For a more native experience, check out this document in Notion at https://bit.ly/Symm-metabuild
Symm is a decentralized, fully on-chain exchange for perpetual futures (or perps for short) built on Near Aurora. (Currently, Symm resides on the Aurora Testnet, but it will hopefully transition to Aurora Mainnet upon completion and audit.
Symm aims to enable deeper liquidity and provide access to financial use cases previously limited to institutional investors. Specifically, Symm enables investors to gain price exposure to NEAR, ETH, and BTC at up to 5x leverage, both long and short.
Perpetual futures: what are they?
Perpetual futures (”perps” for short) are a type of synthetic/derivative asset that match the price of another asset.
For example, NEAR-PERP matches the price of NEAR. Similarly, BTC-PERP matches the price of BTC.
Why have another asset that tracks the price of BTC? Well, perpetuals enable people to get easier access to leverage and shorting assets.
Think about the process of leveraging on pure BTC. First, you need to hold the underlying asset. Then, you can deposit it as collateral on a lending market like Aave or Benqi. Using this collateral, you can borrow USDC (or any other stable asset) and swap it for Bitcoin. However, given collateral limits, you’ll need to repeat this process many times. All the while, you’ll be paying interest on your borrowed asset. This can be quite a pain and restricts leverage to institutions with high amounts of capital.
With perps, you can simply choose your leverage and price exposure. Shorting is similarly simple.
Wow! That’s pretty cool. You’re probably thinking - how does this work? Read further:
Funding rates: keeping the peg
As you saw, having a perpetual that matches the track of an asset like NEAR or BTC can be pretty useful. But how do we create an asset that maintains this peg? Let’s use NEAR-PERP as an example.
Remember, at the end of the day, price is determined by supply and demand (in our case, demand for shorts and demand for longs). Ideally, supply and demand for NEAR-PERP match that of NEAR, so their prices are the same.
However, sometimes the prices of NEAR and NEAR-PERP differ. To bring this system into equilibrium, we implement a mechanism called funding rates to alter demand for longs and shorts. We can use Flux’s API to view the current price of NEAR.
With funding rates, at every hour, longs will pay shorts (or vice versa) to bring the price of NEAR-PERP closer to that of NEAR.
For example, let’s assume the price of NEAR is $70 and the price of NEAR-PERP is $75. The demand for longs is too high, while the demand for shorts is too low.
At the top of the hour, the longs will pay the shorts a small fee. This incentivizes more demand for shorts and less demand for longs, leading to NEAR-PERP keeping its NEAR peg.
Over time, funding rates should balance out, and users should pay/receive minimal in fees.
Virtual Automated Market Maker (vAMM): price discovery
Symm is more than just perpetuals but an exchange for perpetuals. Further, it utilizes an AMM-model, not an orderbook. This allows orders to be processed immediately, rather than waiting for matching with other users’ trades. But how does Symm price perps? Through a virtual AMM (”vAMM” for short)!
A vAMM uses virtual liquidity — in other words, it doesn’t hold the underlying asset. Instead, it’s composed of the perp (NEAR-PERP) and a virtual stablecoin.
Perp Finance has a great explanation of the vAMM.
Liquidation: safety checks for users and the protocol
Symm promotes a safe environment, free of debt, where users only trade assets that they’re able to lose. With leverage and shorting, it’s possible to reach negative portfolio value.
However, Symm prevents this from occurring through incentivizing liquidations, where users’ funds are transferred out of the losing asset before their portfolio turns negative.
Symm currently supports many use cases, including leveraged trading, shorting, arbitrage, and delta neutral hedging. In the future, the protocol can be extended to support a delta-neutral stablecoin and synthetic assets.
In the use cases below, Jasmine is a fictional, 23-year-old developer in India who wants to take better control of her finances.
(Safe) leveraged trading
Symm enables users to trade assets on leverage.
Jasmine is particularly bullish on Near and the broader ecosystem. She wants to make a leveraged bet on the price of NEAR.
The price of NEAR is currently $75. Jasmine thus deposits $1000 of USDC and buys $3000 of NEAR-PERP. Let’s examine three scenarios:
- NEAR increases to $150. Jasmine’s position goes to $6000; she withdraws with $3000 profit. This is 3x her profit without leveraged trading (she would have $1000 profit had she bought NEAR without leverage).
- NEAR decreases to $60. Jasmine’s position goes to $2400. She currently has an unrealized loss of $600, rather than an unrealized loss of $200 without leverage.
- NEAR decreases to $25. Here, something special happens. While Jasmine should hold a negative position and be in debt, Symm enables liquidations. This stop losses Jasmine’s position when NEAR reaches $50 and prevents her from having to pay money she didn’t plan to trade.
As you can see, leveraged trading is a double-edged sword, increasing potential profits and losses. That said, Symm provides a stop loss to minimize losses to the supplied collateral.
Symm also enables users to short assets (or trade at negative leverage).
Jasmine is less bullish on Bitcoin. She wants to short BTC. However, the traditional; process of buying USDC, lending it on Aave or Benqi, borrowing BTC, and swapping it for USDC is too complex.
The price of BTC is currently $40,000. Jasmine thus deposits $1000 of USDC and shorts $1000 of BTC-PERP. Let’s examine three scenarios:
- BTC decreases to $20,000. Jasmine’s position goes to $1500; she withdraws with $500 profit.
- BTC increases to $60,000. Jasmine’s position goes to $500.
- BTC increases to $100,000. Normally, Jasmine would hold a negative position and be in debt. Once again, Symm prevents this through liquidations. Liquidation stop losses Jasmine’s position when BTC reaches $80,000 and prevents her from having to pay money she didn’t plan to trade.
Similar to leveraged trading, shorting is a double-edged sword. But Symm democratizes the process traditionally reserved for institutions or people willing to undergo a complicated shorting process.
Like most DeFi protocols, sometimes Symm temporarily goes out of sync. This allows for successful arbitrage opportunities.
Jasmine notices that the price of ETH temporarily differs from that of ETH-PERP. ETH is at $2500, while ETH-PERP is at $2550.
Jasmine decides to long ETH and short ETH-PERP, knowing that the prices will be the same soon.
Not long after, ETH and ETH-PERP are both at $2600. Jasmine closes her positions, resulting in a $100 gain and a $50 loss, for an overall $50 profit with minimal risk. Jasmine pats herself on the back.
Delta-neutral hedging + earning yield
Sometimes, the Symm community holds a different sentiment than the broader blockchain community. These differences in sentiment can provide passive yield.
For some reason, the Symm community is bullish on ETH. While ETH is at $15, ETH-PERP is at $16 and has remained above the price of ETH for some time. This creates arbitrage opportunities but also a positive funding rate for ETH-PERP holders, where longs pay shorts.
Jasmine decides to go delta-neutral: she buys $500 of ETH and shorts $500 of ETH-PERP. She remains unexposed to the price of ETH but passively collects the funding rates from ETH-PERP longs.
Extension: delta-neutral stablecoin
Hot take: the beauty of web3 is not decentralization, but composability. Developers are able to build on each others’ work without asking for permission or API access.
Like any other dapp, Symm is able to be built upon and extended further.
Jasmine is a fan of delta-neutral hedging and wants to take this a step further. The problem with delta-neutral hedging is that it requires a considerable amount of capital. What if there were a way to unlock this capital to be used in other assets?
Jasmine decides to create vUSD: a stablecoin backed by delta-neutral positions on Symm. As the underlying position (NEAR + short NEAR-PERP, or a similar combination) is delta-neutral, this provides a constant store of value.
If enough people and applications recognize apUSD, it can become a core part of the Near DeFi ecosystem and make delta-neutral hedging much more capital efficient.
Extension: other cryptocurrencies + synthetic assets (stocks, commodities, etc.)
Symm is an incredible protocol. But the possibilities go far beyond NEAR, ETH, and BTC. We are currently limited to which cryptocurrencies we add by what Flux supports on the Aurora Testnet (soon Aurora Mainnet).
In the future, we may potentially add other synthetic assets through the same model. This can include stocks ($TSLA, $GOOGL, etc.), commodities (oil, gold, etc.), and more.
Symm is founded by 3 University of Michigan students with a passion for DeFi and democratizing access to tools traditionally reserved for institutional investors.
Ishaan is a co-founder of Symm. Ishaan’s grandparents immigrated from Pakistan to India with nothing but the clothes on their backs, losing everything to banks who refused to hand over their money because they were “the wrong religion”.
Since then, Ishaan’s vehemently pursued DeFi as a way to ensure everyone has control of their money. He previously worked in venture at Jump Crypto, BD at Ava Labs, and product at PayPal Crypto. He also previously co-founded MeldX, a startup to connect small businesses and retail investors for equity crowdfunding, which failed due to legal issues.
George Fane (LinkedIn)
George is a second-year studying Business Administration and Computer Science. Finance is very interesting, but personal trading is much too stressful, which is why developing a platform like this is so exciting! George worked with PayPal on customer onboarding using decentralized identity, Microsoft on a video game NFT marketplace built on ERC-1155, and Steelcase on a full-stack dashboard.
Sai is a senior studying Computer Science at the University of Michigan. He initially became interested in blockchain when he joined Blockchain at Michigan, a student organization at university. He interned at Amazon this past summer. He previously worked on MeldX, a small business equity crowdfunding platform, with Ishaan and he worked on a cross-chain transfer blockchain project during the end of 2021.
Prioritizing safety: testnet & audits
Above all, our biggest goal is safety for users’ funds. As such, Symm will be live on Aurora testnet as we explore bugs with our community. We will a create bug bounty program for avid community members to help us refine Symm.
After around a month, we expect to have a somewhat finalized version that we can take for an audit. We, the team, will likely raise a private round to fund this audit.
After we’re confident about the security of Symm, we will launch on Aurora Mainnet. During this time, we will focus on growing our user base as well as expanding to include other tokens supported by Flux.
We’ll make heavy use of community tools and increase twitter posting, discord engagement, and hosting live sessions to engage with a broad set of users.
Further, we’ll likely create trading competitions to further incentivize users to trade on Symm.
Liquidity mining after finding PMF
Once Symm reaches product-market fit, we will begin the process of decentralizing our protocol. This will likely include launching a governance token, along with airdrops of said governance token, and liquidity mining to incentivize further use of the platform.
We’ll also lean more heavily into bounties, beginning to reward active community members with this governance token.
Community-takeover and transitioning into a DAO
Finally, we hope to transition to a DAO in the future. Many actions are controlled by the team, to support rapid development and testing. These include which assets are supported by Symm, the maximum leverage factor (currently 5x), which assets are allowed as collateral (currently only USDC), and the broader direction of Symm.
As we transition to a DAO, we hope to experiment with unique tokenomics, such as square root voting, to boost the voices of smaller members of the Symm community.