Defi-Search x CompliFi
We had great pleasure of welcoming CompliFi, on our Telegram channel for the purpose of letting the community ask questions, which they have always wanted to be answered. Join our Telegram channel now and become part of the community.
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This first part consists of a Q&A with us, while the second part is open for the public.
Hi all, I am the founder of CompliFi and have been working on the project for a year. My background is in investment banking and I work in a team of 9 people located across the world, 7 of whom are experienced blockchain engineers.
CompliFi is a derivative issuance protocol + AMM on Ethereum. It allows you to trade and provide liquidity for derivatives as easily as you would for regular tokens on Uniswap. With CompliFi, there are no margin calls or liquidations — your exposure is the price you pay for a derivative, nothing more
We went live on mainnet about a week ago, and our TLV is currently at $3m.
Okay interesting, some of the audience have already tried some of the older and more popular protocols like dxydy , snx and perpetual.
Can you explain in very simple terms how it works from the user perspective?
One of our main goals was to make derivatives trading as simple as possible for the user. To achieve that, we adopted the familiar AMM UI, and hid all of the derivative maths under the hood
CompliFi enables users to swap USDC vs derivatives just like you would with regular tokens on Uniswap. Adding liquidity is just as simple
Behind the scenes, there is a lot more going on.
The issuance part of the protocol works as a “synthetic risk factory”. Users provide collateral and the protocol turns it into equal quantities of short and long position tokens in the chosen derivative. Users incur no risk here — they are minting a fully hedged derivative portfolio.
The AMM enables trading in the minted derivatives. Its pools contain long-short token pairs, offering to swap one for the other.
The AMM incorporates two critical innovations. First, it reprices derivatives in every block before swaps, thereby eliminating most of impermanent losses. Second, it actively manages LP risk, charging a higher trading fee for transactions that increase it and rejecting transactions that push it beyond permitted bounds.
That sounds really interesting and there are 2 follow up questions, for a user that has never used such a system. How is he able to calculate his win/loss when he swaps?
There are currently two x5 derivatives live on CompliFi — ETHx5 and BTCx5. Here is how they work:
- They come as a pair of long and short position tokens — e.g. “BTCx5 Up” and “BTCx5 Down”. Both start life at 1 USDC
- When the price of BTC changes by 1%, the value of BTCx5 Up rises by 5% and the value of BTCx5 Down falls by 5%. In other words, the BTCx5 amplifies the price changes of BTC by the factor of 5 or -5.
- Both tokens have a price floor and ceiling of 0 and 2 USDC
When you enter into a derivative position, tracking it is as simple as following the price chart of your asset. Really not that different to what you would do with a regular token. Derivatives do generate more informations, and we will be expanding our analytics tools as we progress
Okay some part of the community had already experience with leverage tokens that were launched by FTX and also by Binance. Both use slightly diff formulas.
Could we fast compare the FTX/Binance leveraged token product to CompliFI?
The difference is that, as a CompliFi user, you will never have a margin call and your position will never be liquidated. The price you pay for a derivative is your maximum exposure. You may win or lose in the end, but you will never be asked to put up more money.
We can do this because all CompliFi derivatives are fully backed by collateral at all times. It is really important in turbulent markets. While other decentralised protocols will try to get their users paid in full by issuing margin calls and liquidating, with CompliFi all the necessary collateral is always available.
One highlight would be there is also no counterparty risk, how do you plan to provide enough liquidity to ensure low slippage?
Thats our last question.
The no counterparty risk feature stems from the fact that all CompliFi derivatives effectively redistribute a fixed pool of collateral between users — that is how our derivatives are structured in the first place. As a result, the protocol never needs to issue a margin call and will never face the problem that such margin call will not be met => no counterparty risk
As I mentioned, adding liquidity to complifi is as easy as for uniswap. From next month, we are planning a liquidity mining program that should give a boost to liquidity across all of our pools
How secured is your smart contracts code, did you ever audit it via any third party? What has been the biggest challenge you have faced in your project development?
Security is critical for all of Defi, and we see it as a continous process of self examination as well as reliance on the best outside experts and the community
We have been audited twice by Certik, results accessible from our website. Trail of Bits audit is scheduled for june
Our bug bounty program is live and also can be found on our website
Which one of these aspects important for you?
1-Increasing Token Price&Value
2-Empowering Platform Development
3-Building Community Trust
4-Expanding Partnership Globally
In what order?
Community trust has to come first — we feel a huge responsibility for all of trust placed on us and we treasure it. If lost, it is almost impossible to recover. We always remember that.
Empowering platform development is what will guarantee success of any defi project in the medium term. We want to build a lasting piece of financial infrastructure, so have to plan far ahead
global partnerships come very naturally in defi, we are working on them at all times
Do the token holders have the right to participate in the governance of the project? What kind of decisions can they vote on about the project?
Fully fledged decentralised governance is very high on our priority list, updates coming soon. We plan for COMFI holders to be able to vote on all critical aspects of the platform and have a say over the decentralised treasury.
We are also looking to finish implementation of a revenue stream to COMFI holders, where they would receive the preceeds from fees charged on all collateral used to mint derivatives on CompliFI
Many projects rug pulled and exit scam recently. Why should investors trust your project not to do the same?
We have been working on a fundamental piece of defi infrastructure for a year now. There are just so much easier ways to make a quick buck. All that we would have needed to do is fork an existing protocol and add some tweaks — we would be live in 3–4 weeks.
While you build your project.. do you take into account community feedbacks and demands?What’s role play community on Your project?
We plan to involve the community in a variety of decision making processes, and to ultimately put the whole goverance of the protocol into community hands
As the very first step, we are engaging with the community to get a sense which derivatives they would like to trade. The choice right now is a variety of “x5” instruments, e.g. YFIx5, COMPx5, etc.
As the next step, we will look to distribute a significant portion of our tokens to the community through a liquidity mining program, then continue to build on this going forward
Who is your investor? How do you generate revenue to sustain the project? What are your goals to the end of 2021 and beyond?
Our biggest investors as Signal VC, D64 VC and Moonwhale Ventures
What is currently the biggest challenge/challenges that you are facing in terms of becoming a successful project or company and what would you consider as your main advantages on the market over your competitors?
The reality is that defi is such a vibrant scene that there is space for a bunch of alternative solutions to similar finance problems to live side by side and push the industry forward. Our main limitation is that we are coming up against the limits of ethereum as a consensus protocol. Time as come for L1 to take the next step — we expect defi to really take off once that happens.
I am an EXPERIENCED DEVELOPER AND ETHICAL HACKER, does you have plans for HACKATHON so as to check the security of your ecosytem periodically and also invite developers to build?
We would love to do a hackathon in the near future, but for the time being pls have a look at our bug bounty program!
What does x5 stand for?What makes it different from other tokens we have currently?could you mention the most important features that complifi holders will have access??
“x5” means that the token is designed to amplify price changes in its underlying asset by 5. For instance BTCx5 is designed to change in value faster than BTC.
The whole idea of derivatives is that they can do things that regular assets cannot, and we get to design how they behave. CompliFi can be used to issue a wide range of instruments — x5 is just scratching the surface
Where is road map now? Are all targets in accordance with the current road map? and what are the next steps that will be taken in the future?
We will provide more details on the roadmap in the near future, but here are the higlights:
- In may, more x5 instruments and a liquidity mining program
- Next product priority: perpetual instruments that retain all key characteristics of ComliFi — no margin calls, no liquidations, no defaults
- Non-product priority: decentralised governance. This is a big work stream that will matter for years to come, so we want to get it right
CompliFi is designed as a combination of a derivative issuance protocol with an AMM. Can you tell us why you decided to be like this? What are the benefits and advantages this will give you over those projects with similar goals but build different?
Combining issuance with trading came from the simple fact that there is currently no AMM in defi capable of handling derivative volatility — we had to build our own. Order book-based protocols are a possiblility, but they would have never delivered the same natural LP experience as AMMs do
In their Medium blog they point out that all CompliFi derivatives currently have a finite maturity, but could you really tell us more about it? If they will all have the same expiration time, or will they be different for each pair?
All our derivatives currently live for a month, and settle on the 1st of each month. It is basically the point where derivatives stop moving with the market and everyone gets paid. Next series then starts form a clean slate.
This is a solid foundation on which to build more advanced constructs, perps included.