Protocol Design

Derion Protocol is a set of smart contracts designed for the creation of leverage perpetual pools for any index value, with any leverage, and reserved with any ERC-20 token.

Derion perpetuals pool consists of 3 sides as 3 fungible tokens: LONG, SHORT and LP

• LONG and SHORT trace an index value from an external oracle.

• LONG and SHORT are exposed to compound leverage of K.

• When either of the Long or Short sides takes more than half of the pool reserve, its exposure is starting to decrease with a smooth deleverage curve.

Derion pools have the following properties:

• 3 sides: LONG, SHORT, and LIQUIDITY (LP) as 3 fungible tokens.

• LONG and SHORT trace an index value from an external oracle (on-chain or off-chain).

• LONG and SHORT are exposed to compound leverage of K; this leverage is gradually decreased (i.e., deleveraged) as the curve approaches the pool reserve.

• The more LIQUIDITY in a pool, the longer both sides stay in the full leverage range.

• All sides can never go to zero, i.e., no liquidation and infinite liquidity.

• Derivative pools for any token pair can be created by anyone as long as they have an Uniswap pool (v2 or v3).

• Efficiently run on Ethereum mainnet, with no backend services nor permissioned roles.