On October 25, ViaBTC Capital hosted an online AMA titled Can Decentralized Derivatives Trigger the Next DeFi Summer and invited DeFiance Capital founder Arthur Cheong, ZKX founder Eduard Jubany Tur, Aperture CEO Lian Zhu, DefiYield board member Michael, and Volare partner May as guests of the AMA on Twitter Space.

Let’s now check out the brilliant views of our guests during the AMA:

Molly:

Hi everyone, thanks for joining ViaBTC Capital Twitter Space. Today’s topic is decentralized derivatives. I am the host, Molly from ViaBTC Capital.

ViaBTC Capital is celebrating its first anniversary. At the very beginning, I would like to briefly introduce ViaBTC Capital, a Crypto Capital backed by ViaBTC Group. Dedicated to the blockchain and crypto space for years, ViaBTC Group has accumulated abundant industrial resources. It is pooling the technologies, talents, projects, and funding of blockchain industries worldwide together. As the group’s new investment arm, ViaBTC Capital aims to speed up the ecosystem development of the entire blockchain industry.

Looking back on its track record over the last year, we can tell that ViaBTC Capital has achieved major milestones. It has set up a 1st Phase Fund worth $50 million, investing in more than 30 crypto funds and blockchain projects.

In addition to funding, ViaBTC Capital has also provided professional post-investment services for the target projects, say, strategy consultation, technical support, marketing resources, investor connection and so forth.

Last year, our investment covers trending blockchain categories such as infrastructure, NFT, GameFi and DeFi. Especially in DeFi, we focus on strategies and derivatives and we think there remain huge chances in this area.

When it comes to DeFi, it always reminds me of the DeFi Summer in 2020. Yes, both my wallet and I miss that period. Back in that stage, DeFi was initially powered by some basic applications, say AMM/DEX and lending protocols for spot assets.

As we know, there are various categories in traditional finance areas. Say futures, options and structure products, such more complicated but efficient derivative products. We think the crypto world, including centralized and decentralized applications, may have similar landscapes. Therefore, if DeFi Summer will come again in the next bull market? Will it be triggered by decentralized derivatives? How can investors make use of the opportunities brought by DeFi derivatives among the countless innovative projects?

In today’s Twitter Space, we invited our partners and portfolios to share their professional views. They are all professional investors and project founders who have been in the blockchain industry for many years. Let’s welcome Arthur Cheong, Founder of DeFinance Capital, Eduard Jubany Tur, Founder of ZKX, Michael, Board Member of DeFiYield, and May, Partner of Volare. I appreciate your attendance. We expect you to spark new ideas.

So before our detailed discussion, please briefly introduce yourself and your amazing capital or project. Could we, let’s start by Arthur, Arthur? Could you briefly introduce yourself and DeFiance Capital?

Arthur-DeFiance Capital:

Hi, everyone. This is Arthur, the founder of DeFiance Capital. I have been in the crypto space since 2017. There are a couple of different things, but, basically as an early participant, user and investor in the DeFi space, I have invested in a lot of the early stage, primitive, DeFi primitive, such as AAVE, Synthetix, SushiSwap, Yearn Finance since 2019. I launched DeFiance Capital in 2020. We are one of the most active investors in the DeFi space. Some of us initially define investment, especially integrity for dYdX. We are the lead investor for Series A. Over recent months, we also make a lot of venture investments in the Web 3 gaming space as well. A pleasure to meet all of you.

Molly:

Thanks, Arthur.

Eduard, could you tell us more about ZKX as well as about yourself?

Eduard-ZKX:

Sure. ZKX is a derivative protocol built on StarkNet. We were one of the first to jump and use Starkware technology to build applications.

We have been building for over a year, with CAIRO language, so we’re one of the earliest teams to do so. Our background comes from 15 to 20 years of experience working in tech in Asia and Europe, with corporate venture capital, previously at a firm called SOSV, which has $1.3 billion in AUM, and famously, also was one of the investors in Bitmex. So we’ve seen the rise of derivatives in crypto and perhaps was one of the tools the traders love to use. And we’re very excited to build within the ZK rollup space. I think that’s gonna be, you know, an ecosystem for the future and the option of a walk along with love to see on this journey.

Molly:

OK, thanks Eduard. May, could you please tell us more about yourself as well as Volare?

May-Volare Finance:

Sure. Hi everyone. This is May from Volare Finance. So Volare Finance is actually built for the crypto volatility market. And the founding team is kind of a bunch of professional web 2 option traders previously, but Volare is actually trying to provide a transparent trustless and convenient, decentralized mechanism that runs without any intermediaries and option trading. We hope we could put, bring on a trading platform, and out of that, we are also planning to bring in a combo option, indexes, and strategies packages to our users. Nice to be here today.

Lian Zhu-Aperture:

Aperture Finance is an omni-chain structured product that aims to democratize hedge fund strategies and allow users to 1-click into institutional-grade strategies such as delta-neutral leveraged farming and DeFi Option Vaults with outstanding performance under different market patterns.

QUESTION 1:
Molly:

Sure, that’s May. So let’s move to our most exciting discussion part. So actually, most of the crypto derivatives projects came after DeFi Summer and even at the end of the bull market. Do you agree that DeFi Summer will come back again in the next bull cycle? At that time, what kind of roles will decentralized derivative play?

Arthur-DeFiance Capital:

That’s an interesting question. I don’t think DeFi Summer, at least not in the same format, will come back anytime soon. I think there was a very unique 0 to 1 moment. So 0 to 1 is a term coined by Peter Bill, a very famous Silicon Valley venture capitalist. He basically talks about what they do in the start-up world, and also illustrates most of what start-ups try to do. We need to realize that in 2020, we are not really in a bull market yet. And at that point, there were a lot of questions about, what is the use cases of crypto, because we just came back from a bear market, and people were questioning: what is crypto good for? And then finance turned out to be one of the most important use cases. And we also have a lot of projects that have been building throughout the bear market, launching the token for the 1st time, and like liquidity mining. And also against the macro backdrop that the interest rate was very low, there was no other place where you can obtain a good risk-adjusted yield in the traditional finance space. But right now, with the macro condition, a hundred percent flip over, we have actually very high nominal interest rate and yield in the traditional finance well right now. And liquidity mining as a concept is fairly well understood. I don’t think it will come back in the same format. I do think that there will still be some breakthrough in DeFi use cases that will surprise people, and I still think there’s a lot of growth ahead, but we probably will not see, such an exuberant market anytime soon. That’s my feeling.

Molly:

Okay, thanks Arthur. I definitely agree that there will be more cases that we can explore. Then, Eduard, how about your thoughts on this problem?

Eduard-ZKX:

I do agree with Arthur’s because these opposite macroeconomic conditions have turned. We are not in a situation where there is active quantitative easing or injections of capital from most governments. And right now you might find that in most cases, you know, interest rates that you can get from DeFi are actually lower than you might be able to get in the traditional world, in some cases. So it’s a very new situation that we’re in. Moreover, if you think about it from the perspective of the infrastructure, I think what we have realized in the past year Yield in ZK rollup technology, is that we are still extremely early, and most of the necessary infrastructure to truly build a decentralized web in the future is still being built, or will have to be built in the future. So the technology is maturing. As you know, ZK roll-up technology will really come to fruition within the next two years. So we wouldn’t expect to have a meaningful new wave of applications sooner than that, to be honest, we’re all building and trying to innovate, but the reality is that there are still a lot of challenges to be solved, which are fundamental to the entire space. Whether it’s decentralized computation and decentralized relay network, or decentralized oracles, there are a lot of base layers that need to be solved, and this will take time to develop an implementation. So in that sense, to envision another sort of Cambrian explosion of tokens? Probably not. But if it happens, it will probably be further down the line. Whenever there’s a new underlying infrastructure that allows for these new use cases, and probably these use cases will not be what we all think about now. It will be something a bit more unexpected. As much as, you know, few people had envisioned play-to-earn to explode. We probably have new use cases and new applications that we didn’t expect. So in that times, it’s hard to predict. It backs the question around. The token concept as it is, we’ve seen Vitalik pushing for soulbound tokens and trying to push for the idea, not every protocol should have, a tradeable token that can be monetized. And I think that is a very interesting concept that probably makes sense for a lot of protocols. And there have been a lot of protocols that haven’t really connected the value accrual to the tokens. So the fact is that we centered on crypto itself in the concept of the token, and that might also take another form in the future. So, would we see a bull round within the next twelve months? Probably the answer is no. Is that a bad thing? Actually, not. Because it gives everyone more time to build and really try to improve what probably would not be the best case scenario. If we all just replicate the same patterns and the same applications and deploy them within new blockchains and new rollups, that doesn’t really bring much innovation. Rather, we need more time to really mature the underlying technologies that will let us bring Web 3 a reality.

Molly:

Okay, great. Great. Thanks, Eduard. I especially like the point that actually they are for infrastructure, we still have a long way to go, despite the bear market, but it gives us a long time to build our basic ecosystem. So, um, Michael, do you have anything to add on? But before that, could you briefly introduce yourself as well as DeFiYield?

Michael-DeFiYield:

Sure, good to connect with everybody. Apologize for taking a bit to get on the space, but glad to have you all around. So I am Michael. I am a co-founder of DeFiYield. And so we have built sort of the center point for a DeFi place to manage all your Web 3 in one, and built the first antivirus for smart contracts, essentially a means of protecting yourself against acts and scams, et cetera, through our automated tools. So for anyone who wants to avoid having a malicious smart contract, they accidentally purchased honeypot or something, or they’ve approved some sort of a smart contract that they don’t know it’s malicious, and they want to revoke access so they don’t get in trouble. And you can do that through our platform very easily. We allow you to manage all your assets across something, 23 different chains, both EVM and non-EVM compatible. And so you can get a DeFiYield app and go and check that out. It’s free, and it’s not custodial, and going to be very helpful for the community.

As for my perspectives on what will come, I think that a lot of whatever is mentioned is probably accurate. There is definitely a lack of some of the core infrastructure that we need to get in order to build a lot of use cases in the future. I mean, I kind of think of what are the killer apps in crypto to date. Probably there is money, as evidenced by the explosion of the market caps of stablecoins, which has remained pretty persistent, even in the bear market so far. And yield, right? People always want yield. Now, as he pointed out, look, yields in DeFi are actually worse than in the real world at this point, which is a real flip from what we saw back in 2020 when you saw DeFi Summer. I think people will always have an interest in pursuing better yield. And so one of the things that is probably going to be a big deal, since we’re talking a lot about derivatives today, I do think that we’ll probably see a combination of things. So I believe there will be a trend in what I would call real yield. And so, if you just go back to DeFi Summer and where all the yield was coming from, what was it? Some of it was actually from these generated through, you know, liquidity pools, etc. But a lot of it was token emissions, right? They were sort of these unsustainable, ponzinomic type setups that were great for some early adopters, but actually didn’t build a lot of value for the ecosystem. It created a lot of mercenary farmers and this sort of thing. And so I think in order to have real yield, you need protocols to generate real revenue that people were willing to pay for. I was on a panel at Osmic Consensus this summer, and we were discussing a little about what does it take to get to a billion users. Probably the starting point is you need usefulness. And what we’re doing right now is we’re kind of creating a lot of the primitives that form the backbone of what will become very useful. But the question is, really, aside from these very financial architecture-type activities, what is it that people are actually willing to pay for here? And what is the user experience that’s going to engage them at a large scale? We haven’t quite crossed a lot of that threshold yet. And so going back to my point about, the fact that money is one of the killer apps. Well, you would think, the basic promise of Bitcoin was supposed to be peer-to-peer digital cash, right? We haven’t done a great job of achieving that yet. And I think, for example, one of the fundamental primitives that are missing still that a lot of projects are working on, and somebody’s gonna solve in the not too distant future is privacy, right? I don’t want to go to a gas station and pay for my fuel myself and, you know, show what my wallet balance is, just because I’m paying for something. So there will be a primitive like that that will come out that will enable a bunch of things. Then there will be other ones that will come out that will enable a bunch of things. People will figure out different ways of increasing throughput. They’ll figure out ways of getting a better user experience. They’ll figure out ways of, as Eduard said, doing things that we don’t have, we don’t even think of today. Like, I think a really good example of this was the invention of flash loans. When Abe came up with that, right? This was something that you couldn’t actually do in traditional finance. And I think as we bring more and more things into the space, people will innovate, and they will find ways of creating new functionality. We will probably at some point have real-world collateral makers working a lot on this problem right now, and some others. I wouldn’t surprise if, if you think about where, and what drives bull markets, I don’t think you ever repeat the same cycle over again. But I think one of the big drivers is new methods of capital formation. And so previously we had, you know, ICOs, then we had DeFi, then we had NFTs. Each of these was a different way of creating capital formation there. Well, one, a big one that would unlock a lot of value would, for instance, be if we could figure out how to have real-world collateral, all of a sudden, this would open up a tremendous amount of liquidity, and potentially would enable all sorts of cross-border commerce. So I think there are a lot of things that are being built right now and probably will continue to see unfold over the next five years or so, that will lay the groundwork and really kick things off. But in the meantime, it will take quite a while to build. And I do think, I do kind of agree that there’s something healthy about where we’re at, because every system needs kind of a cleansing mechanism. So if you just think about, you know, the human body, if you don’t have a cleansing mechanism, that doesn’t work so well, right? Very similar to any sort of ecosystem in normal and traditional finance, we have a bankruptcy, and a lot of companies go under. Well, what we saw late last year was just too many projects. And when you get too many projects, the supply-demand gets imbalanced. And so now we’re going to see fewer projects as the space is down, and supply and demand will be kind of rebalanced, and you’ll get a new wave of innovation, which will create another flood of people who are innovating on that. And this will then turn into another round. How long will that take? Impossible to tell, but probably it won’t be super fast, just because of, you know, what’s going on globally, as well as how long it takes to build things. So those will be some of my thoughts.

Molly:

Ponzi scheme, actually, people always put a negative attitude toward the Ponzi scheme, I think, on some level, a useful tool for our world, especially for the crypto world. And lastly, I would like to, invite May to share more about your views.

May-Volare Finance:

Okay, sure. So I think I strongly agree with Michael’s opinion. I think we probably won’t see exactly, like DeFi Summer as what we have gone through in 2020. Because I think the cycle stuff will be changing. But in the end, my opinion is the DeFi Summer is over, but that doesn’t mean whole DeFi projects won’t be able to. So if we are thinking about the whole history of crypto, we’re keeping seeing that more and more people jumping in. And we’re seeing good signal that, you know, once they’re stepping into this type of new industry, like people are looking for some sort of solution, right? And luckily, right now, we are seeing a good enough combination so far. And my personal opinion is that, given we are expecting, definitely an upturn trend, we’re expecting, there’s huge growth potential. And then similarly, Volare itself, like what we see right now, like previously, DeFi definitely stepped out as one of the major applications in crypto, because, like, before 2020, we don’t even have, like, some real apps, right, in the industry. But I think next time we can like fully expect that for the infrastructure level. We’re seeing the tech is definitely improving, and we’re seeing, real users step into that generally DeFi solutions will be a more healthy companies. And then we’ll see the ecosystem will be bigger. And that’s how the layer division is. Given the volatility of the whole market, our vision is that we’re going to take the position and try to help people hedge the risk. And then pretty much, we’ve been preparing ever since we started. And but I’m also speaking, I think whether we should stick with DeFi, or whether some sort of a combination with CeFi is relatively acceptable, is actually an open topic. And we haven’t really got a final answer yet, but like we’re hoping today, in the following questions, we can discuss a little bit.

Lian Zhu-Aperture:

The crypto market cycle largely coincides with the price movement of BTC since 2009. We have been through 3 of such cycles and are riding through the 4th one. However, for DeFi derivatives and DeFi in general, this is only the first cycle. We have all the reasons to believe that DeFi will come back in the next bull cycle. DeFi derivatives will always be there and will grow in TVL, as it serves an important role to make the market more efficient.

QUESTION 2：
Molly:

So for whether DeFi summer will come again in the next cycle, our conclusion is no at least not in the same format, as in the last bull market. The market will verify our views in the next cycle. Meanwhile, I think the degree of the retail market is still poor, as mentioned. For the next topic, wven in traditional finance, derivatives are difficult for retail users. What do you think are good ways to lower barriers for DeFi derivatives retail users?

Eduard-ZKX:

Sure. I’m happy to look at this question, So basically, this is something that we will start asking ourselves about a year ago when we thought “OK, I’m ZK-rollup”. The technology in general will open up a higher degree of scalability, considering that there’s an inverse relationship between, you know, the number of transactions and cost. I mean, the more transactions you can put inside the ZK protocols you can get for everyone in very simple terms.

Now having the advantages of these underlying structures still didn’t mean that we could be able to onboard all users, right? And the fact, the matter is that there is fragmentation right now within the ecosystem as more and more chains are popping up and more and more roll-ups are coming up. So in a way the question was and still is how do we abstract away with the entire underlying infrastructure? So users don’t even have to think about, you know, having their own entire wallets set up for different changes of the roll-ups, in the bridges in order to access tools in Web 3 and DeFi. And for that you know there are several aspects of our key one of them is a kind of abstraction which is basically having the ability to wrap a wallet into smart contracts in very simple terms. What that means is that we think of roll-ups, specifically, ZK roll-ups. You have the ability to create wallets on their management smart contract, and these management contracts hold funds, and have the ability to integrate and have a wider range of structures, compared to a wallet on Ethereum.

So let me give you an example. On the ZK roll-up, we could actually build a wallet that installs the keys we think secure and claims from your phone, off your smartphone. Or you could have a wallet that has two-factor authentication until there are much more avenues in ways that you can design the wallet experience and the management of these, you know, basically what we call accounts on ZK roll-ups. And this provides an advantage where you know you don’t always have to depend on 12-word secret phrases and you don’t always have to depend on having to set up your MetaMask to the right chain. Rather, you can abstract all of that away from the user and simplify the experience while still being decentralized.

So a common distraction is one of the key features we think will help, and from there you know, it will take opposite underground work activation of these users, while, as you know, a lot of education, which is still a massive, massive factor in this phase. You know, how we educate users, and how we, you know, make them able to distinguish between centralized and decentralized options and make their best choices.

But generally, we have an account of attraction as one of the key features we think will help bring more users on board. And obviously, the core structure will go lower as we implement more and more as we implement more and more ZK Roll-up technology to a point that fees should be negligible and should not even be, you know, a consideration when actually interacting with DeFi. That’s what we’ll think is very important because at that point, you know, a user from Indonesia will not have to bear the one dollar, two dollars, three dollars, or sometimes a hundred dollars that you would be paying for transactions on Ethereum. So we think that’s gonna be a major step in terms of, you know, helping more and more users which, you know, will obviously take time, because you always depend on a field of rails and you depend on many more things.

But with a simple example just yesterday, Apple updated the rules in terms of, you know, what can be done through their App Store with crypto. So this clarity will help, will always bring more limitations for decentralized applications like us. So it will have to see how we can bring this mobile experience for users because that’s also a big factor that we realize that we’re a centralized crypto camp easily that you know the application and start acquiring users, you know, decentralized applications don’t have such an easy time deploying these applications. So that’s one thing as well that we believe will help. But you know, there are many, many, many other factors at the end of the day. But these are problems we feel that will bring, this is becoming a reality.

Molly:

Thanks. ZKX has paid much effort to user education and improving user experience by using roll-up technology. Meanwhile, we noticed that Volare is hosting testnet competitions recently. This is a great observation for users. May, could share more about your views on lowering barriers for retail users?

May-Volare Finance:

Sure. I think there are definitely barriers when we tell users DeFi derivative products, especially option products are specially designed for professional traders. And not many people are familiar with how to use the indexes and how to, you know, make a decision based on whatever the signals you see from the market, especially also like we’re facing with our committed users, we’re seeing questions as to how to really set up the strategic portfolios.

So firstly, we’re providing an option trading platform. I would like people to, you know, do the market making, be the taker, and trade accordingly based on their own opinions but we are also planning to provide some, like strategies, previewed option portfolios. For example, we’re partnering up with a few, especially hedge funds, or venture capitals like DCG and a few others. We hope that we could provide such kind of strategies from their side and we offer a bundle of retail users that they can directly rely on centralized solutions. But I think we are executing this DeFi so that there’ll be more transparency and more reliability. Then we’re also trying to prepare a little bit, you know, based on some sort of a structure before the construction, you know, try to make sure that we offer some ways for users to jump in. But again, given our focus, we still focus more on professional traders.

Lian Zhu-Aperture:

Retail users tend to have the characteristic of underestimating the risks and overestimating the return, leaning more toward speculation than investment. They are vulnerable and easy to fall prey to scams. Therefore in traditional finance, there are all kinds of regulations and checks to protect them. In DeFi, they still face the same challenge. As a project, we bear the responsibility of educating users — not only letting them understand the difference between risk-adjusted returns vs. aping into the hype but also telling them the specific risks associated with derivatives products. Of course, there is a lot to be desired in the user experience of many DeFi products, but UX improvement is secondary to user education.

QUESTION 3：
Molly:

In fact, the entry barrier is one paint point that the whole DeFi market is facing. Therefore, it leads to another pain point of the crypto market, which is there is just a small group of users. Will DeFi derivatives have the chance to attract more traditional finance customers into the crypto world? For this question, I would like to ask Arthur(Defiance) first.

Arthur-DeFiance Capital:

First, I think a good perspective is actually the traditional finance users are already here. But the number is apparently small because, just give a perspective, when you look at dYdX the largest DeFi derivative dex exchange, I think we have more than 70% market share right now. The top market maker is all professional trading firms. Some of them have a lot of traditional finance market-making experience as well.

Except that when we look at Robinhood, a lot of takers’ flow come from the retail customers but the market makers are probably less than 1/3 of them. So I think what we’re gonna see is similar in the DeFi derivatives. You’re gonna have a majority of the market maker being traditional finance customers. You have ten, or fifteen of them that provide 80% of the liquidity on the market. And then you have more other non-professional users that generally take a flow. I think this is what will happen.

When you look at the other side of the derivative options is also the same, 90% of the flows are professional trading firms that traded with traditional finance markets before.

So I think that these trading firms are traditional finance customers. They come where there is liquidity and where there are some market opportunities. So to give a perspective, as a professional fund like us, we will use DeFi derivative if there is good liquidity and if there is a good selection of access and future that we would like to use. And I would say, depending on how a firm is set up legally and regulatory speaking, some of the centralized exchanges might prove very difficult to get users on board and that’s actually a push factor for DeFi derivatives.

The given example is, actually, very troublesome to trade CME, Bitcoin and Ether futures. First of all, the margin requirement is significantly higher. You need to put 40%-plus margins. So for every hundred-dollar contract, you need to put 40–50 dollars. I think you need to find a primary good platform that can do the clearing for you. So I think there’s a huge barrier, especially if the fund is not big. It might be just easier to trade on DeFi derivative exchange directly and the future might be better and the margin requirement is lower. So yeah, I think that this is an ongoing process and we already have a lot of traditional finance users. Currently, I think it will continue to increase.

Molly:

Great point that traditional investors go wherever there are liquidities. Hi, Michael, what are your views on this item?

Michael-DeFiYield:

Yeah, When I think about derivatives, I don’t think of retail being directly exposed that much. So you can just ask us that question even while introducing traditional finance. We’re derivatives, by far the largest markets, and how many people even know what derivatives are. It’s very small, right? They couldn’t tell you different types of derivatives, etc. I would say something like Robinhood has popularized to a large extent, something like trading options.

But the truth is, in the traditional finance world, derivatives are not dominated by retail, and most don’t think that derivatives as something to trade, the thing that’s going to bring out a lot of retail. I think what’s much more interesting is when you take those derivatives and package them up in products, and these products can come in brightly different forms. One is, or even you can build, for example, structural products. They are investment products that, for example, allow someone to earn the yield of their long position on Bitcoin or something like that.

I don’t have that anything to boast, derivatives or something, etc. I simply know that I have some sort of product that I’m buying into and the mechanism by which it’s achieved happens to be by derivatives and derivatives happened to open up a bunch of use cases. But is that a product that is very simple and very easy to understand for the user that can draw in some degree retail?

The next thing I think is the derivatives are fantastically important in enabling all sorts of benefits within our real economy, and I will give you a quick example of this. The chicken magnate is enabled by the fact that McDonald is able to run a price hedging strategy that maintains a reasonable stable cost of chickens so they can sell that product, which is really enabled by derivatives, right?

So every day, millions of people interact with the result of derivatives in real life, without knowing that’s taking place. And I suspect that in crypto, that is probably going to be buying large what happens. So I think that as you get more liquidity, as is more sophisticated in terms of the strategies available, as you get more sophistication in terms of the types of derivatives you can take advantage of. Whether it’s in DeFi or in crypto broadly various ecosystems, I think that’s going to draw more institutional capital, a lot more institutional traders, and those things will mean that you can build up other products which are attractive to retail. I think, if you’re drawing out trying to say “look, let’s educate the consumer world on derivatives.” That’s probably not going to happen, right? People are just not ever on what’s going to be sophisticated.

But I think there are lots of ways that we can enable use cases that will attract these people without having them understand what’s going on. Anything that’s a great deal. And another thing that I think will be a big factor that will change things a lot because so much of the derivatives space is based on institutional players, is of course clarity of regulation. I mean, you can see that lots of major banks, investment banks, and traditional financial institutions are ready to go or are interested in getting into the space in a much bigger way but are waiting for regulatory clarity. At some point, regulatory clarity is going to come. And when it does, that will open up a lot more liquidity, that will open up a lot more tools, that would bring a lot more resources into developing these sorts of products, etc. And I think that’s going to also help to grow the space quite a bit. Teams to be slow-moving may be then a lot of people would like and maybe that’s a row of DeFi again is to smooth over, you know, where it’s not able to buy traditional mechanisms, it could be enabled through decentralized ecosystems. Maybe that’s the possibility.

But I really think that where it’s mostly gonna come from is from the key things that people care about. So what do people care about? They care about stable prices, they care about yield, they care about some use case that benefits them and they don’t really want something that is very complex. Yes, there’s a small subset of users who understand options, they know how to run straddle strategies. That’s the thing that happens, but not for the majority. And so I really think that the key is building on, is using these tools, and more and more tools, and then using those tools to build things that are really attractive to the retail community as an approach of trying to educate the retail community on something sophisticated or trying to push them into these more sophisticated instruments that they might approach to grow the community of the whole space via derivatives.

QUESTION 4：
Molly:

Thanks, Michale. We do expect more derivatives protocol will be included in DeFiYield, which will make it easier to explore more robust financial instruments. For the last topics: what do you think about regulatory issues on crypto derivatives? Hi May, what’s your attitude towards current regulation?

May-Volare Finance:

OK, I think my own opinion is that for the general crypto market, if we want you to involve in some like players from TraFi regulator license the company who want to, you know, step into and we want these people to start to trade Bitcoin and we offer a product we want these people to be our clients or our, at least, partners in some way. Then for sure, we need to consider the general requirements of different kinds of countries or regions. So from what I see right now, we still see the window that there will be a certain time period people can work on crypto only. We have certain types of users, traders, they can use our product or they can join the platform, and play a role. But like India and what I’m seeing is like probably insert type of time period once we want them on board more traditional like, I’ll say money because this is the measure we make the whole market cap bigger, then we should start to offer a professional solution. And then in terms of that, which I think we are basically some kind of attempts that people are partnering up with existing solutions and offer a pro version, right, to such kind of companies. Or some of the companies they’re looking for or some lasting solutions by themselves. So we’re expecting that, and meaning at certain points we can either partner up with a third party to offer, you know, a procedure that we actually are, and then we should look for who are eligible to use our product, and we may also seek some solutions by ourselves or through our partners to offer, you know, products in a more regulated way. I think that would be what we can do. But at this stage, we are still a crypto start-up so we still focus on, you know, DeFi users.

Molly:

Arthur, how about your thought on this item? Arthur?

Arthur-DeFiance Capital:

This is my least favorite topic. I think the ultimate answer is really to be really decentralized. I don’t think that I need an easy way out because once you comply with the regulation of one country, what happens next like where do you draw the line? Every country can have a different set of regulations toward DeFi or crypto if there it is. Obviously, US is the biggest market, and then you have EU as well. I think this will become a nightmare to manage and you’ll not be very scalable. I think the best is just to stick to the crypto principle of open finance, decentralized finance, and economic freedom. And that would not be easy. It’ll be very hard to make the protocol decentralized on a full stack basis, but I think this is what is really scalable in the long run. I don’t think complying with any jurisdiction or regulation is very scalable. On the dYdX side, definitely they’re following the regulations because right now the protocol is not fully decentralized yet. I do think most DeFi and crypto derivatives, and protocols shouldn’t just pay lip service just to this whole decentralization thing. Actually, they need to work on it. And I don’t think the window would be open forever as well. I think it’s very clear that this is more than the biggest challenge facing the crypto derivatives space right now. Yeah, I think that’s the way going forward.

Molly:

Alright, today’s AMA is almost at the end. I hope you guys captured some ideas today. Will decentralized derivatives trigger the next DeFi summer? The market will tell us in the near future. Thanks again, Authur, Eduard, Michale and May, for sharing your amazing views and building for crypto markets.

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