You can ambush JTO on the trading platform for $0.6, it's time to get to know Aevo

Author: Joyce, BlockBeats

Early this morning, Solana ecosystem MEV infrastructure developer Jito Labs opened the JTO airdrop claim window, and the price of JTO quickly surged after a brief fluctuation at the opening, reaching as high as $4.94.

JTO has become a hot topic of interest in the crypto community over the past two days, and in this discussion, besides projects within the Solana ecosystem, another platform has also attracted community attention: the derivatives trading protocol Aevo, which quickly launched JTO futures after the JTO airdrop check website was announced. As of the time of writing, JTO futures on Aevo have generated over 300% growth in just two days.

One-stop On-chain Derivatives Trading

Aevo is a decentralized derivatives exchange focused on options trading, under the on-chain structured product Ribbon Finance, utilizing an order book and margin model. Currently, Aevo's total trading volume has exceeded $100 million, with current futures open interest exceeding $50 million.

On April 7, 2023, Aevo's mainnet officially launched. According to DeFiLlama data, Aevo's TVL has now surpassed $23 million, with nearly half of the TVL coming from November and December.

JTO is not the first wealth code that Aevo has encountered; futures for popular assets like PYTH and MEME on Aevo have also seen impressive gains. On November 24, Aevo announced the launch of BLAST futures, stating that the market assumes a total supply of 1 billion BLAST tokens. Subsequently, BLAST futures surged nearly 400% within 5 hours.

Aevo supports options, perpetual futures, and other derivatives within a single margin account, allowing users to trade using mainnet USDC and real settlement. Users will be able to trade ETH options on the options chain.

Aevo's Product Ecosystem

Theta Vaults and Earn Vaults

"Theta Vaults" operates an automated European options selling strategy, generating returns on a weekly basis by writing out-of-the-money options and collecting premiums. Aevo uses the term "Vaults" to reflect the concept of depositing user assets into a vault and earning returns within it.

Users only need to make a simple deposit, and the vault will automatically begin executing specific options strategies. By sharing gas fees among all vault depositors, this alleviates most gas fee issues to some extent: instead of each user making 3-4 trades weekly, the vault will execute 3-4 trades weekly for thousands of users at once. This makes the user experience for Theta Vaults very straightforward and relatively inexpensive.

Theta Vaults also allow users to freely choose when to participate or not in the weekly strategy through pause and resume functions, enabling them to adjust their use of options based on market expectations without being subject to other restrictions.

"Earn Vaults" is a series of new yield vaults designed to complement the risk profile of Theta Vaults. It is an all-weather yield product that offers principal protection and enhances returns by leveraging exposure to short-term market volatility through a combination of lending and exotic options.

Earn Vaults adopt a fully funded strategy, allowing depositors to take advantage of Ethereum (ETH) volatility during the week while ensuring their capital is protected. Earn Vaults are a new product line for the vaults, so more variants will be launched soon.

Earn vaults structure

Aevo OTC

Aevo OTC is the first platform that allows users to trade large-cap altcoin options on-chain with institutional-level liquidity providers, using an RFQ system with an on-chain dynamic margin system. Users will be able to trade 13 different cryptocurrencies on weekly, bi-weekly, and monthly terms. The list of currencies will rotate monthly, depending on the most popular currencies in the market.

Aevo OTC addresses the issue of information opacity that users face when purchasing altcoin options. The altcoin volatility market often exhibits fragmentation and opacity, requiring users wishing to buy altcoin options to join multiple market makers and OTC platforms.

In addition to the cumbersome onboarding process, a few users who successfully onboarded must send messages to each market maker to request trades. After that, users need to compare prices and follow margin rules that largely favor OTC desks. Additionally, communication regarding margin rules often relies on traditional chat channels, which can also be opaque.

In this scenario, Aevo OTC enables users to trade on-chain with institutional-level market makers.

Furthermore, under Aevo OTC's margin system, liquidity providers are required to provide 30% initial margin in USDC, along with a dynamic margin system that prompts market makers to deposit additional margin based on the market value of the trades. All margins are securely locked on-chain.

aeUSD: Yield-Stable Valued Collateral Asset

On December 6, Aevo announced the launch of aeUSD, the first yield-stable valued collateral asset for crypto derivatives exchanges, allowing users to earn a 4.75% annualized yield on exchange margin while trading with 20x leverage.

Users can convert their USDC to aeUSD for free on Aevo. aeUSD is an ERC-4626 asset based on Aevo L2, which is a combination of USDC and sDAI. aeUSD is a whitelisted collateral asset on the exchange with a 100% collateral factor, allowing users, market makers, and strategies to earn a 4.75% annualized yield on exchange margin.

Additionally, aeUSD's yield is generated by depositing into MakerDAO's Dai Savings Rate (DSR) module and receiving sDAI.

Aevo Technical Architecture

Aevo is built on a custom L2 based on the OP stack, inheriting Ethereum's security while achieving high throughput and performance, operating with an off-chain order book and on-chain settlement.

Off-chain Order Book

Aevo operates an off-chain order book where orders from makers and takers are posted and matched. Once a maker's order and a taker's order are successfully matched, they are published to Aevo's smart contracts deployed on the L2 rollup.

Before an order is created and posted to the order book, it is evaluated by an off-chain risk engine. The risk engine checks the margin requirements for the account (standard margin or portfolio margin) to determine if there is sufficient margin to create the order.

On-chain Settlement

Users' funds and positions are always held in Aevo's on-chain smart contracts. This means that all fund flows occur within the smart contracts, including options settlements, fund payments, and options fee exchanges.

L2 Architecture

Aevo's smart contracts run on the Aevo Rollup, which is an EVM-based Ethereum optimistic rollup. Transactions are created and settled on the smart contracts of the Aevo Rollup, which operates in collaboration with Conduit.

Conduit runs a sequencer for the Aevo Rollup, batching transactions to be published to the Ethereum mainnet every hour. In practice, withdrawing from Aevo will take 2-3 hours for full confirmation. The confirmation time required for deposits into the Aevo Rollup is the same as regular Ethereum mainnet transactions, approximately ~10 minutes.

Gas fees for transactions in the Aevo Rollup are paid in ETH. Most of the costs are for placing the call data of this batch of transactions on the Ethereum mainnet. Currently, the gas fees for settling transactions are paid by the Aevo exchange, while the gas fees for deposits and withdrawals will be paid by users.

Liquidation

Since the exchange operates with full margin, the entire portfolio of the trader is considered when assessing liquidation. The liquidation process is triggered when the risk engine evaluates the account and determines that it violates the requirement of "AB - OO - MM > 0", where AB = account balance, OO = total value of open orders, and MM = maintenance margin of existing positions.

During the liquidation process, the trader's account is taken over by the liquidation engine, and they cannot open new orders. After each step of the process, the liquidation engine reassesses the health of the account. If the account's net worth remains below the maintenance margin, the liquidation engine will proceed to the next step.

Token $AEVO and sAEVO

$AEVO is Aevo's native token and governance token, which will be launched before January 2024. sAEVO is the staked version of $AEVO and is non-transferable. Users can obtain sAEVO by staking $AEVO for a fixed term of 3 months at a 1:1 ratio, requiring re-staking of $AEVO every 3 months to regain sAEVO.

Holders of sAEVO can participate in special events such as commission discounts, reward multipliers, early access to new products, and more. Additionally, sAEVO holders have double voting rights.

Governance

Ribbon Labs Foundation, also known as Aevo DAO, is an autonomous entity composed of owners of $AEVO and sAEVO, pursuing growth and development goals for Aevo through both profit and non-profit initiatives.

With the merger of Ribbon and Aevo, all revenues from the two platforms will be consolidated. Currently, Ribbon DOV revenue flows to Ribbon DAO, while Aevo revenue flows to the Aevo insurance fund. In the future, fees from the exchange and vaults will flow into a new wallet managed by the Treasury and Revenue Management Committee.

Token Economics

Prior to $AEVO, Ribbon's governance token was $RBN, which has been widely circulated in the market. The previous 45% of $RBN owned by the DAO will be exchanged 1:1 for $AEVO.

Of these assets, 16% of $AEVO will be used as incentives (including airdrop programs), 9% of $AEVO will be used to support liquidity for $AEVO on DEX and CEX. An additional 5% will be allocated for community growth, while the remaining 16% is unspecified and reserved for future DAO expenditures.

Conclusion

Before launching and transforming into Aevo, Ribbon Finance completed a $8.75 million Series B funding round led by Paradigm in March 2022, and in the following month, its locked value surpassed $300 million, setting a historical high.

However, after that, its TVL struggled to recover. In June 2022, Ribbon Finance suffered a DNS hijacking attack, which led to malicious interaction requests. Although Ribbon Finance stated that it had fixed the vulnerabilities and that funds on all vault contracts were unaffected, this news caused the already declining TVL to be halved, dropping to less than $80 million.

Ribbon Finance's TVL fluctuation

The announcement of Aevo's launch was made on September 8, 2022. Public information shows that the Aevo team comes from companies like Coinbase, Kraken, and Goldman Sachs, as well as institutions like Stanford University, MIT, and Cornell University.

In July of this year, the Ribbon Finance community voted to approve the proposal to "merge into Aevo." Subsequently, Aevo announced the launch of Pre-Launch token futures in August, providing perpetual contract trading services for the upcoming token, with SEI being the first token launched.

Aevo has been active recently, first announcing the launch of the Spot Swaps feature on December 2. This feature allows users to directly exchange their collateral within the Aevo app; previously, users had to withdraw assets from Aevo, exchange them on an external DEX, and then re-deposit them into Aevo. On December 6, Aevo announced the launch of the yield-stable valued collateral asset aeUSD, allowing users to earn a 4.75% annualized yield on exchange margin while trading with 20x leverage.

Considering Ribbon Finance's TVL once surpassed $300 million, Aevo, with its current TVL of just over $20 million, seems to have significant room for growth. In the fiercely competitive derivatives trading arena, whether Aevo can recreate Ribbon Finance's "past glory" remains to be seen.