Trading to Mine for a Fast Climb What Sets Vertex a DeFi Derivatives Protocol Apart

Written by: DeepTech TechFlow
In the competitive derivative DEX track, a dark horse is rising with agility.
On November 28, the derivative trading platform Vertex achieved a daily trading volume of 1.63 billion US dollars, surpassing established platforms like dydx and GMX, becoming the largest derivative DEX.
How did it achieve this feat so quickly?
On November 23, Vertex announced the launch of an incentive program. Users who trade on the platform can receive token incentives, not only their own platform token VRTX but also ARB, derived from over 3 million incentives received from Arbitrum DAO through STIP. It also includes familiar trading and mining, as well as one-click dual mining.
According to the rules disclosed on the official blog, traders can earn ARB rewards in two ways:
1. Trade on Vertex: Trading on Vertex can earn ARB and VRTX rewards. ARB rewards will be distributed based on the taker fees paid by traders, up to 75% of the paid taker fees. ARB rewards will be distributed weekly. The total ARB trading rewards will range between 1.35 million to 2.55 million ARB (450K – 850K ARB per 28-day cycle).
This means users only need to pay 25% of the fees to earn VRTX.
2. Become a depositor in the LP Elixir Fusion Pools: By becoming an LP in the Elixir Fusion Pools, users can also earn ARB and VRTX rewards based on the liquidity provided in the Fusion Pools. The maximum ARB Fusion Pool reward is 450,000 ARB, up to 150,000 ARB within a 28-day cycle.
Additionally, during the 12-week ARB reward program, all Sequencer fees for trading pairs will be reduced to 0 USDC.
With the dual incentives of ARB and VRTX, a large number of traders have flocked in, increasing the daily trading volume by 546% compared to last week.
What are the special features of Vertex?
As a derivative trading platform, what sets Vertex apart from established DEX like DYDX and GMX?
The main feature is that Vertex combines the order book used by centralized exchanges with the AMM often used by DEX, filling the business gap between DEX and CEX.
Vertex uses a hybrid order book-AMM model, which means the platform needs to maintain two types of liquidity. One is order book liquidity provided by market makers through APIs, and the other is LP funds provided by smart contracts.
With AMM liquidity on-chain and order book liquidity off-chain, these two types of liquidity are combined through a sequencer, allowing traders to see a unified liquidity at the front end for trading and settlement at the best price. Combining on-chain and off-chain liquidity also significantly improves trading efficiency.
Furthermore, to increase the efficiency of capital utilization, Vertex introduced the concept of “Universal Cross Margin”, which expands the scope of margin.
Users can use all their funds (deposits, holdings, and investment profits) as margin on the platform. For example, a user providing liquidity for a spot fund pool can earn fees and use LP funds as margin for contract trading.
To enhance the interaction experience to a greater extent similar to CEX, Vertex has a one-click trading feature (1CT).
Users only need to sign one approval transaction before starting trading, and any subsequent operations carried out in Vertex do not require further approval, similar to starting trading after logging into a CEX account.
Token Economy
On November 20, 2023, Vertex officially issued its official token – VRTX.
With a total supply of 1 billion VRTX, 34% is allocated to ongoing incentives, 20% to the founding team, 10% to the Initial Token Phase (first stage of the Trade & Earn program), 11.7% to the treasury, 9% to the ecosystem, 8.8% to early investors, 5% to future contributors, 1% to LBA (Liquidity Bootstrapping Auction), and 0.5% to advisors.
In 2022, Vertex Protocol completed an $8.5 million seed funding round, with lead investors including Hack VC, Dexterity Capital, Jane Street, and Hudson River Trading, among others. For early investors, the VRTX supply distribution of 8.8% (88 million VRTX) roughly occurs 2-3 years after the project’s initiation.
In June of this year, Vertex Protocol received strategic funding from Wintermute Ventures, although the amount has not been disclosed.
90.85% of VRTX tokens will be distributed over 5 years or more, as shown in the chart below.
Through the chart above, the current token distribution accounts for only 16% of the total supply, and within this 16%, only 10% is in actual circulation.
According to official documentation, VRTX tokens are primarily intended to incentivize the Vertex community and mediate mutually beneficial relationships among Vertex contributors. Currently, they serve two main purposes:
(1) Staking: Staking VRTX contributes to the security of the Vertex ecosystem. Vertex has also introduced the “VE” model, generating voVRTX scores proportional to the duration of VRTX staking. The longer the staking period, the more rewards users receive.
(2) Long-term rewards for different degrees of contribution to the protocol.
Although the competition among derivative DEX is fierce, “trading mining” still appears to be a very practical method for cold start. However, after the incentives, whether Vertex can still maintain its momentum and cultivate a group of loyal users remains to be seen. But in terms of innovation, Vertex still has notable features.
Currently, over 97% of derivative trading volume is still conducted on CEX, while derivative DEX only accounts for 2.72% of the total trading volume. Once derivative DEX makes a breakthrough, it will bring about a huge change in trading, and many investors are choosing to bet on this track. In the eyes of many, they may even dominate the core narrative of the next bull market.
The track is still in its early stages, the outcome uncertain, and we will continue to keep an eye on it.
This article is authorized to be reprinted from DeepTech TechFlow.