Section II: - A Case Study

How do other systems handle liquidity concerns when users close their trades?

To better understand the SYMMIO problem and its solution approach, looking at how others solve these challenges can provide meaningful insights.

The examples and explanations provided herein serve as a high-level and simplified representation of the intricate systems that underpin the discussed concepts. It's crucial to recognize that there's significantly more depth to Orderbooks, vAMMs, and other associated mechanisms than what is being outlined in the upcoming section. The following texts primarily aim to furnish a foundational overview and shed light on the conceptual groundwork that sparked SYMMIO's solutions.

Readers seeking comprehensive insights into these systems are encouraged to delve deeper into specialized sources.

Binance and DyDx: Traditional Orderbook Models

Trading perpetual futures (or "perps") on platforms like Binance doesn't equate to the acquisition of "physical" bitcoins or ethereum. Instead, traders interact with a virtual representation of these assets. Once a trader buys, for example, a perpetual futures BTC contract on Binance, it remains tethered to the binance platform. It cannot be freely moved to another exchange for sale, as one might with physical (spot) cryptocurrencies.

DyDx operates similarly. Like all order book perpetual CEX/DEXs, for one to purchase a futures contract, a seller must be on the other end, and vice versa. However, the derivative asset acquired remains localized to that specific exchange. Unlike tangible cryptocurrencies, which can be transferred and traded across different exchanges, derivatives like perps demand the presence of liquidity on their home platform for trades to occur. This dynamic explains Binance's dominance in the volume of derivatives. Liquidity begets more liquidity; the most liquid markets invariably attract more capital, reinforcing liquidity. This "rich get richer" phenomenon is why scaling up orderbooks can be arduous, making it difficult for newcomers in the order book space to challenge established players.

Drawing similarities to SYMMIO's issue, every User <> Hedger instance could be seen as an isolated Exchange-Orderbook between the two parties, like a "minature binance." This system creates unprecedented capital efficiency but also poses particular challenges. Consider a situation where a hedger doesn't respond to a trade request, resembles an "hypothetical scenario" where the Binance order book would have been entirely depleted of liquidity, leaving no prospective buyers for your asset, a solution to simulate exit liquidity is required.

Emerging Models: vAMMs like GMX simulate exit liquidity.

However, the crypto landscape's incredible creativity in solving problems has created viable alternatives. Virtual Automated Market Makers (vAMMs) like GMX introduce innovative solutions. When a user decides to sell a perpetual on GMX, they trade against an Oracle price combined with the liquidity pool (LP). This mechanism means there is no need for a concurrent buyer when someone wishes to sell. The result is an environment more conducive to bootstrapping trading and offering a more adaptable model than the traditional orderbook.

While traditional platforms like Binance and DyDx have their methods and inherent limitations, emerging systems like vAMMs showcase the sector's continuous evolution, pushing boundaries and redefining paradigms. In conclusion, the quest for ample liquidity in the crypto derivatives market remains a central challenge.

Lets further explore how SYMMIO inherited those principles. Section III. - Solutions