Introduction

This is the story of a team that started building in DeFi during the bear market of 2022. We share this journey to inspire others, showing how our challenges guided us in the right direction.

Like many, I began trading without prior experience. My journey started with Forex in 2015, and by 2017, I had shifted to crypto trading.

By 2020, DeFi platforms got my attention. They offered traditional financial services but used an innovative technology: Ethereum. Trading from any place without KYC/AML and having complete control of my money was very attractive. I spent much time exploring perpetual and option protocols in DeFi.

August 2022 — DeDeLend Begins

In 2022, many lending protocols were around. They let people borrow using popular ERC-20 tokens, Uniswap LP positions, and even PFP tokens. However, none allowed borrowing against option positions. Wanting to offer something new, I gathered a team to make the first lending protocol for option positions.

We named it “DeDeLend”, short for Decentralized Derivative Lending.

Our goal was simple: allow traders to use their unrealized profits without closing their option position.

For instance, if you had an option with a $100,000 unrealized profit, you could borrow up to $50,000 against it. This borrowed money could then be used to buy another option, token, or anything else.

September 2022 — DeDeLend v.1 Is Released

In September, we introduced our MVP, designed for borrowing against Hegic option positions. However, due to the market's low volatility and decreased option trading activity, it was difficult to gain traction. If there's no volatility, the option will expire out-of-the-money.

We realized that we needed to switch to perpetual swaps, as they are the most popular trading instrument.

December 2022 — DeDeLend v.2 Is Launched

Perpetual swaps have always been the most popular crypto trading product, so we thought allowing borrowing against GMX positions would work.

The core idea was that users would open a perpetual position and use it as collateral to borrow money. Using the borrowed funds, they would purchase options to hedge their positions.

To support borrowing against GMX's perpetual positions, we created a system that minted an erc-721 token for every position a user opened on GMX. Since each position was tokenized, we were able to create a lending market.

Though we launched our product at the end of December, only one user used our platform. After working hard for four months, we understood that users wouldn't borrow money for one position to buy another. It's a user experience that will never succeed.

We believed that we had the right tech, but we needed to combine it with the right business logic and user experience.

January 2023 — Introducing the Margin Account Concept

At the start of 2023, DeFi trading primarily offered the Isolated Margin mode, where every trade required its own collateral. Building on our previous work, which enabled the valuation of both options and perpetual positions, we embarked on creating a cross-margin system.

We envisioned a product where a trader could borrow up to 10x the amount of USDC they possessed from DeDeLend. With these borrowed funds, traders could then open positions on GMX (without using GMX's leverage since they had already leveraged their funds by 10x) and Hegic.

Drawing from the technology used in our previous two releases, we could consistently calculate the value of both perpetual and option positions, ensuring the system's solvency.

This capability meant users could trade on GMX with a high leverage without facing liquidation, as profits from the options could offset losses.

With this blueprint in mind, we commenced the development of the Margin Account.

March — Perpetual Aggregator

Knowing that the development and launch of the margin account might take several more months, we began working on our trading interface, anticipating its integration once the margin account contracts were finalized.

In the DeFi landscape, we noticed that liquidity was scattered, compelling users to navigate various interfaces even when protocols essentially offered the same product: the opportunity to speculate on market movements. With this in mind, we sought to launch a perpetual aggregator, allowing users to trade across multiple perpetual protocols from a singular interface. Our hypothesis was twofold: firstly, that users would gravitate towards our perpetual aggregator, and secondly, once we introduced the margin account, they'd be keen to explore it.

In March, we launched the perpetual aggregator, supporting markets like GNS and GMX. If users faced liquidity constraints on GMX, they could effortlessly transition to GNS and execute their trades. By consolidating trading into one platform, we eliminated the need to juggle between tabs.

While we were confident that this innovation would resonate with our audience, the feedback we received post-launch painted a different picture 👇

April — Option Aggregator

In April, we turned our attention to options. We believed one trading platform was better than switching between many tabs. With options, you need to think about direction, strike price, and expiration date. But with perps, it's simpler: you just choose 'long' or 'short'.

Because options are a more complicated product, each option protocol has its own unique look and feel. If a user simply wants to find the most affordable call option, they'd have to jump between 4-5 different protocols, figure out how each one works, locate where the option price is shown, and determine if the price includes all fees and the available liquidity.

By combining three major option markets – Hegic, Lyra, and Premia – into one platform, we simplified this process. As a result, we began to attract more users and received positive feedback.

At the same time, our developers were trying to build the margin account tool. But it was getting complex. We could only do long trades on GMX and thought we might need four more months to finish everything. Since it wasn't getting a lot of interest, we weren't sure if users would even want it.

So, we decided to stop working on the margin account and put all our energy into the option platform because it was doing well.

On April 26th, we introduced a new feature to our option platform: "take profit" and "stop-loss" orders specifically for Hegic and Lyra options. This feature stood out because it wasn't available anywhere else. Additionally, by integrating Chainlink Automation, we ensured that everything operated automatically and trustlessly. This innovation marked a significant advancement for us.

This innovative feature received a lot of positive feedback.

June 2023 — One-Click Option Strategies

While our option aggregator was doing well, we identified another opportunity: option strategies. Being an option aggregator gave us access to all option liquidity in DeFi. This allowed traders to buy option strategies that involved multiple options.

For instance, to buy a Long Straddle, which profits when the market moves in either direction, you'd typically need two separate transactions. And there were many other strategies involving multiple buys and sells.

We designed a contract that let users buy any option strategy in just one transaction. Our trading interface was updated to make it easy to choose expiry dates, prices, and to show a profit and loss chart for each strategy.

August 2023: Reflecting on a Year in the Bear Market

We launched DeDeLend in August 2022 as a lending protocol focused on derivative positions. But success wasn't immediate, and we faced numerous challenges:

• Borrowing against Hegic Options? It didn't take off.

• Borrowing against Perpetual positions? That too, didn't work.

• Our Margin Account venture? We had to halt it as the approach wasn't right.

• The Perpetual Aggregator? Unfortunately, another miss.

Yet, with every setback, we learned and adjusted:

• Our Option Aggregator? That was a hit.

• Stop orders for options? Big success.

• And our One Click Strategies? Another win.

These missteps over the past year were invaluable, teaching us the correct paths to tread.

By August 2023, our name 'DeDeLend', standing for 'Decentraland Derivative Lending', no longer fit our core focus on option trading.

We're excited to turn the page on the DeDeLend chapter and embark on a new journey with 'Sharwa.Finance'. More details on our rebranding, new strategies, and products will be unveiled soon.

Stay tuned! Follow us on Twitter and join our Discord community.