dFuture: A Relatively Mature DEX Protocol for Derivatives

TI Research

With the boom of DeFi (decentralized finance) in mid-2020 and the crypto bull market starting in October 2020, the trading volume of various DEXs (decentralized exchanges) has also boomed.

As of March 7, 2021, the total lock volume (TVL) of the existing decentralized exchanges in the market has reached $19.48 billion, of which more than 70% of the TVL has been concentrated in the past three months, showing the good development potential of the DEX market. As the spot DEX maturing, derivatives trading has also sprung up, just like the development track of traditional markets. At present, the TVL of derivatives in the past three months has reached $310 million. It has begun to move out of the original development stage.

The TVL of the Derivatives and DEX market in the past year, Source: tokeninsight.com

However, the current DeFi derivatives market is complex. On the one hand, a large number of projects are far from reaching mature standards, with the interface that are either too simple or too complex, resulting in poor user experience. On the other hand, the original codes of many derivatives trading protocols are repeated and reused with each other, resulting the projects less valuable.  In addition, the development of derivatives DEX protocols is difficult. A large number of projects have fallen by the wayside, or just started at the development stage. Meanwhile, many projects have stalled due to a lack of liquidity.

As we all know, the oldest and more mature derivatives in the crypto asset market are futures contracts. At present, most of the popular futures contracts in the DeFi market are mainly perpetual contracts. The mature DeFi futures exchanges include Futureswap, MCDEX, Injective Protocol, Perpetual Protocol, Leverj, dFuture. Their market cap and TVL are shown in the table below.

Basic Info of DeFi futures exchanges, chart from 12:00pm March 8 2021, Source: defiIpulse, dFuture, tokeninsight.com
* Note 1: Trading volume in the past 24 hours of an exchange refers to the trading volume of contracts on the exchange, rather than the trading volume of tokens. Part of the main network of the exchange has not been online yet, and the data of the test network is for reference only. Some exchange TVL data is not disclosed. 。
* Note 2: Some exchange tokens are only used for liquidity mining because they are not in circulation yet, so their pricing is based on liquidity mining, and their market value is based on fully diluted valuation (FDV) rather than the circulating market value.

Among the projects that have been launched on the mainnet, dFuture performs better than other futures contracts DEX. Based on the trading volume, as of March 8,2021, the total daily trading volume of dFuture on the BSC and HECO reached $384 million, higher than the total daily trading volume of other online projects. According to the disclosure of ChainNews, dFuture's daily trading volume exceeded $600 million on March 6, and its lock volume exceeded $60 million, which was equivalent to the TVL of the Hegic, an on-chain option trading protocol.

The trading mechanism: Quoted Price and Constant Sum Based Automated Market Maker (QCAMM)

Currently, there are three types of trading mechanisms in the futures DEX market. The first uses the order-books and uses a liquidation engine to liquidate transactions, which is represented by Leverj and Derivadex. The second trading mode is based on AMM (Auto market maker) and liquidators (Keeper/ Liquidator), represented by Futureswap, dFutures, MCDEX and Perpetual Protocol. The third is between the two, with some of the characteristics of the above, represented by Injective Protocol.

Compared with the traditional market maker model, although the AMM model solves the problem of less transparency brought about by centralization and the risk of insufficient liquidity (due to order-books) , It also brings problems such as impermanent loss. At the same time, slippage is still inevitable. The interests of traders and liquidity providers may be lost. If the yields from trading mining and liquidity mining cannot make up for the impermanent losses caused by changes in asset prices, the incentives of users to provide liquidity into the pools will be frustrated. At this time, the competitiveness of DEX is likely to be inferior to that of large-scale centralized exchanges, which directly affects the operation and survival of DEX.

To solve drawbacks of AMM, there are currently two improvement solutions in the market:

  • The vAMM (Virtual AMM) mode adopted by the Perpetual Protocol, which uses the AMM constant product rules while storing the assets used to trade perpetual contracts into a "vault," the pool does not store the actual assets, and the vAMM is only used for price discovery. In this case, the Perpetual Protocol can protect the liquidity provider from impermanent losses, but the problem of algorithm slippage still has not been solved.
  • The other is dFuture's QCAMM (Quoted Price and Constant Sum Based Automated Market Maker). QCAMM does not use algorithms to determine the price, but integrates the quotations of external oracles and decentralized exchanges to input prices into the trading system. At this point, the internal asset price of the trading system is connected with the asset price of the external market, and theoretically there is no room for deviation and arbitrage. Because QCAMM still retains the rules of automatic quotation by the system in the AMM mode, users can only choose to take orders, thus eliminating the possibility of slippage occuring from algorithm and insufficient trading depth, and therotically avoiding the losses caused by external price fluctuations and pool-imbalances. The only slippage risk is the uncontrollable network risk caused by network delay and market fluctuations. At present, although this risk can be reduced to a certain extent by optimizing the external quotation system andintroducing a dynamic spread closing-position mechanism (the mechanism introduces time variables, and the shorter the opening and closing time, the higher the spread) and other solutions, there is no solution that can completely eliminate uncontrollable slippages risks.

In addition, in QCAMM, the liquidity provider can choose to deposit only USDT to provide liquidity, instead of simultaneously providing the assets on both sides of the trading pairs according to the market price. The liquidity share of each LP is determined by the proportion of the liquidity they deposited into the pool. Since the U-margin and Coin-margin contracts are only denominated in single asset, the single asset pool only bears the risk exposure of its own.

However, the QCAMM model still have risks:  since the liquidity provider only deposits single asset and the liquidity share is calculated in terms of a single asset share, the liquidity pool could be "drain" if there is insufficient supply on the other side of the transaction.

To solve this problem, dFuture designed the mechanism "dynamic transaction/position fee mechanism based on constant sum rules", which means the sum of transaction fee and position fee of long and short parties remains a constant value.

  • The direction of higher handling fee is the direction of naked position. When the naked position does not affect liquidity, the transaction fees are charged for both sides (lower than the centralized exchange).
  • However, when naked positions affect liquidity, open a position towards the naked positions direaction requires a higher transaction fee (higher than the centralized exchanges), while open the opposite direction of naked positions can obtain a transaction fee refund.
  • Since the trading price is determined by the external market, the arbitragee can use the locked strategy to obtain risk-free arbitrage: hold the positions in the same direction as the naked position in a centralized exchange, and at the same time open positions in the opposite direction in dFuture to form a "lock". When the position is locked-up, the profit of the position is 0, but since dFuture returns the transaction fee, the risk-free profit that the arbitragee can obtain is the difference between the transaction fee of dFuture and the centralized exchange.
  • The existence of risk-free profits will stimulate the reverse position of naked positions increase, thus maintaining the balance on both sides of the liquidity pool and significantly reducing the risk of "drain".
Comparison of AMM, vAMM and QCAMM, Source: tokeninsight.com

Trading Experience

In addition to mechanism maturity, the user experience is also an important part of evaluating the level of DEX exchanges. TokenInsight takes the comprehensiveness and timeliness of information acquisition as the criteria and carries out a comprehensive evaluation of the DEX of futures contracts trading experience in the market through 11 indicators, as shown in the table below.

 Summary of the futures contract DEX user experience indicators, Source: tokeninsight.com

In general, dFuture's trading interface is relatively simple and intuitive. The amount of information that can be obtained in the trading interface is the largest among the six exchanges, but the price indicators on the board is too simple. Among the six exchanges, except for the Futureswap, only dFuture does not have any supplementary analysis tools. For users who are accustomed to using technical analysis, they cannot use relevant tools, which may affect the user experience.

Tokens, Trading and Liquidity Mining

For DEX, liquidity mining and trading mining are the main means to attract users and liquidity providers and are also the core of its token ecological construction. The reason is the income generated by mining is the main token value. The mining info of the futures contract DEX are shown in the following table.

Comparison of mining yields and liquidity of futures contracts, Source: tokeninsight.com

Combining the table information with 24-hour trading volume, it can be found that the current high-liquidity mining yields has significantly stimulated the trading and liquidity providing enthusiasm of dFutures users. In addition, only USDT can participate in mining, and the minted DFT can be used to other platforms for secondary mining to obtain excess returns. This further ensures the liquidity required by the DEX, which make the DEX can carry higher trading volume and user scale. It also makes the trading ecology in a healthy operation mode, and further stabilizes and enhances the value of DEX tokens.

Note: dFuture Secondary Liquidity Mining (Source: dFuture Team),


• The total amount of DFT is 400 million, and 200 million DFT are issued on Heco and BSC.

• Block mining reward of Heco and BSC is 7.6 DFT, 3 seconds a block, 28,800 blocks per day.

• dFuture platform liquidity mining rewards 3 DFT, dFuture contract transaction mining rewards 3 DFT, third-party platform secondary liquidity mining rewards 1.5 DFT, FOMO pool rewards 0.1 DFT.


The first-level liquidity mining is carried out in the liquidity pool of dFuture's official website. Users get DFT as a mining reward by depositing USDT, and the total amount of DFT available for the first-level liquidity mining accounts for 30% of the total DFT issuance.

The DFT obtained will be deposited into liquidity pools on Pancakeswap (BSC) for DFT/BNB trading pairs. Or the DFT obtained will be deposited into liquidity pools on MDEX (Heco) for DFT/USDT trading pairs. The income from secondary liquidity mining can be obtained through the LP Token mortgage interface on the official website, and the dividends of DFT and transaction fees can be obtained through mortgage.

After obtaining DFT rewards from the liquidity pool, directly staking DFT to obtain 40% of the transaction fee dividend (accounting for 40% of the total dividend).

A healthy trading ecosystem has given multiple uses-case and value to DEX tokens. In the past, due to the limitation of user scale and liquidity, its tokens were difficult to be used in other occasions except for governance and liquidity mining. dFuture's tokens can also be used for trading rewards, staking, secondary liquidity mining, "lock acceleration" and other occasions. Of the total 400 million dFuture tokens DFT, 20% of the tokens are held by private funding investors and teams. The main part of the tokens (80%) is fully invested in liquidity mining and trading mining rewards, secondary liquidity mining rewards and community rewards. Users can also obtain transaction fee dividends (USDT) and more DFT income by staking DFT. The diversification of the token use is helpful to creating a comprehensive token ecology. It can also give a positive feedback on the transaction ecology. Moreover, a good token & transaction ecology will jointly promote the development and maturity of DEX.


Because the derivative market requires a higher liquidity and more professional investors groups, setting up a derivative DEX is more difficult than spot DEX. Meanwhile, the futures contracts DEX faces strong competition from centralized exchange, the development of derivative trading DEX is relatively slower in the market. It requires higher standards for teams who want to build a futures DEX in both technical and operational capacity. As various AMM emergencies, the technical problems have been improved to some extent. However, in order to realize a large-scale user community of futures DEX, the projects need to have a solution to ensure sufficient liquidity (such as improving mining yields, etc.) and a complete token ecology.



TI Research

TokenInsight is a data and research organization for the digital asset market. TI provides comprehensive asset-related data and comprehensive and timely information and research services for digital assets.

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