TL;DR
Today we’ll be looking at the newly redesigned AEVO project. AEVO is a DeFi Options trading platform that offers new ways for institutions to position themselves in the cryptocurrency markets. Operating an off-chain order book lets AEVO provide customized derivatives solutions that create a level playing field for everyone. Launched as Ribbon Finance back in late 2021, AEVO began as a side project. After a recent proposal, the project is phasing out Ribbon and transitioning entirely to AEVO. So what does this mean for RBN token holders and does AEVO have what it takes to provide the best options for new and old traders?
Reviewing Ribbon Finance when it was first released, you should already be somewhat familiar with the project and how it combines options, futures, and fixed income to improve a portfolio’s risk-return profile.
The main objective for Ribbon was to create a sustainable yield through financial engineering. This was accomplished through a series of Vaults that interacted with the Yearn protocol. However, this was seen as unsustainable and leveraged too much of the project in one very specific direction.
Heading back to the drawing board, Ribbon Finance discovered that a complete overhaul was in order and quickly began working on the launch of a brand new exchange, AEVO.
What is AEVO?
Passing the Merge proposal in July of last year means that Ribbon Finance has officially merged with AEVO, the first Derivatives L2 to focus on options and perpetual trading. But what does this mean for users besides a new interface to get familiar with?
Well for starters the original idea of Vaults has remained the same but with a slight modification. Still considered a viable yield-farming option. These vaults didn’t offer much on Ribbon and had little to no return for those who used them, earning yield from the protocols they were exposed to, instead of from Ribbon itself.
Attempting to prove that automated options strategies are sustainable and not a complete failure, AEVO has included them in their perpetual and options contracts.
On the backend, nothing much has changed in the way AEVO is designed compared to Ribbon Finance. The exchange still uses an off-chain order book with an on-chain settlement layer. Making all activity on the platform pretty seamless thanks to the custom EVM roll-up operating at the base layer.
Before each order is accepted it’s evaluated by a risk management algorithm to provide details on acceptable margin requirements for that position. This helps to ensure that users can’t create under-collateralized positions and potentially game the system.
Using Conduit as a sequencer allows AEVO to offload transaction information to the Ethereum main chain every 1-2 hours. This creates delayed finality on the exchange but provides the on-chain security inherently built into Ethereum.
Deposits on AEVO are routed through the Optimism Bridge to provide near-instant credits on the exchange. Transition batching is also a big part of how AEVO operates to cut costs for users. Allowing for lower gas fees when opening or closing positions on the platform.
With AEVO operating on cross-margin trades it is necessary to deploy an automated liquidation engine that will close positions as they reach their maximum risk allotment. During this…
Head of Research Jesse is a passionate seeker of truth who enjoys educating others about Bitcoin. As a free thinker and 2nd amendment advocate, Jesse believes each individual has the right to monetary freedom. “The swarm is headed towards us” -Satoshi Nakamoto
