AlphaDex : a decentralized derivative market and liquidity aggregator

On AlphaDex and KittenSwap

The two pillars of the Kitten.Finance ( https://www.kitten.finance/ ) ecosystem are AlphaDex and KittenSwap. They complement each other.

AlphaDex works in a layer above all AMMs, providing advanced trading functionalities (including derivatives) for KittenSwap, Uniswap and Sushiswap etc.

You can even delegate other traders to trade for you, with risks and rewards controlled by the contract. Originally I planned to reveal this in a later update, however KP3R comes out with somehow similar ideas (delegated jobs managed by contract), so I can reveal it now.

A testnet version of AlphaDex v0.9 is at https://www.kitten.finance/alphadex/ .

KittenSwap is the ultimate AMM, supporting one-sided liquidity and limit orders, providing solutions for the IL problem and the oracle problem, and comes with a stable coin kBASE.

Moreover, KittenSwap has the best support for AlphaDex functions. Therefore KS comes after AD, because KS must take functions of AD into consideration.

Here we present the first look of a basic AlphaDex function, which is a bit similar to a binary option, yet with improvements to make it immune from price manipulations and flash loan attacks.

The Staking Process

If you stake in round x, you are speculating on the TWAP of round x+2 vs the TWAP of round x+1. (TWAP = time-weighted average price).

If you ask : why x+2 vs x+1 instead of x+1 vs x? Then please read https://medium.com/@kitten.finance/alphadex-explained-in-images-fe269837b3e1 and https://medium.com/@kitten.finance/alphadex-explained-in-images-part-2-bed309b6ca0a.

For example, let one round be 10 minutes. Assume current round is 09:20:00 ~ 09:30:00. In this round, you put your stakes on the difference of:

  1. the TWAP between [the last trade before 09:30:00] and [the last trade before 09:40:00].
  2. the TWAP between [the last trade before 09:40:00] and [the last trade before 09:50:00].

If you think 2 > 1, you are bullish. If you think 1 > 2, you are bearish. If 1 = 2, then everyone gets their stakes back.

The Payoff Process

AlphaDex introduces the concept of paired stakes, to limit the risk exposure when there is bull-bear imbalance in stakes.

As an example:

  • Let there be 100 bullish stakes and 10 bearish stakes. Then the amount of paired stakes is 10. So the bulls are only risking 10 stakes.
  • In this case, if bulls win, bulls receive 1.1 stakes per stake.
  • (Note 100 * 1.1 = 110 = 100 + 10)
  • In this case, if bears win, bulls can still receive 0.9 stake per stake, while bears receive 2 stakes per stake.
  • (Note 100 * 0.9 + 10 * 2 = 110 = 100 + 10)

Therefore one can put significant amount of stakes near the end of a round, without worrying about them taken by tiny stakes on the opposite side.

Conclusion

Derivatives are essential financial instruments and consist a multi-trillion dollar market. Moreover they provide highly valuable information (such as implied volatility) for other tasks.

Hence we will firstly focus on derivatives settled by contract. And we will gradually reveal more AlphaDex and KittenSwap functions when they are ready.

A testnet version of AlphaDex v0.9 is at https://www.kitten.finance/alphadex/ .

Join our Discord and Telegram ( on https://www.kitten.finance/ ) for latest updates.

For more detailed discussions of AlphaDex, please read:

and: