Surf协议：让你开交易所的AMM合约衍生品协议
冲浪协议：实现简易AMM衍生品交易的合约UniSwap方案，让人人都能开设交易所
Surf Protocol, led by ABCDE, is an unstoppable AMM derivative trading protocol that supports the creation and trading of a wide range of crypto assets. If we were to describe Surf using a familiar model, it would be the contract version of UniSwap, but with a crucial innovation: anyone can provide perpetual contracts for any token without permission. Everyone can open a contract pool.
Compared to GMX and dydx, which have only 9 and 37 assets respectively, Surf’s advantage lies in its permissionless pool creation. In the future, Surf will have thousands of perpetual contract trading pairs for many long-tail assets.
- Trader Extractable Value – The Role It Plays
To understand Surf’s crucial innovation, we need to understand the role of Trader Extractable Value (TEV) in the world of AMM derivatives.
When describing MEV, we often compare the blockchain to a dark forest, with various robots and scientists scouring the unconfirmed transaction pool (mempool) for potential profit opportunities through arbitrage and other means. This is where Maximum Extractable Value (MEV) comes from.
However, MEV mostly focuses on various arbitrage opportunities in areas such as spot DEX and lending settlement. In certain sub-sectors, there are more refined concepts.
For example, A16Z published a detailed article on LVR – Relative Loss Rebalancing, which is a form of reverse selection cost for Dex LPs. But we won’t go into that here.
Another example is the arbitrage opportunities between spot and derivatives caused by price differences and other factors. We call this Trader Extractable Value (TEV).
Simply put, the Ava price manipulation on Avalanche that happened last year in GMX is a typical example of TEV. When the cost of spot price manipulation is lower than the friction cost of futures, scientists find it profitable.
You might question whether it’s possible to manipulate the prices of BTC and ETH, as they have more liquidity and consensus compared to Avax.
Well, partly yes and partly no.
Yes, because the depth and consensus of BTC and ETH make it much more difficult to control spot prices. That’s why GMX V1 on Arb only had BTC and ETH trading pairs.
No, because GMX’s GLP TVL is only a few hundred million. Just imagine if GLP’s TVL was tens of billions. Under the premise that traders profit when LPs lose, big players would spend a “fortune” manipulating the prices of BTC and ETH, just like what happened with the Avax trading pair. As long as the depth of the GLP transactions is sufficient, GMX’s fixed trading friction cost will lead to spot price manipulation cost being lower than the futures friction cost. As GLP TVL increases, the possibility and success rate of TEV also increase. This is why the TVL of GLP is capped at around 300-500 million USD as a “balance.”
- Surf’s Solution and Innovation
So, how does Surf incentivize higher TVL in derivatives and create an innovative trading protocol?
The solution offered by Surf is quite straightforward. To maximize LP incentives, Surf introduces an interesting innovation in its LP mechanism by creating a B2B2C trading protocol. In general, LPs earn 70-80% of the trading fees, while 20-30% flows back to the protocol itself. Surf, on the other hand, has made a crucial change: 80% of the trading fees go to LPs, 10% goes to the protocol, 5% is awarded to the creator of each pool, and 5% is awarded to the contributor with the largest TVL in each pool.
Under this incentive system, LPs are more motivated to create trading pairs for non-blue-chip long-tail assets. Additionally, because the contributor with the highest TVL in a pool can receive 5% of the entire pool’s trading fees, there is a real-game layer on top of TVL, encouraging “large and loyal” TVL to continuously provide LP and bring better trading experiences and greater depth to traders.
Furthermore, how can we address the friction cost of futures?
Simply by making the friction cost on the futures side non-fixed and dynamic. This is achieved by introducing a pool structure similar to Uniswap V3, with different fee rates for homogeneous trading pairs.
In Surf Protocol, each transaction automatically creates five different pools, each with a unique fee structure, forming various liquidity pool structures across different assets. In theory, high-liquidity assets like BTC are expected to have a significant portion of liquidity in low-fee pools, while less popular assets like PEPE may have more liquidity in high-fee pools.
For traders, these pools are transparent, and when placing orders, they are automatically matched starting from the pool with the lowest fee. Once the lowest fee pool is filled, the order flows into the next fee level pool. For LPs, choosing different pools is a market game, allowing them to earn higher fees and dynamically select positions between traders. For the overall system, more stable periods may significantly lower fees (with more LPs choosing low-fee pools), potentially reaching the theoretically lowest possible level. During extreme market activities, fees increase, preventing a scenario where the GLP is constantly depleted due to price manipulation, like what happened with the GMX Avax trading pair.
- Permissionless – The True Meaning of Cryptocurrency
Old OGs familiar with the early development history of cryptocurrencies know that the original focus of Bitcoin was not on decentralization, but rather on permissionless. This point is evident in both Satoshi Nakamoto’s whitepaper and forum comments; he used the term “permissionless” rather than “decentralization.”
In other words, decentralization is just a form that arises from the core of permissionless.
Uniswap achieved success in the spot DEX market by allowing permissionless token listings and LPs.
For derivatives, GMX V1 benefited from the innovative invention of GLP but also limited the creation of permissionless trading pairs. The majority of blue-chip and long-tail asset derivatives still concentrate on centralized exchanges, which is why we have GMX V2 now.
We need a freer and healthier on-chain derivative financial mechanism, a fairer trading market, and a transition from centralized contract markets to decentralized markets.
The battle for permissionless derivative trading has just begun.
We have reason to believe that by introducing a game-theoretical “homogeneous but different value” trading pool and a permissionless, innovative LP reward mechanism, Surf has the potential to bring AMM-style derivative TVL to new heights. This will provide traders with better trading experiences, better protect the interests of LPs, and achieve a “win-win” situation.
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