Links
Youtube link: https://www.youtube.com/watch?v=JA4vG8JjVSI
Official links: https://linktr.ee/
Summary
Wladimir from Diva protocol shows us how Diva is changing the game for derivatives & using Tellor to do it.
Whole call
Nick: We have a phenomenal guest with us today who we've had the chance of getting to know over the past few months would you like to introduce yourself what you’re doing and your project?
Wladimir: Sure, thanks a lot for having me in this call and giving us the opportunity to introduce what we're building and yeah. So, my name is Vlad I'm the co-founder of Diva protocol it's a protocol to create and settle fully customizable derivative products. I will explain what derivatives are in a sec and yeah so, we started building it I don't know one and a half years ago and fully focused on building that maybe over the last couple of months and now we are we have just launched the test net yesterday so we'll also spend a few words on that at the end of the presentation and yeah what else. My background is in mathematics and finance so I'm mostly doing solidity programming and project management Diva protocol and yeah supported by a great team that are contributing on all hands where help is needed so.
Nick: Nice yeah, I mean so I think most people here or probably that are watching this will be semi familiar with like derivatives yeah but basically you know like what would be an example like which ones are you going to launch with I guess right out the door?
Wladimir: Which derivatives? If you allow to share my screen then I can briefly I prepared a few slides so just simpler for the listeners. You see my screen yep okay. Yeah, I think the term derivative that might be a little bit intimidating for some people but is like essentially, it's pretty simple. A derivative has basically two ingredients it has an event and then you have a payout that is linked to the outcome of that so the simplest example is sports bet right so you can if you bet on team A if it wins you get a payout of one, if it loses you get you get nothing and yeah now you can generalize that idea so instead of a sports event you can take say the bitcoin price or anything else right or some insurance event say the house burns down yes or no so you can choose whatever events you want and then on the payoff side you can also instead of using a binary one so zero or one all or nothing payoff you can maybe choose something that is more linear in a certain range and yeah so that's kind of like the basic idea of what the derivative is I don't I mean in traditional finance there's a lot of terminology that is used among professionals but I feel like that's probably the best explanation for people that just get started and yeah.
Nick: So, I mean I can just ask you the easy question so like where does the oracle fit in here and.
Wlad: Yeah, exactly I wanted to come into that so I would I wanted to briefly explain how Diva protocol works how it allows to create these types of structures and then basically where the oracle comes into play and briefly explain that. So, basically how your protocol works is you deposit an asset collateral into a smart contract and in return you get the claim that is represented by two directionally reversed payoffs or legs so you have a short and a long so if you sum them up you always get one so basically if you deposit say 100 USDC you get the long and the short sight so if you want to take out the 100 USDC from the pool you just give both the long and the short side back and you get your USDC back now I mean it wouldn't be fun if you if you do that right so what people want to do is they deposit 100 USDC they get the shortened alongside and then they want to sell one side in order to gain either exposure to the upset or to the downside and that's basically what your protocol is doing now here you have like a linear shape right but you can think of any other shape binary or combination of binary linear and in diva we have four parameters which are called floor inflection cap and gradient which basically allow you or allow users to slice and dice these payoff patterns and I will demo that in a sec. To come back to next question where the oracle comes in. Now let's say you have you create a derivative on the bitcoin price right, on the bitcoin price at the end of the year for instance so these positions they need one input from an oracle so someone needs to report what is the btc value end of the year. So, once we get there and yeah so and I mean for Diva protocol to function this oracle part is extremely critical so if this oracle park doesn't work so if I don't know the oracle sense unreliable information and the payoffs for the short and long positions turn out to be wrong users will lose confidence and will no longer use the protocol so that's why like the oracle is really the key part and yeah, we are super excited to work with Tellor on a solution that will actually provide the highest guarantee or give users the highest confidence that the values that are reported are actually accurate and yeah so that's kind of like how this diva protocol works and yeah. Here maybe just a few examples what kind of payoff shapes you can produce just by moving these four parameters so that's on the long side on the short side it's basically just mirrored I can also briefly show you how this looks like in the app and yeah as a reference asset it's also we don't limit users to any specific assets they can literally use anything so it's sort of like a standard to create distributed assets and users can use anything they want to bet on or they want to create insurance on so it can be like market prices of assets but you can also create more exotic structures where you use for instance the eat gas presses the underlying and use that you hatch yourself against rising gas prices or you can lose the TVL in DeFi as the underlying. And yeah, so with this flexibility you also need a good oracle that is able and flexible enough to provide all these inputs when users need them and yeah.
Nick: Cool yeah, I mean I have to ask you like you know why didn't you use ChainLink Maybe I'm jumping in a gun yeah. Three slides ready at the end yeah.
Wlad: Exactly yeah it's a I mean it's a very good question so we actually started looking into ChainLink and the problem that we had with ChainLink was that it was incredibly difficult to get historical prices so to get the historical price feed for these derivative assets so in Diva protocol when the pool expires so these assets expire the reporter or the data provider or the oracle has 24 hours to report the value as of the expiration date and what we figured what we yeah; in ChainLink they have this concept of rounds and it was incredibly difficult to translate it into time stamp the time stamps which the expiry dates are denominated in and yeah we basically gave up on that and yeah we're looking for a solution that was flexible enough to do that and what we learned during that process was that a lot of oracles actually focus on providing real-time data so the current value and that makes a lot of sense where liquidation liquidations need to be done right so they rely on the most recent values and I think that's where a lot of oracles focus on but for prediction markers there was there were not so many solutions out there that yeah could offer something up out of the box.
Nick: Yeah, cool. I mean I would hardly say that your solution was sort of out of the box.
Wlad: Yeah, no it was not it was not no but something like I meant solutions out of the box exactly that would report historical prices if you send the request that's what I meant with out of the box.
Nick: Sorry.
Wlad: Yeah, so maybe I can spend let me maybe first show you how what I just told how it looks in the app and then I will spend a few words on the Tellor oracle integration how we envisage this to be uh or to look like when we eventually launch the app and test that so this is some insight into our app where users can create derivative products so here for instance, I have a product on the bit on the usd price of bitcoin right we have a few suggestions here but theoretically or anyone can just I don't know TRB/usd define any other references they don't need to stick with what we're proposing here and then you also define at which point in time do you want to observe that metric say end of July so this this part defines your events you have a metric and you have the point in time at which you want to observe that and here at the bottom you define the payoff shape so you basically you as a user you can say how the payoff should look like as opposed to many other prediction markets you might know over poly market they typically only offer binary payoffs but for instance for myself I don't like fire because I don't just doesn't fit into my risk appetite so I would probably go with something linear but binary is also possible it's just one special case so you can I basically create a binary option or you can go more crazy and create something very specific for your particular use case something like a combination so now is there sort of a max leverage you can get on it um well the next level is basically the binary right okay exactly so you can yeah you can control the leverage if you choose a very tight range so here you're tracking bitcoin in the range 20 to 21k so it's completely high leveraged product yeah so when you define this derivative product then in a in the second step now you basically or the user needs to say okay who is who is supposed to report the final value when this pool expires so these assets expire and I mean right now for the testnet we're just running like a test bot but the ultimate goal is when we launch on mainnet later this year to have Tellor as the kind of like as the first integration on the oracle site in yeah in this diva app yeah so basically you have these two steps where you find the oracle and then you actually create these assets and then they will end up in your wallet as two separate positions I'll quickly show you slowly so for that so basically you have the btc usd the long on the short side and then you basically trade one side out to obtain exposure to one of the sites. That's kind of like a high-level overview.
Nick: Sure, and when you trade them do you guys have like a built-in AMM or something or do you guys just use an order book or do you guys run that or do you guys not even run that?
Wlad: Yeah, exactly so we are leveraging 0x protocol for that.
Nick: Cool.
Wlad: So actually, this app that you see is the first app that is built on top of Diva protocol but in addition to Diva protocol which is responsible for creating these assets and kind of like determining the payoffs when they settle, we also leverage 0x protocol for the trading part so people to facilitate the exchange and yeah then when we go live, we will also use Tellor oracle. So, basically this app that you find here is a combination of free protocols to offer users yeah maximally decentralized solution. None of the data that's that you see here is stored on any server sorry I have to correct myself we actually have four protocols we also use the Graph proper code so all the data is indexed so this divide that you see here it's a combination of four protocols actually working together.
Nick: Super cool.
Wlad: Yeah, and maybe I can spend also a few words on the solution that's we're building and why we went with Tellor oracle in the end and why it's like much better than say like a centralized approach so maybe I highlight the drawbacks of the centralized approach in our case let's say you have this oracle that I just showed this central oracle Diva protocol so now the problem with the central oracle you have a single point of failure what if this oracle or what if the bot that is running on a server goes down right and the user doesn't notice that or what if there are a lot of pools that is reporting so this one single bot is basically queuing all the reporting so there could be an event where there are too many pools that needs to be reported and yet he just cannot make it so yes central centralized sports certainly not a good solution or not a robust solution for diva protocol to function properly the nice thing about Tellor protocol is that basically any anyone can report to report the value right so you don't have the single point of failure anymore so reporters will see okay this school needs reporting they need the bitcoin price as of the end of the year for instance right and everyone can submit so if one bot goes down there are several other ones that have the possibility to submit the value and earn a fee so from that perspective it's much more stable and you also don't have the skewing queuing problem that you would have when you use a decentralized option so yeah overall I think Tellor yeah it's just a really great fit on the oracle side for this new protocol. And yeah, but as Nick said the integration was not out of the box so it was not super straightforward and this has to do a little bit with the theme mechanics so how diva protocol works is when an address gets selected as the data provider for derivative uh for a derivative, they are entitled for a five-bit fee based on the total TVL inside the spool so I don't know if there is like 10k usdc locked in this pool to generate these short and long positions then the reporter would get what is it this is five dollars to report the value now you could imagine the case where I don't know there is one million or 10 million pool and the fee to the reporter would actually be I don't know 500 or even higher dollars for just reporting one single value and the challenge was that this could actually trigger like a wave of disputes on the Tellor dispute or in the Tellor mechanism right if there's if reporters know oh there's a reward or there's a possibility or chance to get like five thousand dollars to report the value and you see someone already reported before you and this guy might be eligible right you might start disputing each other yeah which may have like undesired consequences or delays so that was a little bit a challenge and we were thinking how to solve that part and the solution that we came up with is that we cap the fees that go to the to the reporter at ten dollars for now I mean this is this is like an input we can agree on and also change over time but let's say ten dollars and everything in excess will be sent to the to the teller treasury so that's kind of like the current setup and yeah so the consequence of this logic is it's no longer sufficient simply submitting the value of the reference asset at expiration so let's say the bit compressed enter here but the report is also supposed to report the value of the collateral that is used suffering I mean in the simplest case people will just use usdc as the collateral so you just report one but what if someone wants to use eve as collateral right then yeah you basically need this additional piece of information in order to determine how much is going to the reporter and how much is going to this access fee receiver which is the Tellor treasury so that was a pretty tricky part and yeah also big thanks to the Tellor team, Owen and Tim, especially who helped help us you had to basically build a reporter for that particular.
Nick: Does that make sense to everyone here sort of I can explain it further if you guys want. Yeah so, I think like the basic thing is like if you were willing let's say there was a Diva which of course is going to happen they're going to get enormous and they're going to have like a billion-dollar pool over on diva and what's a what's five pips on a billion-dollar pool like 500k or something like that but they you know you let's say you're going to pay or even 50k. Let's say you're going to pay 50 000 to the next whoever reports this teller value it's thousand dollars well it actually creates a really bad incentive because so like let's say Spuddy throws it off hell yeah, he's getting fifty thousand I would actually want to dispute Spuddy and then submit because I can dispute him for like a thousand dollars and then put my value up and that's even though his value was good it leads to like weird incentives whenever the fee is so crazy unnecessarily high so that's why if Diva got too successful that their fees to the oracle were unnecessarily high you would you know actually create like an issue in the Tellor system as far as like it doesn't actually break anything in the Tellor system like no matter what we're still putting good values up on chain it's just like miners aren't acting and you know there's like a we want to like save people money and you should you know and then be like you don't you don't want this game to happen so.
Wlad: Yeah, anyway thank you thanks a lot for yeah experience.
Nick: Okay can I ask you some we'll ask you a few questions more, good so I just have to ask so derivatives and prediction markers have sort of been done in the past what makes Diva what's going to make Diva win?
Wlad: Well like in Diva prediction markets as you know then it's just one special case as I mentioned most prediction markets only offer you this this binary type of payoff or nothing which might not be yeah might not be a good fit for a lot of users, so Diva actually allows to adjust the payoff structure to your risk appetite for instance what you see a lot in traditional finance especially in the structured products business are the following types of payoff patterns so like these combinations of binary and linear right so this is something that does not yet exist and we achiever can offer that and fill this gap and yeah also we don't impose any reference assets that you can use we don't impose any collateral asset that you can use and we don't impose any oracle that you can use so we are working on integrator or a Tellor oracle and propose them to users but technically users can choose whatever they want so it's super flexible it's like the Uniswap for derivatives you can create derivatives on whatever you want including insurance products and yeah as you said mentioned prediction markets and yeah, we'll just see what people can come up with and yeah that's one part so the flexibility and also the other and the other part is probably also our strategy so how we want to grow diva so I think what you see with the existing prediction markets they're more or less silos so they'll build their application of their smart contracts and they expect all users to use their application like holy market for instance while our approach is more okay here you have the smart conflicts it's the engine to create these type of derivative products build great front-ends on top so this Diva app that you find here this is just the first implementation of an app right but you can build so many different things maybe you want to build an insurance platform on top with a focus on d5 hack insurance for instance right so also like the different types of strategies I think that that's what's what differentiates us from our competitors.
Nick: Cool awesome Owen how was integrating diva Owen and Tim?
Owen: It's good we we've had like calls every week with Wlad and it's been great working with them and I'm excited to get our reporters trying it out hopefully some people in our community will be excited to do that and whatnot so cool.
Wlad: Yeah, I think we have now enough time also for testing that properly I think that's important.
Nick: Yeah, I know I mean thank you so much for being a protocol that tries to properly test everything you know it's kind of it's going to make a difference in the long run for sure you know I know you've taken a long time to launch but it's like definitely for anyone in your community it's so worth it and it's refreshing from like an oracle perspective to have somebody who actually wants to think through these things so hard so it's awesome. Yeah, anybody else have anything for plan let us know.
Mike: Let the audience know like where they can get involved how they can find out more information about your yes where to find.
Wlad: Yes exactly thank you thanks a lot so as I mentioned through my presentation we have launched testnet recently so where users can earn a claim on the future diva token that will launch and thereby become governors of the Diva protocol in the future so basically how this works so if you access the app diva dot finance you will see a few tasks that users are asked to complete all are related to discovering the functionality of the diva app so basically you as a user you get familiar with the diva app and we will benefit from the feedback that we'll receive so that's kind of like the setup and yeah so check that out every every uh item here is linked to our docs and it's also described how to create say binary options or options within linear type of payouts and yeah so here again what are derivatives basic what I just described is again in our documentation what is diva pro what is Diva app so you find a lot of information from docs.your protocol dot io and yeah if you want to read our testnet amount announcement that's on our Diva protocol dot io page so right now it's more like a landing page so you have basically everything you can access via this page so you can access the app here by pressing this button you can access the git book here and you can also read our testament announcement where you basically find all the details how to participate in the testing.
Brenda: Nice.
Nick: Super cool thanks yeah, we can't wait for you guys to launch and I'm sure people in our community will hear from you more cool.
Wlad: Thanks a lot.
Nick: All right thanks everyone we shall talk to you guys all yeah soon see.
