Preface
According to the data platform of #DeFiLlama , since November 2023, the transaction volume and TVL of #Vertex have skyrocketed. The transaction volume once became the second-ranked on-chain perpetual contract platform (the first is dYdX), and it has great potential to surpass dYdX. Why has Vertex grown so rapidly in terms of transaction volume and TVL in a short period of time? What is the innovation and attraction of Vertex? Let's take a look.
1. Project Introduction:
Vertex is a decentralized derivatives protocol on Ethereum with spot, perpetual and synthetic currency markets. The vision is to trade like a CEX and self-custody like a DEX.
It was once a decentralized foreign exchange platform on the Terra chain. After the collapse of Terra in May 2022, it migrated to Arbitrum as a DEX and developed three types of products: spot trading, futures trading, and lending markets.
Profit model of the agreement: collect transaction fees
Generate agreement revenue.
Economic incentives for market makers to provide liquidity.
Regulate speculation and manipulation of specific trading pairs.
Official website: https://vertexprotocol.com/
2. Products and Innovation:
product:
Spot Market: All spot assets are quoted in USDC. On Vertex, users always retain ownership of the spot assets on the chain.
Perpetual Contract Market: Traders can go long or short crypto assets with up to 10x leverage, using USDC as the primary collateral, and the cross-margin system can use other spot assets to support perpetual positions.
Lending Market: Users can automatically borrow spot assets using their portfolio margin to obtain loans. The smart contract for the lending market is on-chain (e.g., on Arbitrum).
Innovation:
Hybrid design of order book + AMM:
At the protocol level, it integrates the on-chain exchange and risk engine, and configures the off-chain sorter to form a hybrid order book + AMM DEX. Including spot, perpetual contracts and money markets — controlled by the Vertex protocol smart contract at the Arbitrum layer.
Three key elements:
A fully on-chain exchange (constant product AMM) — protocol level.
A risk engine that is fully on-chain — at the protocol level.
Off-chain sequencer for order matching.
Cross Margin Mode:
By default, Vertex is fully margined, with the user’s portfolio serving as collateral for multiple open positions.
Vertex V1 does not currently support isolated margin trading. In Vertex V2, isolated margin trading for perpetual contracts will be added for users to choose from.
sub-account:
Traders can isolate the risk associated with a single position by opening new sub-accounts.
Using multiple oracle price feeds:
Currently, Stork oracles are mainly used. In the future, Chainlink’s high-fidelity sub-second market data will work with Stork to help support the market to ensure liquidation, funding rates, and profit and loss calculations.
Stork is an ultra-low latency, decentralized hybrid oracle network for EMV-compliant quotes. It powers Vertex through its hybrid on-chain/off-chain architecture, unlocking the ability to perform initial processing off-chain.
Competitive transaction fees:
It provides low-fee transactions (0.02%) for takers and zero-fee transactions for makers of spot and perpetual contracts for major currency pairs such as BTC/USDC and ETH/USDC. Compared with DYDX and GMX, Vertex has lower fees and is more competitive.
One-click trading 1CT:
Enabling users to sign an approval transaction at the beginning, without the need for subsequent approval signatures, creates an experience similar to a CEX where users can log in (sign an approval transaction) and start trading without having to sign every trade they make.
More innovations will be introduced in V2!
3. Community and Data:
social media:
Twitter：https://twitter.com/vertex_protocol ，84.3K followers
Discord: https://discord.com/invite/berachain, 28.8k members, 2.2k online
Protocol data:
Total volume: $45.21b, of which $41.21b was in perpetual contracts
TVL:$45.3M
24h trading volume: $242.87M
Number of users: 20,615
24h transaction fee: $49.26k
Average daily number of users in the past month: 500–600
Data source: https://stats.vertexprotocol.com/
Currently, you can participate in the 6+ year continuous incentive plan of the protocol itself and the short-term incentive plan (STIP) of 3 million ARB tokens provided by Arbitrum DAO.
4. Economic Model
VRTX Total Supply:
1B, no additional issuance. 90.85% of the tokens will be released in 5+ years.
distribute:
Ongoing incentives: 34.0% (340 million VRTX)
Initial Token Phase: 10.0% (100 million VRTX)
The Initial Token Phase consists of the first 7 epochs of the Vertex Trade & Earn rewards program, which launches in April 2023 and ends on November 8, 2023. 10.0% of the VRTX supply designated for the Initial Token Phase is a one-time allocation of VRTX tokens — which early Vertex users can accrue as trading rewards.
Early investors: 8.8% (88 million VRTX)
Early investors include participants in Vertex’s $8.5 million seed round from 2022.
Initial VRTX Liquidity (LBA): 1.0% (10 million VRTX)
The initial VRTX liquidity is 1.0% of the VRTX token supply unlocked at Genesis and designated as rewards for Vertex LBA participants.
Future Contributors: 5.0% (50 million VRTX)
The Future Contributor Allocation is a reserve for future team growth. Once vested, it will be placed into the protocol treasury for potential use, but will not necessarily enter circulation. VRTX tokens allocated to the Future Contributor category will not begin to vest until Year 2.
Ecosystem: 9.0% (90 million VRTX)
The Ecosystem Development Allocation consists of a reserve of VRTX tokens that support Vertex's long-term ecosystem growth. At Genesis, 1% of the Ecosystem Development VRTX Allocation unlocks (10 million VRTX). The remaining 8% of VRTX tokens are designated for ecosystem development, releasing linearly at 2.67% per year from Year 1 to Year 3.
Advisors: 0.5% (5 million VRTX)
0.5% of the total VRTX supply, released beginning in Year 1, will be used for third-party services that provide long-term benefits to the growth, security, and sustainability of the Vertex Protocol — including but not limited to code audits and bug bounties.
Protocol Treasury: 11.7% (117 million VRTX)
5% of the total VRTX supply (50 million VRTX) will be unlocked to the protocol treasury, and the rest will be released linearly from year 1 to year 3.
Founding team: 20.0% (200 million VRTX)
The team has allocated a timeline of release roughly 2–3 years after the mainnet launch in April 2023.
The monthly release breakdown can be seen here: https://docs.google.com/spreadsheets/d/1iLKBY7uoiYpa7lVzYuCK6HRCOJw-u4mnUR1CcD_OW3s/edit#gid=639807660
VRTX Staking
voVRTX User Score: Various incentive mechanisms will be introduced to allow active participants to receive VRTX token rewards. Increasing the voVRTX score can increase the number of incentives.
USDC Rewards: USDC is rewarded based on the user’s voVRTX score, and USDC comes from protocol revenue.
Insurance Fund Staking (USDC)
Reward the liquidation profit of the insurance fund (if there is a surplus)
Further improve voVRTX user scores to get more VRTX staking rewards
5. Financing and Team:
Financing:
2022–4: Vertex Protocol completed a US$8.5 million seed round of financing, with investors including Hack VC, Dexterity Capital, Jane Street, Hudson River Trading, etc.
2023–6–22: Received strategic investment from Wintermute Ventures. The specific amount has not been disclosed yet.
team:
Alwin Peng: Co-founder, former Jump Trading software engineer
Darius Tabatabai: Co-founder, former Head of Trading at JST Capital, 20 years of trading experience in options, commodities and FX. BSc in Government and Economics from London School of Economics and Political Science.
Conor McNamee: Head of Product, former Business Development and Operations Manager at Eterna Capital. Graduated from the University of Western Ontario, Canada and City University of Hong Kong.
SJ Park: Head of Strategy. He has 10 years of trading experience in rates and credit and was previously a portfolio manager at Goldman Sachs.
Jeff Blockinger: General Counsel with 25 years of experience specializing in securities, investment funds, fintech, blockchain, cryptocurrency, and regulatory matters. Currently also General Counsel of Quadrata.
VI. Summary:
Vertex is a vertically integrated DEX that aggregates spot, perpetual contracts, and currency markets into a unified trading platform. Trade at lightning speed, with universal full margin, and a user-friendly trading interface. Vertex combines the advantages of DEX and CEX, enabling self-custody of DEX and fast trading like CEX.
Unlike dYdX (off-chain order book) and GMX (on-chain liquidity pool solution), Vertex uses a hybrid order book + AMM approach to achieve spot and perpetual contract trading. With products that have the advantages of CEX and DEX and a continuous trading incentive plan (340 million VRTX), Vertex's trading volume and TVL have been steadily increasing.
In the field of derivatives, there is no monopoly, and Vertex is expected to compete for a place in it. Currently, dYdX, GMX, and APEX, which has recently soared tenfold, have their own advantages. Only protocols that provide a safe, reliable, smooth trading experience and low slippage and low transaction fees can gain users for a long time, and distributing protocol income to token stakers is an important aspect that can firmly attract users.
In terms of market capitalization, DYDX has a market capitalization of $990M, GMX has a market capitalization of $385M, and Vertex has a market capitalization of $44M. Considering the trading volume, they are undervalued.
From the profit point of view, the transaction volume is high, but the transaction fee rate is very low, the daily fee income is relatively low (about $50K), and the income distributed to the coin holders is also relatively small. Fortunately, the official incentive activities can make up for this.
In addition, according to official sources, Vertex V2 will have more optimizations and innovations. We look forward to Vertex bringing us more surprises!
SANYUAN Labs is a DAO-driven venture capital firm focusing on investing in Web3.0, DeFi and AI.
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