Coming soon: Manage your exposure with interest rates & bonds
As of 2021, the size of the bond market is estimated to be at $119 trillion worldwide. Derivio is positioned to be the pioneer that brings bond products to the DeFi landscape through its game-theoretical design.
Providing liquidity on Derivio is effectively holding a market-neutral index while generating yield from market making & fee sharing. As the yield can be highly profitable, it also comes with uncertainty. Derivio's interest rate & zero-coupon bond markets allow users to have ultimate control over their portfolio, while providing powerful legos for building novel DeFi strategies such as pseudo-fixed income products.
DLP = rDLP + bDLP
One DLP can be used to mint one rDLP and one bDLP. rDLP represents revenue, and bDLP is effectively a zero-coupon bond.
Stake rDLP, locked for 7 days, to share 7 days revenue
Stake bDLP, locked for 7 days, receive 2% of the staked rDLP
By staking 1 rDLP, 7 days later, less than 1 rDLP + 7 days revenue can be claimed
Rebalancing is done every hour
By staking bDLP for a long period of time, a bDLP staker continuously gets rDLP, so bDLP converges back to DLP, which can be redeemed for the underlying asset.
*: Note that the period (i.e. ~1 year) in the pictures is flexible to user's choices.
The separation allows different kinds of traders to participate: those who want yield from the platform can buy rDLP from the market, and hence enjoy a leveraged position, whereas the bond investors will be able to lock in a fixed investment return by buying bDLP. In the TradFi world, rDLP is the variable yield, and bDLP is a zero-coupon bond. And the game theory behind the mechanism design pushes the corresponding prices of yield and bond to converge to the Schelling point — that is, rDLP represents the yield, and bDLP represents the principal ownership.
- Why would I buy rDLP?
Notice that rDLP has zero delta exposure. For yield-hungry investors, rDLP offers the most capital-efficient way of doing (leveraged) delta-neutral farming without the risk of liquidation.
- Why would I buy bDLP?
For conservative investors who favor passive investment, bDLP offers the most capital-efficient way of entering principal-protected passive investment opportunities over a variety of indices.