Decentralized Crypto Derivatives Protocol Maverick Protocol: Targeting Mid-sized and Long-tail Markets for Higher Capital Efficiency

In statistics, there is a "long tail effect," which means that aggregating all non-mainstream markets can create a market larger than the mainstream market. Currently, the development of blockchain, especially DeFi, is changing rapidly, and the huge potential market behind the "long tail effect" of DeFi assets is beginning to shine. Based on this, the decentralized crypto derivatives protocol targeting the "long tail market," Maverick Protocol, has emerged.

As a decentralized perpetual contract protocol that allows the staking and trading of any ERC20 version of on-chain assets, Maverick Protocol is built on a Layer 2 solution and has innovatively introduced the ALP vAMM mechanism, achieving high capital efficiency, up to 10x leverage, high staking yields, low gas fees, and low slippage, further meeting the growing demand for mid-cap cryptocurrency derivatives in the DeFi market and providing liquidity providers (LPs) with more capital-efficient staking services.

On February 15, 2022, thanks to its innovative operational mechanism and solid implementation foundation, Maverick Protocol received support from leading investment institutions including Pantera Capital, Jump Crypto, Altonomy, Circle Ventures, and Gemini, completing a strategic financing round of $8 million.

Permissionless, High Yield: Maverick's Operational Mechanism

Currently, although many users have discovered the huge potential of the long tail market, they still face some dilemmas:

On one hand, most centralized exchanges (CEX) can provide over 100 derivative trading pairs, while most decentralized exchanges (DEX) focus only on top cryptocurrencies, offering fewer than 20 derivative trading pairs. Moreover, centralized exchanges contradict the decentralized philosophy of blockchain, and the lack of transparency in trading has caused some DeFi players to lose interest in centralized exchanges.

On the other hand, in the past few months, we have seen significant price deviations between perpetual markets and spot trading prices. Such price deviations can adversely affect trading volume and cause traders to suffer significant losses due to liquidation.

Most importantly, perpetual contract markets often only list assets from which exchanges can profit and use a central limit order book instead of automated market makers to provide liquidity. This limits the liquidity mining opportunities for token holders and prevents traders from taking positions in a wide range of cryptocurrency trading markets.

Maverick aims to fundamentally change this situation by building a truly permissionless, efficient, and secure DEX. In Maverick Protocol, users can participate in Maverick in the following three main ways:

• Create Trading Pair Pools: Anyone can deploy a trading pool on Maverick for any ERC20 asset trading pair they wish to trade, thus creating a perpetual trading market for that asset. Each trading pair consists of a Base asset and a Quote asset.

• Staking: LPs stake their crypto assets into the corresponding trading pair pool to increase liquidity. At this point, the contract will convert the staked assets of LPs into an equivalent amount of virtual Base assets based on the current price from oracles and the marked price, and continuously and automatically transfer LP's staked assets through the ALP vAMM algorithm to ensure higher yield from liquidity. The yield will be distributed to liquidity providers based on their staking proportion in the trading pool.

• Trading: After the contract converts LP's staked assets into virtual Base assets, these virtual Base assets will be provided as liquidity to traders in the pool. Traders can collateralize assets to gain up to 10 times purchasing power for long or short trades. In this process, traders do not need to own physical assets, truly realizing the ability to profit from changes in the price of virtual Base assets with lower risk.

For example:

User A creates an ETH/USDT trading pair pool.

User B can act as an LP, staking 10,000 USDT to provide liquidity for the trading pool. When the ETH trading price is 5,000 USDT, based on this 10,000 USDT, the contract will generate 2 virtual ETH in the vAMM.

User C, as a trader, wishes to open a long position on the ETH/USDT token pair. He collateralizes 1,000 USDT and opens a position with 5 times purchasing power, obtaining 1 virtual ETH. Subsequently, when the ETH price moves to 6,000 USDT, User C chooses to close the position, and the virtual 1 ETH returns to the trading pool, while User C also gains the profit from closing the long position.

Project Advantages: Low Slippage, Low Gas, High Stability, High Yield

Innovative ALP Mechanism Promotes Low Slippage and High Yield

The ALP mechanism, short for Automatic Liquidity Placement, automatically concentrates liquidity near the price.

The goal of any exchange is to achieve the most effective price discovery; for this, Maverick uses both internal and external oracles. For less active trading pairs, Maverick relies more on external oracles to keep the trading pool aligned with the spot index price; for highly active trading pairs, the trading pool can be self-sufficient in price, and Maverick relies more on internal oracles. That is:

The larger the trading volume, the higher the weight of the internal oracle; the smaller the trading volume, the higher the weight of the external oracle.

As part of the ALP vAMM, these weighted oracles help the ALP vAMM continuously rebalance the liquidity in the asset pool, concentrating liquidity around the market value of the asset, thereby preventing Maverick's perpetual market from significantly deviating from the index price of its assets and nearly eliminating arbitrage opportunities.

As a result, traders enjoy greater liquidity and can enter positions with lower slippage, while liquidity providers can achieve higher yields without frequently managing their positions.

Higher Asset Efficiency

On one hand, anyone can deploy a trading pool on Maverick for any ERC20 asset trading pair they wish to trade; on the other hand, Maverick allows traders to deposit any collateral for trading without needing to convert their held assets into stablecoins, which not only gives users a broader multi-chain choice but also greatly improves asset efficiency.

More Stable Automatic Liquidation Mechanism

In the Maverick system, when a trader's collateral deposit falls below the 5% threshold, the transaction will be liquidated. This transparent and decentralized liquidation mechanism further promotes market stability.

Dual Security Assurance

Maverick sets up an independent insurance fund for each trading pair pool to prevent one pool from depleting the funds of another pool, effectively preventing asset risk from becoming platform risk. Additionally, the well-known blockchain security team CertiK is conducting a security audit of Maverick Protocol to further safeguard user asset security.

Higher Efficiency, Lower Gas

Built on a Layer 2 solution, it not only ensures high efficiency in Maverick's trade execution but also significantly reduces transaction gas costs.

Future Development Plans

According to publicly available information from the team, thanks to the aforementioned $8 million strategic financing, Maverick will launch its decentralized perpetual contract protocol mainnet on the Polygon chain in the upcoming second quarter of 2022. At that time, Maverick will seek to collaborate with more long-tail token projects to create more token use cases in the Maverick perpetual contract market and launch perpetual futures trading competitions and bug bounty programs.

In terms of governance, Maverick will introduce Maverick DAO and encourage token holders to actively vote and promote new proposals through a decentralized governance reward program.

Regarding tokens, Maverick will also initiate MAV staking, allowing token holders to earn more diversified token rewards through staking MAV.

Additionally, Maverick's multi-chain deployment plan is steadily progressing, with expectations to launch on popular chains such as Solana, Avalanche, and Arbitrum in the near future, serving a broader DeFi user base.

At the announcement of the $8 million strategic financing, Joey Krug, co-CIO of Pantera Capital, the lead investor in this financing round, stated:

DeFi needs someone to meet the derivative needs of mid-sized and long-tail assets that cannot be served by existing exchanges. Pantera believes Maverick is the protocol that can achieve this goal, as its innovative market structure provides traders with low slippage and low maintenance experiences, while offering liquidity providers (LPs) efficient staking services.

With the continuous deep development of the industry and the ongoing segmentation of the market, Maverick Protocol stands in the popular DeFi track, seizing market pain points and striving to provide DeFi players with an open, free, stable, secure, efficient, and high-yield decentralized crypto derivatives market, laying a solid foundation for the project's continuous positive development.

It is worth mentioning that the Maverick development team comprises several experts in the blockchain field: the team's background includes participation in the development of swap aggregators, Ethereum layer 2, PoS public chains, DEX, decentralized storage networks, crypto lending, and quantitative digital asset investment. Many members have also worked at industry-leading companies such as MetaMask, TRON, BitTorrent, Abra, TrueFi, Paxful, and LedgerPrime, indicating rich experience in blockchain project development and operation.

Based on this, in terms of "turning visions into reality," we can further trust the strength of the Maverick team and look forward to the future, as the Maverick project is expected to bring more innovative mechanisms and gameplay to the entire DeFi track.