To get all the latest details on the roadmap items in this blog, join us Thursday, June 8th at 18:00 UTC for a live Community Call and AMA in Discord. Don’t miss it!
In this article, we collect the key details of the Kwenta protocol in one place, simplifying the process of researching the DAO. Below you will find a breakdown of Kwenta’s state, growth, and future developments. If you would like to get involved with the project, jump to the bottom to find ways to join the DAO.
Kwenta is a decentralized derivatives trading platform, offering perpetual futures powered by the Synthetix protocol, spot swaps powered by Uniswap, and options trading powered by Lyra. Kwenta’s flagship product, perpetual futures, provides traders with up to 50x leverage, over 40 assets to trade from, deep liquidity on all markets, advanced orders, permanent trading rewards, and more. Perps pricing is acquired via Pyth and Chainlink with much of our UI data sourced on-chain, from The Graph, and Satsuma. Kwenta is live on Optimism with options trading also available on Arbitrum.
Kwenta is currently responsible for ~99% of the total volume generated on the Synthetix Perps V2 engine. To date, Kwenta has facilitated over 11 billion in perps volume. Kwenta consistently achieves over 100M in volume daily at this point and has a dedicated base of traders with an average of 500 traders using the platform daily and over 8000 addresses having opened Perps positions.
The Kwenta DAO is a densely detailed system so we’ll list out the key components here to avoid a large blob of text.
The Kwenta DAO includes:
A council-centric model where stakers of the token vote in a 5 person council for decision making, voted on bi-annually
A Kwenta State Log (KSL) which acts as a constitution and complete description of the state of Kwenta at any time
A Kwenta Improvement Proposal (KIP) system which enables the DAO adapt and change the KSL to fit the DAO’s needs
subDAOs managing operations include an adminDAO, treasuryDAO, devDAO, protocolDAO, and marketingDAO
DAO Contributors under the title of either Management Contributor, Core Contributor, External Contributor, and Bounty Hunter
A legal support branch currently filled by Horizons
For a complete guide on all things governance, check out our documentation.
Kwenta offers the best perps product in the DeFi market. We have the lowest fees, deepest liquidity, sustainable rewards, a fantastic community driven UI which is always being improved upon, and a thriving community of intelligent developers, traders, and anons.
Kwenta uses an intuitive tokenomics model where all tokens in existence were either purchased, generated through inflation, or used to incentivize product usage. KWENTA can be staked to capture inflation as well as capture additional trading rewards; inflationary and trading rewards are locked for a one year period with a burn-to-vest-early penalty built in which starts at 90% and depletes to zero over one year meaning if exercised, the proportion of tokens still unvested would be returned to the treasury while the rest is freely liquid. The Kwenta market cap consistently hovers around $300M FDV.
Currently, Kwenta generates revenue through an incentive program run by Synthetix. Although the Volume Source Fee Program has only been live for 2 months, Kwenta has been receiving a 5% rebate in SNX from fees generated by Perps V2 during this time, which has earned the DAO 144,000 SNX to date; this is currently being held in the treasury awaiting a proposal for the DAO’s usage.
Although protocol fees paid to Synthetix are not earned by Kwenta directly at this time, fees generated by this partnership may be helpful in understanding the value of the Kwenta integration and the success of our relationship with Synthetix. In terms of fees generated through the Synthetix protocol, early results are encouraging with nearly $9M in fees generated since perps v2 began in December of 2022, and over $4M of these fees generated in the month of March alone. We expect the success of the current fee sharing program to serve as the foundation for a more permanent and sustainable program as Synthetix moves into v3.
Additionally, new value capture opportunities are actively being worked on via delegated trading features and native TWAP perps (more on this below).
The KWENTA staking system will soon share the capture of early-vest penalties 50/50 with the treasury as well as a method to transfer escrow.
These are Perpetual Futures modeled after Synthetix Perps V2 which use Uniswap liquidity. This will enable us to put pressure on fees, expand assets, expand to new chains, increase OI caps, offer quanto positions (perps in a base currency), add new value capture methods for the protocol, and maybe most importantly: offer atomicity (composability of perps). All liquidity will be completely native with our sights set on evaluating the Synthetix V3 model once live which will enable derivatives protocols to host liquidity on Synthetix. Although Synthetix Perps V2 will remain our flagship product and our primary focus, TWAP Perps offers valuable experimentation in owning more of our stack. A testnet competition will soon be launching on Arbitrum.
A more balanced liquidity management solution that will enable anyone developing derivatives liquidity the ability to tap into powerful infrastructure, bootstrapping operations.
A trading mechanism that can enable profit sharing for copy trading or script trading alongside the Kwenta SDK.
A new DAO framework that progresses the autonomy of the DAO system without losing the powerful agility that comes from a council centric model (currently still in R&D).
Formal proposals of DAO 2.0 will be discussed with the Elite Council and the community over the course of Q3, aiming to begin an implementation plan by Q4. While the direction of the DAO ultimately depends on Kwenta’s community governance, Core Contributors will work to facilitate this process.
In preparation for our next stage of growth, the Core Contributors will be working on a few opportunities:
Topping up the treasury: A KIP outlining a method of raising will soon be introduced and if approved will enable the treasury to extend its runway. If interested in this proposal, I recommend you reach out to the Core Contributors in Discord.
Refining legal operations: As the DAO matures, navigating the centralized finance space will be an integral part of growth. To address this, Core Contributors will continue to work with Horizons to bridge DeFi and the real-world.
Hiring new Core Contributors: The adminDAO will be adding a few new roles such as a Data Engineer, a Full-Stack Developer for managing keepers, a full-time QA role, and a senior frontend developer. If interested in any of these roles, find the details here.
An honourable mention that’s only recently made its way into the pipeline is a referral program which will enable supporters of Kwenta to benefit from sharing the exchange with others, opening a variety of promotional opportunities up to the exchange. Keep yours eyes out for this upcoming KIP.
Kwenta has an ambitious goal to create a decentralized platform that can rival top centralized exchanges. To achieve this, Kwenta will need to equip itself with more resources and evolve into a more robust operation. The above steps are necessary to make progress in this direction.
From the perspective of those actively building, Kwenta’s success is a reason to celebrate the past epoch, and develop even more ambitious goals for the next. Here are some unfiltered perspectives from a few contributors.
A lot of “DAOs” are full of shit. The memecoins, delusional use cases for NFTs, ponzimonics, and general detachment from reality that the crypto space prides itself in are as necessary and brilliant as they are distracting and harmful. The money and mania will always be attractive, however there’s only so much you can do with money before you become more focused on lifestyle management which inevitably leads to one confronting how broken the world is and how interesting decentralization is. I drank the kool-aid back in the day that DAOs could offer a new way for people to coordinate with greater impact than any pre-existing coordination mechanism. If no one else is interested in actually moving that forward, I will personally be pioneering the real DAO movement. Incentives are a proven way to shape behavior and coordination processes and DAOs offer a way to make this programmable: in my opinion it’s the single most revolutionary concept to come out of the invention of blockchains.
Currently, there’s far too little infrastructure for any DAO to operate in a trustless vacuum. However, Kwenta stands out as one of the single most decentralized projects in the space. It was voted in to existence by the Synthetix DAO, no material change to the DAO has ever been executed without following due governance process, and we’re at the stage where to reach our goal of complete decentralization (human-minimized facilitation of processes) the contributors are building custom tooling. I highly encourage you to review the Kwenta docs to learn more about how Kwenta pushes the boundaries of decentralization.
I’m working on a draft for a new DAO model: a hybrid model of council-centric (Synthetix model) and direct-token-voting (Maker model). I’ve been wanting to write this for a long time but I think the DAO has matured to a level where the infrastructure will soon become mandatory to streamline progress.
We’re in a very fortunate position to experiment with DAO modeling as Kwenta has rocketed into the upper echelons of DeFi products. This is partly due to the sheer success of Perps V2 which offers low fees, insane liquidity, and a relatively reliable experience. However I personally attribute this success to the incredible partnerships with projects like Synthetix, Optimism, Pyth, Chainlink, the Graph, Lyra, Gelato, community OGs, community investors, and many more. This is not only the embodiment of the money legos model that early DeFiooors dreamt of but a fantastic, very human, support network. If there’s ever a hard problem in front of our community, there’s a plethora of smart people with different skill sets to push through any issue. I recognize the privileged position we hold and intend on maximizing the impact we can have on DeFi with it.
Over the past epoch I’ve had the opportunity to contribute alongside some of the best in the industry on a wide range of tasks toward improving the Kwenta product, including:
A revamped futures interface with the aim to rival top CEX’s
New dapp architecture to improve stability, performance and dev experience as we begin to scale
Kwenta SDK to enable 3rd party integrations
Implement new features like smart margin accounts with limit / stop orders
Now having laid down some solid foundations I’m excited for the next phase of the roadmap as we begin to onboard more users, continue to refine the UX, introduce exciting new features and target institutional traders with a suite of SDK’s, API and automated trading tools.
Since joining Kwenta, I've had the chance to work on some really exciting projects. Out of all my accomplishments, I'm most proud of taking charge of our margin engine and developing Smart Margin V2. These contracts handle huge daily volumes, and it's amazing to know that my work has significantly improved our users' experience.
Another perk of our margin engine is that it is upgradeable. Upgradeability means I can continue to iterate on many ideas that did not make it in this version. I am already working on upgrades to our conditional order execution that will improve the accuracy of order triggering. And on the near horizon, I will add integrations with Uniswap to significantly enhance the onboarding process needed before users can start trading.
Working at Kwenta has given me the freedom and responsibility to build products that immediately impact the DeFi space. It has also connected me with others in the community passionate about creating the future of finance. Big things will come from this project, and I am excited to be a part of it.
The past epoch at Kwenta has been massive for both the product and the community. It’s been incredible to watch this project evolve from an experimental synth trading frontend organized from a quiet Discord server to a derivatives powerhouse facilitating over $10b in volume rivaling the biggest players in the space, and hosting a vibrant community of traders and DeFi enthusiasts. The Kwenta team has cultivated a reputation of being some of the best in the industry, partners are excited to work with us, and I’m proud to work alongside the top talent in the space.
Moving into the second half of 2023, I’d like to capitalize on our strong position and outstanding product by exploring more traditional marketing strategies, such as a referral program and advertising. I’d like to continue leveraging our strong community by funding content creation and independent projects, and keep Kwenta the most fun and interesting place to trade. I’d also like to prioritize building on my close personal relationships with traders, ensuring that Kwenta is an environment where everyone truly cares about each other, even as we grow and evolve.
Cheers to a strong finish in 2023.
To join the community, visit the Kwenta Discord.
To be the first to learn about new updates, follow us on Twitter.
To trade perpetual futures, visit kwenta.eth.limo.