2024.04.06

Source of information for this article:

Currently, Surf Protocol has migrated from Base to Merlin, and many features specific to BTC users have been developed on the Merlin chain. However, as the white paper on the official website has not been updated, part of this article comes from the project owner Space, class representative @安全鹅长’s Space summaries, X, etc.

Too long to read

Surf is a leverage trading platform with a maximum leverage of 50X. You can choose to trade here and earn the principal of the liquidity provider LP. Surf provides you with an original margin model denominated in Satoshi, and even LP can be used as your margin for opening orders. Of course, you can also choose to provide LP. Surf provides you with an original single-coin liquidity model. You don’t need to worry about LP price fluctuations, and you can earn the trader’s commission and the principal lost by gamblers due to liquidation.

Project Description

Surf Protocol is a decentralized leveraged trading platform that aims to provide a secure and transparent exchange on the chain. It was originally deployed on the Base network (discontinued), but has now been migrated out and launched on the Merlin Chain test network. The test network activity has ended and it will soon be launched on the main network, and the points system and rebate system will be launched simultaneously.

On the Surf platform, traders can use up to 50X leverage to open long/short trades for the underlying assets supported by the platform; the platform's liquidity providers and traders are counterparties to each other, and their profits and losses offset each other.

Investment background and team

As a project selected for the Binance Accelerator incubation program, Surf Protocol completed a US$3 million financing in October 2023, led by ABCDE Capital, with participation from Inception Capital (formerly OP Crypto) and C2 Ventures.

Surf’s core team includes former Amber co-founder Tony (who has experience in foreign exchange and interest rate derivatives trading in investment banks in Hong Kong and Singapore), and former Huobi Futures COO.

How to participate in the project

There are currently three ways to participate in the project: in addition to trading on Surf and providing liquidity, you can also attract new users as a KOL and get commissions.

1. Trading

For assets supported by the platform, traders participating in leveraged trading can use the quote currency as margin, open positions using a position-by-position margin model, and trade with liquidity providers based on oracle prices, with a maximum leverage of 50 times.

In each transaction, traders can individually select the margin amount and leverage multiple, and can also choose to place market orders or limit orders; there is currently no transaction slippage, but there will be a transaction slippage mechanism after future upgrades.

Margin

In the previous test network, Surf used USDT as margin. In the future, BTC and MBTC will be allowed as margin. In addition, according to the official cooperation of the project party, SolvBTC of the Solv project should also be allowed to be used as margin in the future.

In addition to the common margin system, Surf also innovatively introduced the Satoshi-based margin model and the LP certificate margin model.

(1) The Satoshi-based margin model: In the BTC ecosystem, margin is calculated in Satoshis, which is closer to Bitcoin ecosystem players;

(2) LP certificate margin model: users who provide liquidity on Surf can use LP certificates as margin to open positions on Surf. This allows LPs to obtain liquidity benefits while trading, greatly improving capital utilization.

Leverage trading fees

Participating in leveraged trading requires paying two parts of fees. One is a fixed transaction fee of 0.08% (there is also a rebate mechanism, which is about 0.07%); the other part is the leverage funding fee, which is related to the open positions on the platform. The more open positions there are, the higher the leverage funding rate.

Position Liquidation

Since the margin model for leveraged trading on Surf is a position-by-position margin model, each position will be evaluated for liquidation separately. When "initial margin + unrealized profit - various fees" is less than 10% of the total initial margin, liquidation will be triggered. If the leverage is 10x, liquidation will be triggered if the decline is less than 9%.

2. Liquidity Provider

In the liquidity of traditional Dex, the price of liquidity provider LP is usually linked to the price of a certain token (such as various LPs on Uni), or to the price of a basket of tokens (such as GMX's GLP and JUP's JLP are all baskets of tokens). No matter what tokens you hold, to participate in providing liquidity, you must purchase a basket of tokens and bear the risk of token price changes.

Surf Protocol proposed Delta Neutral Vaults, which separates the token pools through a bookkeeping system and provides single-coin staking services, no longer requiring everyone to provide a package of tokens.

In Surf's liquidity pool, the proportion of each currency is similar to that of other token basket projects, except that the entire liquidity pool is further broken down into the amount that can be invested in each token, allowing users to provide a single currency as liquidity. However, from the perspective of the Surf platform as a whole, the liquidity model has not changed.

Users who provide single-coin liquidity no longer need to bear the risk of price fluctuations and can earn coin-based returns by holding LP-Tokens (since liquidity providers and traders are counterparties, it is not 100% profitable).

Trading assets supported by the platform

According to the project party’s statement in Space, BTC, ETH, ORDI, and SATS will be launched in the early stage, and the supported assets will be gradually expanded later.

Oracle

Surf Protocol uses Pyth Oracle as a verification source to reduce the risk of single exchange plug-in.

AND 卡

Surf has issued 2,000 OG cards to qualified users of the test network. The project team has repeatedly stated in Space that OG cards are deeply tied to the overall development of the platform and will be empowered in the future. The opening price of OG cards was as high as 0.055B, and now the floor price has remained stable at around 0.036B.

Points system rewards

After the points system is launched, you can earn points by trading and providing liquidity on Surf. Points will be converted into tokens according to certain rules in the future. The project owner has made it clear that they will fight against witches and give rewards to real users.

Similar products GMX Case

GMX is a well-known on-chain leveraged trading platform and the largest Dex on the ARB chain. Its real project income has always been at the forefront of on-chain project income, and its TVL and handling fees on the ARB Chain even exceed Uni. Since its launch in August 2021, the ARB chain has accumulated a transaction volume of 133.64B, and the liquidity provider GLP (which can only provide/purchase a basket of tokens to provide liquidity) has accumulated a handling fee of 214.95M.

During the same period, GLP earned more than 200 million yuan in commissions, but the profits and losses of GLP and the traders basically offset each other, which means that GLP made a net profit of more than 200 million yuan.

advantage

1. The ceiling of the derivatives track is relatively high, and there are currently no derivatives trading projects on Merlin Chain. As the first native derivatives project, it can gain first-mover advantage and attract a large amount of funds with investment needs on the Merlin chain;

2. Surf is a project of Binance Accelerator Incubation Program, and its team and products have certain strengths;

3. Surf's unique single-coin liquidity mechanism is very attractive to both coin-based and U-based users;

4. At present, the various projects on Merlin are relatively united and cooperate with each other a lot. In the future, Surf will also consider using the pledged tokens of other projects in the Merlin ecosystem as LPs to improve the utilization rate of funds; Surf's LP-Tokens will also be staked in other projects in the ecosystem.

5. Under the points incentive mechanism, many trading users will increase transactions for points, which will allow LPs to obtain more transaction fees.

Project Security

Surf Protocol’s auditors are Certik and Beosin. The audit report address is as follows:

Certik ：https://skynet.certik.com/zh-CN/projects/surf-protocol

Beosin：https://www.beosin.com/audits/Surf%20protocol_202311080924.pdf

Related Website

Official website: https://www.surf.one

Twitter ：https://twitter.com/surf_protocol

Discord ：https://discord.com/invite/Ma2NjR9uMs

Medium ：https://medium.com/@surf.protocol