On-chain derivatives need more capital efficiency to rival centralized exchanges: SynFutures CEO

On-chain derivatives trading volume registered an all-time high in March when it reached nearly $317 billion. Rachel Lin, co-founder and CEO of the decentralized exchange for perpetuals trading (perp DEX) SynFutures, highlighted to Crypto Briefing that there are still capital efficiency problems hindering perp DEXs’ growth despite recent developments.

Lin explained that the current AMM models struggle to compete with centralized exchanges’ order books: despite offering better transparency, they struggle to address high slippage when liquidity is low, which is a big concern for investors.

“Like the previous versions, SynFutures V3 introduces an upgrade that majorly impacts liquidity providers (LPs) and traders. The new version comes with a new AMM model called Oyster AMM (or oAMM), allowing LPs to provide concentrated liquidity for any derivative pair listed on the platform. In SynFutures’ V1 & V2, LPs can already provide single-token liquidity, but with the new AMM, LPs will also be able to provide single-token concentrated liquidity, ie. liquidity that is concentrated within specific price ranges.”

This new feature could improve capital efficiency for liquidity providers and get them higher returns while decreasing slippage for traders, Lin added.

Increasing regulatory scrutiny is crashing volumes

Although on-chain derivatives trading volumes showed a solid performance in March, this momentum seems to be cooling down, as trading volumes in May just surpassed $175 billion. This movement could be tied to increased scrutiny from government organizations, highlighted Lin, mentioning the SEC’s recent movements against Coinbase and Uniswap.

“In early March, we saw Bitcoin break above the heights that it made more than 2 years ago. Ethereum inflows sustained that upward trend and altcoins were seeing big gains as well. All of that momentum no doubt snowballed and carried over into the on-chain derivatives market, among other sectors,” shared Lin.

Blast plays a key role in on-chain trading

Ethereum layer-2 (L2) blockchain Blast has been a key ecosystem for on-chain derivatives trading in the past weeks, dominating the volume for most of April and now fighting toe-to-toe with Arbitrum for such dominance.

Lin is optimistic about Blast’s landscape, underscoring SynFutures’ being one of the founding projects on “what could become one of the biggest L2s.” Nevertheless, the perp DEX’s CEO stated that they plan to deploy their platform on different chains, in an effort to keep their significant share of on-chain trading volume.

“New DEXs are entering the space and deploying on new chains on a biweekly if not weekly basis, so volume numbers are in constant flux. One chain will be on top one day and the other may be on top the next. SynFutures is a multichain DEX, so while V3 launched on Blast, we’re exploring deployment on other L2s in the near future.”

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