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Divergence: A Complete Overview of the Fast-growing DeFi Protocol

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Divergence is considered one of the most promising DeFi derivatives protocols for good reasons. It is building a decentralized platform for volatility trading and hedging with a focus on digital native assets. The protocol is backed by top investors such as Mechanism Capital and KR1. Its recently announced strategic investors include Huobi Ventures and AscendEx. The protocol is planning to launch its native DIVER token on 20 September 2021.

Many investors are inquiring about what Divergence is doing, and its upcoming IDO. So we reached out to its team for a Q&A section on Divergence and the key features.

Q: What is the value proposition of Divergence?

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A: Divergence is a platform for anyone to trade, hedge and profit from DeFi-native volatility. The key value proposition of Divergence is to

  1. Provide DeFi users with features to protect their holding value.
  2. Offer an additional source of yield — volatility premium, in addition to traditional lending, staking, yield farming rewards for LPs;
  3. Provide an easy-to-use tool for traders to profit from asset volatility changes.

Q: What differentiates Divergence from traditional binary options platforms?

A: Traditional binary options prices are quoted by their implied volatility, and transactions are matched in a centralized fashion. This means that market participants have to trust the dealer who facilitates trades and accept what is being quoted.

Divergence deploys smart contracts that enable open and permissionless market-making and trading on-chain. It is a fully decentralized market where anyone can participate in the real-time price discovery process. There are no centralized authorities to determine the pricing of implied volatility for binary options. The market’s expectations for market volatility is reflected in the transaction prices of derivatives tokens on Divergences.

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Q: What are Spears and Shields?

A: Spears and Shields are tokenized representations of binary call options and binary put options. Spear buyers make bullish bets on tokens’ price or price volatility, while Shield buyers do the opposite.

To place it into perspective. Spear token holders will be eligible to claim 1 collateral at expiry if the underlying settlement price is at or higher than the strike. Or in the case of range-strike options, Spear holders get paid when the underlying settles outside a price range. Shield token holders will be eligible to claim 1 collateral at expiry if the underlying settlement price is lower than the strike or lands within a price range.

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Q: How does Divergence differ from traditional liquidity pools?

A: The fundamental difference is that Divergence pools facilitate the automatic market-making and peer-to-pool swaps of binary options tokens. Each pool can be considered a specific binary options market with its own underlying expiration, strike price, collateral, and rollover mechanisms (per strike or per percentage). Only one type of collateral is used per pool.

Q: What are the main advantages that Divergence offers to liquidity providers (LPs)?

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A: Divergence has different features that provide benefits to liquidity providers. Liquidity providers can have higher capital efficiency since the minting and liquidity seeding phases of derivative tokens (binary options) are integrated and do not involve over-collateralization.

Divergence also allows LPs to create multiple binary option pools using fungible tokens, including DeFi assets from other protocols. LPs can leverage this by depositing a yield-bearing asset into liquidity pools and earn rewards on Divergence in addition to rewards from other platforms.

Q: Is Divergence a cross-chain DeFi platform?

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A: Divergence is currently building its DEX on the Ethereum mainnet with plans to deploy on the Binance Smart Chain and on Ethereum L2  in the future. As we are blockchain agnostic, we can see us building where the ecosystem demands us to be.

Q: What is Divergence Flagship Product?

A: Divergence flagship product is an AMM-based binary options marketplace for DeFi natives assets. Key features include

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  1. Composability with DeFi assets. This means that Liquidity providers can write binary options with any fungible tokens as collateral. This significantly increases capital efficiency.
  2. Market continuity chain: Divergence smart contracts continuously roll over pools based on preset target volatility or strike within a single, smart contract. This means that liquidity providers don’t have to relocate assets once the binary options contract expires.
  3. Capital efficiency. Liquidity providers are not required to over-collateralize since there is a predetermined amount of payout at expiry, 1x collateral is required for writing a call and a put. Divergence reserves maximum claims for collateral, providing liquidity providers flexibility of withdrawing capital prior to expiry.

Q: Who are the major investors behind the Divergence project?

A: Divergence has successfully attracted investment from different rounds of funding. Some of the key participants include top VCs such as: Mechanism Capital, KR1, Arrington Capital, Trading Firms: Orthogonal Trading and DeFi stakeholders: Do Kwon from Terra, Igor from xDai, Sandeep from Polygon.

Other strategic investors include Huobi Ventures, AscendEx, HoneyDao, ICOPantera, Drops Ventures, Kyros Ventures. Divergence is a unique project, and this is evident with the diverse group of firms and individuals that have invested in the initiative to build a decentralized platform for composable crypto derivatives.

Q: When is the Divergence IDO taking place?

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A: Divergence will host its IDO (Initial DEX Offering) on September 20, 2021. The IDO will distribute our native token DIVER to the public. The token sale will offer 2% (20 million) of the overall supply of DIVER tokens through a Dutch auction on SushiSwap’s MISO launchpad.

A Dutch auction is a fair distribution method and a type of distribution in which the token price opens at a higher price and descends over time. The starting price of the DIVER token sale is $0.010, with a floor price of $0.05. After the IDO is completed, DIVER tokens will be available for trading on SushiSwap, and future listings are planned on major exchanges.

Q: What are the future developments planned for Divergence?

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A: Divergence expects to launch its Mainnet in the fourth quarter of 2021. The Mainnet launch is expected to include various feature enhancements and interface optimizations from its public testnet on Kovan. LPs will be able to use any fungible tokens as collateral as opposed to one testcoin on the testnet. Divergence also plans to launch additional pairs and improve on the ease of navigation and user experience.

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DeFi

DeFi Lending: Understanding the ins and outs of decentralized lending

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What is DeFi Lending?

Decentralized finance is a blockchain technology that eliminates the use of intermediaries like brokers and decentralized ledgers. This type of finance offers anybody willing to earn interest and profits through trade using digital assets. Most assets used for trading in decentralized finance are a result of a cryptocurrency platform called Ethereum. It is also responsible for most decentralized finance applications.

Instead of intermediaries like banks in traditional finance, Defi is enabled by smart contracts and protocols directed by AI and computer algorithms. While some think it cannot go mainstream since some traders do not accept crypto coins and tokens due to the fear of volatility, statistics do not support the same. According to Defi Pulse, there is 83.05 Billion USD locked in DeFi today. DeFi has also brought about a significant improvement to the blockchain.

How DeFi Lending works

DeFi lending provides a chance for trade between two parties and can only involve a trusted third party if the APIs allow. With the use of this criterion of finance and smart contracts, P2P ending is possible. A crypto investor can enlist his crypto coins for lending on the crypto platform and lend out to another investor by use of protocols. This type of lending is becoming a trend because of how trustless and transparent it is.

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A borrower is supposed to create an account on the cryptocurrency platform then ensure that he has an active wallet. He is then supposed to open smart contracts that are supposed to guide how the lending is expected to happen. 

Defi lending allows the lender to earn interest from the loans. One can borrow money at a specific interest rate. It is also helpful as it serves financial services while giving back to the cryptocurrency community. It is beneficial to both lenders and borrowers because borrowers can access crypto loans quickly, and the lender earns a yield from investments instead of watching wealth sit in one’s wallet.  Lenders are like investors who deposit their money in lending pools like banks in centralized finance.

Various ways can be used for an investor to access their interest and from borrowers. Moreover, different liquidity pools have different borrowing approaches, so an investor needs to research the pools. 

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Borrowers are expected to offer something of equal or more value compared to the loan amount provided. This is used as collateral during loan payments. Depending on the borrower, a wide variety of crypto tokens can be offered as collateral for the loan.

Benefits of DeFi lending

Decentralized finance is advantageous in different ways. These are;

  • Unlike traditional banks, the processing speed of crypto coins is fast
  • Decentralized finance complies with the law of the land
  • There is an availability of helpful analytics that a borrower can use to tell the best lender and vice versa
  • DeFi is permissionless
  • There is transparency in their services

As DeFi targets to go mainstream, it is advisable to try its services like lending to compare it with the usual way of things; it might just be your niche! 

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Open DeFi Notification Protocol Aims to Help Traders Manage Risk

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October 21, 2021
 — Decentralized public blockchain platform Orbs has announced the launch of the Open DeFi Notification Protocol, a product designed to supply users with free mobile notifications for consequential on-chain events.

The chain-agnostic protocol originated from the DeFi.Org Accelerator, a joint venture between Orbs, cryptocurrency exchange Binance, and wallet provider Moonstake. The Accelerator helps founders launch the next wave of innovation in decentralized finance, providing liquidity, mentorship and exposure to market players.

The Open DeFi Notification Protocol – which is Orbs’ newest contribution to the venture – leverages contributions from community members to record events such as accumulated pending rewards, price swings, near liquidations, stop loss, contract upgrades, new governance votes, and more.

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In gaining access to such data, DeFi users including traders and liquidity providers can better manage their activities and avoid losses, particularly during periods of market volatility. With a simple 30 minute integration on Github, any DeFi project can furnish its users with free mobile notifications, a feature that may help them gain an edge on rival protocols.

‘Transparency is a hallmark of blockchain, yet reliable mobile notifications that can aid the DeFi community are virtually nonexistent,’ says Orbs Co-Founder Tal Kol. 

‘Our talented team has created a user-friendly protocol that functions almost like a reactive DeFi assistant, alerting users to the possibility of impending liquidations, significant price swings, contract upgrades and the like. We are positive it will make a huge impact.’

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Although the initial beta version of the Open DeFi Notification Protocol will use a centralized node to track and display the various updates, Orbs intends to launch an updated version that utilizes the eponymous network’s set of independent nodes  to aid further decentralization.

With the Open DeFi Notification Protocol, users can set up any number of alerts for different defi apps, with the ability to integrate an open-source web component directly within many dApps’ frontend architecture. Users simply downloads the mobile app “DeFi Notifications” for iOS or Android and scan their address QR in MetaMask (or the position QR in the app’s UI). No registration is required. An example video of the Protocol working with Sushi has already been uploaded to Orbs’ official YouTube channel.

‘The great thing about the Protocol is that it can work with emerging DeFi projects,’ says Tal Kol. ‘All that’s required is the implementation of a simple JavaScript web3 class, to extract the notification from the on-chain data. This is then contributed via PR to the Protocol Github repo.’

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About Orbs

Orbs is a public blockchain infrastructure designed for mass usage applications and close integration with EVM-based L1’s and L2’s such as Ethereum, Binance Smart Chain (BSC), Polygon, Solana  and Avalanche. The Orbs protocol is decentralized,executed by a public network of permissionless validators using Proof-of-Stake (PoS) consensus and is powered by the ORBS token.

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The Biggest DeFi Hacks in 2021

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  • According to DeFi Pulse, there is around $100 billion locked up in DeFi.
  • In 2020, around $120 million was lost to DeFi hacks

Decentralized Finance deals with a decentralized ledger and lacks intermediaries, making it quite favorable but also risky. According to DeFi Pulse, there is around $100 billion locked up in DeFi. As the total value increases, so does the crime rate around it. Hackers have taken up the opportunity to loot investors as the business is booming.

Nevertheless, more measures have been taken to ensure the safety of investors’ assets. In 2020, around $120 million was lost to hackers. This year, the number is probably going to be much smaller, taking the current statistics. 

Funds are swindled from the system by use of hacks, rug pulls, and system failure. However, these are vital areas that the platforms have decided to put significant concerns on to curb the crime. These are some of the biggest hacks that have taken place this year.

Significant DeFi hacks in 2021

Yearn finance flash loan attack

The attack on the platform happened in February this year. The hackers siphoned $11 million and managed to get away with $2.7 million as profit. They used $8.5 million as fees. The hackers used flash loans which they used to make a collateralized loan. The hacker then made a deposit in Yearns pool, which led to an inflation of DAI.

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EasyFi hack

Monday 19th of April this year, a cyptojacking happened to EasiFi. The platform sits atop of the Polygon Network. A loss of $80 million worth of assets was lost to a strategic hack. The hackers took 75 million USD as assets and siphoned 6 million USD from liquidity pools. To recover the loss and prevent future similar attacks, the managing team altered the blockchain network protocol.

PAID Network major loss

The PAID network suffered a significant loss of around 180 million USD. Hackers managed impunity of 3 million USD. As if that’s not enough, the hackers minted PAID tokens worth above 180 million USD. It caused inflation in the supply of the tokens, which led to a drop in their value by about 85%. While some argue that the attack might have been a rug pull and not a hack, there are no facts attached to the claim.

Uranium Finance Token migration hack

An attack on the Binance Smart Chain network-based platform, Uranium Finance, happened during a token migration event earlier in the year. It was focused on BSC’s automated market protocol. The hacker managed to get away with 50 million USD after taking advantage of a coding error. He liquefied the process without revealing his identity.

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Spartan Flash Loans hack

The Spartan protocol is also a BSC-based platform that suffered a hack in May this year. The project lost 30 million USD taken out by flash loans from PanCake. He altered the balance of assets that were locked in the liquidity pool. He withdrew the stolen funds by use of DEXs 1inch and Nerve Finance.

DeFi platforms should heighten their security measures since DeFi hacks perpetrators are busy developing better ways to manipulate loopholes in finance to their favor. 

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