Vest Exchange: Revolutionizing Decentralized Perpetual Futures with a Risk-Adjusted AMM

Introduction

Vest Exchange is a decentralized perpetual futures exchange that aims to democratize the financial system by allowing users to propose and trade almost any asset. By understanding human nature and the reasoning behind trades, Vest Exchange seeks to create a platform that captures the belief systems of different groups of people. This is achieved through a cutting-edge risk-engine shaped by academic literature and modern market-making techniques. In this article, we will discuss the challenges faced by existing decentralized exchanges and how Vest Exchange addresses these issues through the use of a risk-adjusted automated market maker (AMM).

Challenges in Decentralized Exchanges

Despite the prevalence of perpetual futures markets, there are still many issues that need to be addressed. These include:

1. High barriers for market listing: Current exchanges are hesitant to list long-tail markets due to their inability to adapt to extreme market conditions. As a result, decentralized exchanges (DEXs) repeatedly list the same markets, providing no new exposure to long-tail assets.

2. Lack of risk management: In 2022 alone, DeFi experienced millions of dollars lost and multiple protocols shut down due to market manipulation and oracle attacks.

3. Unclear risk/return for liquidity providers (LPs): LPs are exposed to various types of risk, including insolvency and adverse selection. Exchanges attempt to compensate by imposing high trading fees.

Vest Exchange's Solution: Risk-Adjusted Automated Market Maker (AMM)

Vest Exchange addresses these pain points through the use of a risk-adjusted automated market maker (AMM). This innovative AMM matches buyers (longs) and sellers (shorts) asynchronously, allowing for temporary inventory imbalances. To mitigate the risk associated with holding such inventory, the AMM charges a premium or provides a rebate based on each position's marginal contribution to the risk. Furthermore, a funding mechanism guarantees that the AMM will cover any residual risk that the premium or rebate does not account for.

Conclusion

Vest Exchange is revolutionizing the decentralized perpetual futures market by addressing the challenges faced by existing DEXs. By utilizing a risk-adjusted AMM, Vest Exchange not only improves capital efficiency and enables liquidity to move freely but also allows markets to better reflect human nature, psychology, logic, and current events. This innovative approach to decentralized finance has the potential to create a fully democratized financial system, opening up new opportunities for traders and investors alike.

official links :

website :

https://www.vest.exchange/

twitter :

https://twitter.com/VestExchange

Vest Exchange: Revolutionizing Decentralized Perpetual Futures with a Risk-Adjusted AMM

Introduction

Vest Exchange is a decentralized perpetual futures exchange that aims to democratize the financial system by allowing users to propose and trade almost any asset. By understanding human nature and the reasoning behind trades, Vest Exchange seeks to create a platform that captures the belief systems of different groups of people. This is achieved through a cutting-edge risk-engine shaped by academic literature and modern market-making techniques. In this article, we will discuss the challenges faced by existing decentralized exchanges and how Vest Exchange addresses these issues through the use of a risk-adjusted automated market maker (AMM).

Challenges in Decentralized Exchanges

Despite the prevalence of perpetual futures markets, there are still many issues that need to be addressed. These include:

1. High barriers for market listing: Current exchanges are hesitant to list long-tail markets due to their inability to adapt to extreme market conditions. As a result, decentralized exchanges (DEXs) repeatedly list the same markets, providing no new exposure to long-tail assets.

2. Lack of risk management: In 2022 alone, DeFi experienced millions of dollars lost and multiple protocols shut down due to market manipulation and oracle attacks.

3. Unclear risk/return for liquidity providers (LPs): LPs are exposed to various types of risk, including insolvency and adverse selection. Exchanges attempt to compensate by imposing high trading fees.

Vest Exchange's Solution: Risk-Adjusted Automated Market Maker (AMM)

Vest Exchange addresses these pain points through the use of a risk-adjusted automated market maker (AMM). This innovative AMM matches buyers (longs) and sellers (shorts) asynchronously, allowing for temporary inventory imbalances. To mitigate the risk associated with holding such inventory, the AMM charges a premium or provides a rebate based on each position's marginal contribution to the risk. Furthermore, a funding mechanism guarantees that the AMM will cover any residual risk that the premium or rebate does not account for.

Conclusion

Vest Exchange is revolutionizing the decentralized perpetual futures market by addressing the challenges faced by existing DEXs. By utilizing a risk-adjusted AMM, Vest Exchange not only improves capital efficiency and enables liquidity to move freely but also allows markets to better reflect human nature, psychology, logic, and current events. This innovative approach to decentralized finance has the potential to create a fully democratized financial system, opening up new opportunities for traders and investors alike.

official links :

website :

https://www.vest.exchange/

twitter :

https://twitter.com/VestExchange