1. Introduction
With the continuous development of blockchain technology, DeFi derivative projects have gradually become the focus of the market. The innovation of user experience, further financial innovation, optimization of decentralized governance solutions, implementation of new liquidity mining and incentive mechanisms have led to the rapid development of decentralized derivative trading. The rapid development of the industry cannot be separated from the right opportunity. Being too early or too late is a mistake! The improvement of infrastructure is crucial for a project, even for the development of an industry. This can be concluded from the development process of dYdX.
In this context, the well-established derivative protocol Themis officially landed on Blast L2 in May 2024, opening a new chapter. The economic model, as the core part of DeFi derivative projects, directly affects the success or failure of the project. A reasonable economic model can attract more investors and users and promote the sustainable development of the project. This article will analyze in depth the latest economic model of Themis, explore its core concepts and mechanisms, advantages and innovations, risks and challenges, whether it can open up new valuation space with "derivatives" + narrative, and the potential dividends and opportunities behind it.
2. Current Status of Derivative Trading
In the field of derivative contract trading, centralized exchanges still dominate, but it is undeniable that decentralized derivative protocols have developed rapidly in the past two years, with the total open interest increasing nearly tenfold.
However, on-chain, the spot trading volume of DEXs represented by Uniswap still significantly surpasses the trading volume of top decentralized derivative trading protocols such as dYdX and GMX. Ultimately, the development of on-chain derivative protocols such as GMX, dYdX, and Drift, which have long been in the leading position, has not kept up with the narrative iteration. According to DeFiLlama statistics, as of April 15, 2024, the total DeFi market size reached 86 billion US dollars, but the total TVL of derivative protocols was only 3 billion US dollars, accounting for only 3.48% of the TVL of decentralized derivative exchanges.
Therefore, as the most imaginative narrative in the on-chain DeFi track, the derivative market urgently needs new breakthrough ideas.
Blast, as an emerging Ethereum Layer 2 network, aims to provide higher transaction throughput and lower transaction costs to solve the congestion and high gas fees of the Ethereum network. Currently, Blast has been successfully launched, with a mainnet TVL of nearly 2.5 billion US dollars and a total of 860,000 users. It is expected that in May, Blast will conduct an airdrop activity to distribute tokens to users participating in the network. With the performance and cost advantages of Blast L2, coupled with Blast's own traffic effects, many use cases of derivatives that are limited by the Ethereum mainnet can gradually be implemented. This may be the reason why Themis Protocol has taken action again after two years and deployed it to Blast L2.
3. Overview of Themis Project
Themis Protocol is a decentralized derivative trading platform built on Blast L2, aiming to provide users with efficient, secure, and transparent derivative trading services.
From the perspective of project and team experience, Themis Protocol has always been considered a well-established protocol in the DeFi field that has been tested by time and the market. As early as September 2023, it laid out the derivative trading sector, and its products include Themis Swap, THS Pool, ETH Pool, tbTrade, etc.
May 2022
Deployed on the BSC Chain for testing.
May 2023
Officially launched on Filecoin (FEVM).
September 2023
ETH bonds launched, treasury construction plan officially launched, decentralized derivative exchange launched in beta, providing up to 50x leverage trading.
April 2024
By April 2024, the treasury has received over 1200 ETH.
May 2024
The protocol is deployed on Blast L2, and the treasury's ETH assets are migrated to Blast, with ETH staked in the protocol becoming the first asset in the ETH Pool.
4. Product & Model Introduction
The importance of the economic model for DeFi derivative projects is self-evident. A reasonable economic model can attract more investors and users and promote the sustainable development of the project. The economic model of Themis Protocol fully considers the characteristics and market demands of the project, and achieves the sustainable development of the project through innovative mechanisms and strategies.
Themis platform incentivizes vault construction through five identities, including the minting, staking, and liquidity construction of governance tokens, as well as user growth incentives and trading.
Vault Builders:
Vault builders stake ETH in Themis Vault, enter the ETH Pool, and obtain tETH. tETH is the proof of vault builders' ownership of vault shares. tETH is not tradable but can be redeemed for ETH. Holding tETH entitles vault builders to 65% of the trading fee distribution of the derivative exchange and around 4% annualized coin-based returns. Early vault builders can also receive rewards in Blast points and Themis points.
THS-ETH Liquidity Providers:
THS-ETH liquidity providers add liquidity and obtain THS-ETH LP, which is then used to purchase LP bonds, minting governance token THS. The price of LP bonds has a discount relative to the THS trading price. The LP bonds are managed by the Themis treasury.
THS Stakers:
THS stakers can mint sTHS by staking THS. After staking THS, it enters the THS Pool, and stakers receive sTHS. The quantity of sTHS grows exponentially with a rebase period of 8 hours and a compounding interest rate of 0.2%. Stakers can earn a high annualized yield (APY = 792%). sTHS holders also receive 25% of the trading fee distribution of the derivative exchange.
Invited THS Stakers:
SC is the Scale Code of Themis. It is an indicator of users' contribution to the protocol's user growth. THS stakers can earn high returns (0.2% - 8h) by staking THS, but they need to spend an additional 20% of the value of the staked THS to mint SC tokens. Invited THS stakers and node users who contribute more to the protocol's user growth can receive SC token rewards. Burning SC tokens can accelerate the release of THS staking rewards. The price of SC tokens rises unilaterally, and the earlier they are obtained, the greater the profit potential.
Derivative Traders:
Derivative traders profit from the vault by shorting or longing a certain underlying asset. They either earn ETH from the vault or lose ETH to the vault. In the long run, traders will lose their positions, and at this time, the vault will be over-collateralized. When the over-collateralization ratio reaches 20%, the excess will be used to repurchase and burn THS in the THS-ETH Pool, and 35% will enter the treasury as THS minting reserves, thereby increasing the support price of THS.
tbTrade: Perpetual Contract Trading with Interval Liquidity Based on Vault Liquidity Pool
tbTrade is a decentralized perpetual contract exchange built by Themis Protocol on Blast. As a well-established DeFi protocol, Themis previously launched the derivative trading V1 version on Filecoin (FEVM) and has undergone multiple iterations and updates in nearly a year. After polishing and security audits, the latest version of tbTrade is finally launched and available on Blast.
tbTrade combines the advantages of limit order book (LOB) and AMM, controlling risks while maximizing the utilization of vault funds and providing a better trading experience. To protect the interests of vault builders, tbTrade has set up four protection mechanisms.
Treasury Reserve:
In extreme cases, the Themis treasury contract is activated to mint THS and sell it to replenish the vault deficit.
Dynamic Spread Fee Rate:
By automatically adjusting the dynamic spread fee rate, arbitrage funds are attracted to balance long and short positions.
Funding Rate:
By automatically adjusting the funding rate, the funding fee is transferred between long and short positions to balance the positions.
Profit Cap Mechanism:
The maximum profit is 800%. A single transaction can only earn a maximum of 800% profit and will be automatically closed when it reaches 800% profit.
Early users can provide ETH to the vault as liquidity. The vault's ETH acts as the counterparty for traders on tbTrade. Users deposit ETH collateral to open long or short positions, with a maximum leverage of 50x. Synthetic assets such as ETH/USDT, BTC/USDT, and other mainstream cryptocurrencies against the US dollar price index, forex, and commodities will also be added in the future.
5. Conclusion
As a well-established DeFi protocol, we can look forward to the future performance of Themis after it lands on Blast L2. At the same time, Themis community management has revealed that this migration to Blast Chain will launch new tokens and point rewards. Users can potentially receive airdrops while enjoying derivative trading services. With the team's efforts and community support, Themis will achieve greater success in the DeFi field.