❗️In order not to make access to articles paid, don't forget to subscribe to our Bit.Future TG channel and Youtube 👍
In today's article I will try to break down the main features of a very promising DEX on Arbitrum - Orbital.
What is Orbital?
Orbital is a joint project of Dopex and PlutusDAO, the two leading protocols on Arbitrum. Dopex is the primary and largest options platform. PlutusDAO is one of the key protocols to form synthetic assets on often low-liquid assets, forming their own pools and increasing liquidity for the entire ecosystem.
These teams have extensive experience building secure, functional DeFi protocols and collaborating within the Arbitrum ecosystem. PlutusDAO and Dopex were originally designed to maximize synergies across the ecosystem, and Orbital will do just that in the most efficient and user-friendly way possible.
Orbital is an Arbitrum-native two-tier decentralized exchange ("DEX") that aims to align incentives among participating protocols and users in a way that promotes sustainable and stable liquidity.
Layer-1 is custom DEX using variable weighted pools, stableswap pools and pools with dynamic swap rates.
Layer-2, or Option layer, is a direct integration of options to efficiently provide liquidity while protecting against impermanent loss (IL). I will describe the Option layer in more details below.
By adding a derivatives layer to traditional designs, Orbital can leverage the parameters of option contracts to its advantage, deploying its collateral as an AMM liquidity infrastructure, thereby creating a more flexible and efficient AMM market.
Similar strategies are already being used by many financial managers or simply advanced traders. By narrowing the liquidity range, funds are provided to the liquidity pool (e.g. on Uniswap v.3), thereby earning extremely high returns, and IL risks are hedged by buying options. Orbital, on the other hand, will do it all by itself, both maximizing returns and hedging risks.
Orbitals structure
Variable-weight pools
The main type of pool on Orbital is a variable weight pool or volatile AMM, which uses the weighted mathematical formula from Balancer. Variable-weight pools provide much more flexibility for users and protocols by allowing you to build pools with different asset weights within them. This approach is now already being used by some protocols for their ve-tokens (veXXX or vXXX - you've probably seen a lot of them), and which are increasingly building 80/20 LPs.
Dynamic Swap Rates
As a rule, swap rates within the liquidity pool are constant. Orbital's swap commissions can be varied depending on the pool and the ratio between sellers and buyers within predefined parameters. This allows trading commissions to be adjusted through governance. It also allows for innovations such as volatility-dependent swap rates or volatility-derived swap rates.
Tokenomics
Orbital will use a three-token model with the $ORB native token at the center, and incentives will be distributed through the issuance of ancillary tokens
Native token - $ORB is distributed through liquidity mining to Orbital. Further, $ORB can be locked to veORB, a management token.
Part of the liquidity mining reward will be distributed as dORB (decay ORB), a decaying version of $ORB. The decay rate can be reduced or even stopped by providing value to the protocols. This can include maintaining liquidity on the platform or blocking the dORB for the veORB.
There is no digital visualization of tokenomics with total issuance and distributions yet.
I won't describe it in detail so as not to complicate the article, but those who like to understand it can study the scheme below:
Liquidity mining
Orbital will offer 2 types of LP liquidity pools: the Base Pool and the Reward Pool. Both types of pools can receive:
-
In the form of $ORB and dORB issuance, controlled by veOrb and dOrb votes.
-
Rewards: These can be arbitrarily added and voting
-
Token Rewards: These can be arbitrarily added and directed to LPs
Base pools
Base pools are traditional liquidity mining pools. They have no restrictions on deposits or withdrawals. Basically any liquidity provider can add funds to base pool to earn $ORB and dORB + base rewards
Reward pools
Reward pools are base pools with certain requirements for LP entry (e.g., minimum TVL or duration requirements). Reward pools can be incentivized by token deposits, allowing external protocols to reward LP liquidity providers who, for example, are willing to lock in funds in the pool for at least 6 months. This provides a high degree of flexibility for protocols, allowing them to reward eligible LP liquidity providers beyond standard basic rewards.
**Stable Coffers.
**
Stable liquidity pools, or as they are called here, Stable Coffers, will also have a unique feature. The liquidity provided to such pools (e.g. DAI/USDC) can then be used in any other pool (e.g. ETH/USDC) and/or act as collateral for option purchases.
Option layer
* I hope most of you are familiar with the basic concepts and types of options. Call - a call option, which gives the owner, in exchange for paying a small premium, to buy the underlying asset after a certain time (epoch) and at a predetermined price
Put - put option, which gives its owner, in exchange for payment of a small premium, to sell the underlying asset after a certain period of time (epoch) and at a predetermined price.
Orbital's option design will use covered Call options and covered cash Put options. Typically, this design results in capital inefficiencies when the collateral is idle for an epoch.
The combined Option layer (Layer-2) and DEX (Layer-1) are key elements of Orbital's core product, Options Market-Making ("OPS-MM"). This will allow liquidity providers to provide collateral, buy options, and borrow option collateral for LPs.
The benefit to LP liquidity providers is an increase in capital efficiency of up to 2x, allowing them to receive double the rewards from Base pools and Reward pools Orbital, as well as standard option payouts.
The benefit to option sellers is higher utilization (utilization), resulting in higher premiums, as well as an additional level of return due to the interest paid by liquidity providers in OPS-MM.
There are many strategies and options for combining AMM and options, I haven't yet fully understood what options (combinations) will be offered by Orbital by default. But here, for example, is what your Non-permanent Losses schedule might look like with a liquidity + Call option.
Basic variant:
Variant with the addition of Call option (current ETH price on the chart is $1000):
Conclusion
-
The project is definitely worth attention and if the team manages to make a simple, user-friendly interface - I think the success is ensured.
-
The project also promises a lot of incentives for new partner projects through its Reward Pools. The system somewhat resembles Camelot and should serve as a good incentive to attract new projects
Anyway, keep a close eye on the project and if you don't want to miss anything important, subscribe to our Bit.Future TG channel and Youtube👍.