What is Aevo? Aevo is a Derivatives platform, offering straightforward and user-friendly products for newcomers to the market. The project is evolving into OP Chain, inheriting security from Ethereum, boasting high scalability, and connecting with the Superchain ecosystem.
So, what exactly is Aevo? Let’s delve into the details of the project in this article!
Overview of Aevo
What is Aevo?
Aevo is a Layer 2 Derivative developed with the OP Stack toolkit, also known as OP Chain. Aevo inherits security features from Ethereum while supporting over 5,000 transactions per second. This capability has enabled Aevo to process a transaction volume exceeding $10 billion.
Aevo utilizes an Order Book to create a trading market for Perp and Option products. Aevo operates the order book off-chain with on-chain settlements. This means that when orders are matched, transactions are executed and settled via smart contracts.
In July 2023, a crucial governance vote took place proposing the integration of Ribbon into Aevo, ultimately approved. This near-unanimous decision illustrates alignment between stakeholders’ vision and Aevo’s direction.
Aevo will introduce its governance token, AEVO, linked with Ribbon Token as both projects merge. Specifically, Ribbon Token will be converted into AEVO, with support provided for the transition. The conversion ratio is yet to be disclosed as AEVO’s Tokenomics design is incomplete.
Operating Mechanism
Technology
Funds and user positions always remain within smart contracts on the Aevo chain. Aevo’s smart contracts run on Aevo Rollup, an Optimistic Ethereum Virtual Machine-based aggregation. Transactions are generated and settled on Aevo Rollup’s smart contracts. Aevo Rollup is operated by Conduit Sequencers.
Conduit operates a Sequencer for Aevo Rollup to publish batches of transactions to the Ethereum Mainnet every hour. Dispute resolution for transactions on Aevo Rollup takes 2 hours. This means that after transactions are posted to the Ethereum Mainnet, it takes 2 hours for them to be fully confirmed. In practice, withdrawing funds from Aevo takes around 2-3 hours for full confirmation.
Gas fees for transactions on Aevo Rollup are paid in ETH. Most of these fees are allocated to batch order placement calls for transactions on the Ethereum Mainnet. Currently, gas fees for transactions are covered by Aevo Exchange, while fees for depositing and withdrawing are paid by users. Users can utilize the Optimism Standard Bridge to deposit funds into Aevo Rollup.
Liquidation
During the liquidation process, the trader’s account is taken over by the liquidation tool, preventing them from opening new positions.
After each step of the process, the liquidation tool reassesses the account’s status. If the account’s equity remains below the maintenance margin level, the liquidation tool moves to the next step.
The account enters liquidation mode. It is under the control of the liquidation tool, and the user cannot enter or close new positions. The account’s open orders are forcibly canceled by the trading system to free up collateral.
The liquidation tool gradually unwinds the sell positions on the order book. Limit orders to reduce positions are created every 2 seconds, with a maximum time of 30 seconds. Each matched quantity incurs a liquidation fee.
If positions cannot be liquidated via the order book, the liquidation tool executes trades at an increased price from the insurance fund. Liquidation fees are also charged for these trades.
If a situation arises where the insurance fund is insufficient to settle exercised call options, the exchange must automatically cancel the highest-profit traders. Current call options are closed at the marked price.
In the event that there isn’t enough collateral to settle exercised call options, the insurance fund will settle the difference in USDC.
Aevo’s Products
Aevo offers products such as Perp, Option, OTC, and is developing markets for strategy Vaults based on Ribbon.
Perp: Aevo provides futures contract trading products for users with an order book similar to traditional CEX products. Particularly, the project allows trading of assets not yet listed on the market (not listed on any exchange, for example, TIA Token not yet present on the market but traded on Aevo). Additionally, the platform allows collateralizing positions with their entire investment portfolio.
Option: Aevo provides an order book for traders to buy options with expiration periods ranging from daily, weekly, monthly, or yearly. Users can only exercise the option to buy or sell that type of asset, providing clear and easy-to-use products for end-users. And liquidity is provided by Market Makers.
OTC: Allows trading of option contracts with Altcoins, but only occurs between users, i.e., Peer-to-Peer.
Theta Vault: Allows users to provide liquidity to sell options (selling call options and selling put options) to the market. Users earn insurance fees but incur losses if the option buyers win. This is a role similar to market makers.
Earn Vaults: Vaults are created for users to deposit funds and earn interest. And assets in the Pool for liquidity providers like Wintermute and Folkvang to borrow to provide liquidity to the market.
In addition to prominent products in the Derivatives space, on December 7, 2023, Aevo officially introduced its own Stablecoin aeUSD to the community. aeUSD is a token with ERC 4626 standard born from the combination of USDC and sDAI (Maker DAO’s Real World Asset product). The operation mechanism of aeUSD through the following basic steps:
Users deposit USDC into Aevo’s Layer 2 network.
The user’s USDC is sent to Maker DAO’s Real World Assets program to receive sDAI. The current interest rate for sDAI is around 5%, and users on the platform share this profit together.
Users can redeem their USDC at any time.
Also in December 2023, Aevo introduced its Spot product to the community, allowing users to trade various Crypto Assets. The initial trading pairs include ETH - USDC, WBTC - USDC, and USDT - USDC with different transaction fees.
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