Background

We designed and implemented Regularized Time-Weighted Average CFMM for Derivio's digital option trading. Derivio users can participate in options trading, which functions as a prediction market. Traders can make predictions based on the following predicate:

"I believe that the price of ETH/USD (or any other asset with a price feed) will be higher/lower than its current value in 5 minutes (or any other user-specified timeframe)."

                                                            Derivio’s Prediction Trading Page

Derivio Testnet was launched on zkSync Era a few months ago. Since then, it has attracted over 11k users and processed more than 95k transactions (from both perpetuals & options). In this report, we quantitatively analyze the option trading data of Derivio generated from the Testnet. We demonstrate that Derivio's option trading offers the best trader experience in terms of payout, liquidity, and market offerings compared to our competitors in the traditional finance (TradFi) landscape, such as IQ options and Nadex. Additionally, we highlight how Derivio provides liquidity providers with a highly organic risk-adjusted revenue stream using statistical analysis.

Evaluation

(In the following evaluation section, the Testnet parameter settings are the same as here.)

Positions are long-biased, and the overall win rate is approximately 50%.

<aside> 💡 Short-term excitements are favoured.

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Traders generally prefer 5-minute intervals for prediction as there is more excitement due to quicker settlement. However, around 1/3 of the traders are trading longer intervals.

<aside> 💡 Traders are having the best payout across trades & markets. If you win as a contrarian, you win big.

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Winning trade statistics: