Synthetix's success in offering a wide range of synthetic assets has influenced our approach to supporting diverse assets. Filament aims to be a platform that supports assets from multiple ecosystems, eliminating bridge risk and offering a comprehensive trading experience.
By leveraging these battle-tested mechanisms and learning from the best in the industry, Filament Finance ensures that our technical foundation is sound, secure, and capable of delivering a seamless and reliable trading platform for our users.
Empowering Low Liquidity Markets
Filament Finance is dedicated to addressing a critical need in the decentralised derivatives landscape: supporting low liquidity markets. Our technical approach is designed to provide robust solutions, competitive funding and borrowing rates, all while utilising stablecoins as the settlement layer.
Innovative Mechanisms for Low Liquidity Markets
Dynamic Liquidity Pools: Filament's liquidity pools are intelligently designed to accommodate low liquidity assets. Unlike traditional models that struggle with such markets, Filament employs dynamic mechanisms that adjust funding rates and incentives to attract liquidity, even in traditionally less liquid assets.
Competitive Funding and Borrowing Rates
Market-Driven Rates: Filament's technical infrastructure leverages market dynamics to determine funding and borrowing rates. This approach ensures that rates remain competitive, enticing traders and liquidity providers to participate in low liquidity markets. By using real-time data and demand-supply dynamics, we optimise rates for all participants.
Stablecoins for Secure Settlement
Stablecoin Integration: Filament relies on stablecoins as the settlement layer for perpetual contracts. This choice offers several advantages, including price stability and security. Stablecoins are known for their reliability and are less susceptible to extreme price fluctuations compared to volatile assets. This enhances the overall security of our platform.
Liquidity Provider Insurance
From a technical perspective, this feature represents a significant leap forward, as insurance practices have been notably absent in the realm of perpetual protocols.
Risk Assessment Framework: Filament's insurance module is underpinned by a robust risk assessment framework. This framework continuously evaluates the exposure of liquidity providers in real-time. It factors in market conditions, volatility, and various other parameters to assess the potential risks faced by liquidity providers.
Dynamic Coverage Calculation: Unlike traditional insurance models with fixed premiums, Filament's insurance module employs a dynamic coverage calculation mechanism. This feature ensures that the percentage of earned fees directed to the insurance pool commensurate with the risk exposure borne by LPs.
Decentralised Oracle Integration: To accurately assess risk and determine coverage, Filament integrates decentralised oracles that provide real-time data on asset prices, market conditions, and other critical factors. This data feeds directly into the risk assessment framework, enabling precise risk evaluation.
The insurance module will be enabled through governance and once the protocol is generating enough fees to reach a threshold in the insurance pool.
Delta Neutral Vaults: Redefining Asset Exposure Management
Delta Neutral Strategy: This approach involves offsetting the directional risk of an asset by taking an opposing position or adjusting the portfolio's composition to maintain a delta of zero. In simple terms, it aims to eliminate the impact of price movements on the underlying asset.
Automated Rebalancing: These vaults employ automated rebalancing mechanisms that continuously adjust the portfolio composition to ensure delta neutrality. When market conditions change, such as the inflationary outlook for an asset, the vault automatically takes actions to rebalance the portfolio accordingly.
Key Benefits for Users
Reduced Exposure: Users who opt for delta neutral vaults can reduce their exposure to inflationary assets by providing delta neutrality. This is especially valuable in a volatile crypto market where asset prices can fluctuate rapidly.
Risk Mitigation: The delta neutral strategy serves as a risk mitigation tool, protecting users from potential losses due to adverse price movements. By maintaining a delta-neutral position, users can weather market volatility with greater confidence.
Inflation Hedge: Delta neutral vaults can also serve as an effective hedge against inflation. By managing exposure to inflationary assets, users can preserve the value of their holdings over time, even in inflationary economic environments.
Stay in Touch
To keep up with updates on the project and timelines, please follow us on Twitter and Substack. Also, if you would love to connect with the team, feel free to drop a DM on our twitter.
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