AEVO - A special reserch for Monad
AEVO is a derivative onchain exchange focused on options.
The protocol is hosted on its own L2 blockchain built on the Optimism Stack. AEVO offers an experience comparable to trading on CEX.
AEVO is a project incubated by the Ribbon Finance team and aims to attract traders.
At the moment it was decided to finalize Ribbon and rebrand. Also all RBN holders will be offered to convert their tokens to AEVO.
Architecture
AEVO operates using an off-chain order-book.
Once the buyer and seller find each other, the transaction is immediately placed in a smart contract and recorded on the blockchain. This mechanics is called - Central Limit Order Book (CLOB).
This architecture is more efficient than AMM, providing better pricing and faster execution. It also allows institutional players to act as market makers.
CLOB allows to execute up to 10K orders per second with 10ms latency.
Information about a user's funds and transactions is stored onchain at all times.
This means that all information about the movement of funds, such as fundings, option exercises, exchanges, are all placed in a smart contract and stored on the blockchain.
Aevo Rollup
Aevo Exchange is built on Aevo Chain - an optimistic roll-up on Ether using OP Stack.
Conduit is an infrastructure platform that provides sequencer services.
Sends a bunch of transactions to the main network every hour, after that it takes another 2 hours to confirm. As a result, withdrawal from the network takes from 3 hours.
Standard Optimism Bridge is used for deposits and transactions reach within 10 minutes.
Commissions
All commissions for transactions within the network are covered by AEVO itself.
The user pays only for the network commissions for deposits/withdrawals and of course transaction fees.
Taker fees: 0.05%
Maker fees: 0.03%
Option market - is the main product of AEVO. Now options on BTC and ETH are presented.
Perp market - is indispensable when trading options for delta hedging.
AEVO adds new trading pairs very quickly based on market conditions. The platform offers coin futures, which are not available even on many top centralized exchanges: OX, HIFI, GLMR, BLZ, BANANA, as well as futures on TVL FrienTech.
Pre-Launch is an innovative section that launches futures on tokens only announced but not listed anywhere. Since this marketplace has no spot, there is no funding.
In this section were: TIA, SEI and BANANA.
Pre-Launch allows you to hedge drops, tokens right after seals, as well as gives you the opportunity to try your luck calculating the potential MC.
It is important to note that there is a large spread on all markets due to lack of liquidity.
OTC is a unique solution for medium and large players.
It allows you to buy options on altcoins in large volumes without slippage, in a single order.
Professional market makers act as sellers.
Within 10 minutes they decide if they are ready to execute the order. And another 10 minutes are required to execute the order.
Coins on OTC change every month, depending on popularity.
Services
- Option market - is the main product of AEVO. Now options on BTC and ETH are presented.
- Perp market - is indispensable when trading options for delta hedging.
AEVO adds new trading pairs very quickly based on market conditions. The platform offers coin futures, which are not available even on many top centralized exchanges: OX, HIFI, GLMR, BLZ, BANANA, as well as futures on TVL FrienTech.
- Pre-Launch is an innovative section that launches futures on tokens only announced but not listed anywhere. Since this marketplace has no spot, there is no funding.
In this section were: TIA, SEI and BANANA.
Pre-Launch allows you to hedge airdrops, tokens right after seals, as well as gives you the opportunity to try your luck calculating the potential Market Cap.
It is important to note that there is a large spread on all markets due to lack of liquidity.
- OTC is a unique solution for medium and large players.
It allows you to buy options on altcoins in large volumes without slippage, in a single order.
Professional market makers act as sellers.
Within 10 minutes they decide if they are ready to execute the order. And another 10 minutes are required to execute the order.
Coins on OTC change every month, depending on popularity.
Metrics
There are a total of 4723 unique users.
In terms of volume, AEVO ranks first, among all decentralized options exchanges.
Total volume over all time is $479,768,583
30% is accounted for by BTC and 70% by ETH.
Future Tokenomics
AEVO is a yet-to-be-released governance exchange token. Which will give holders the right to control derivative products, OTC and the roll-up itself.
All governance rights of the RBN token will go to AEVO.
RBN will be able to be converted 1:1 into the AEVO token.
The transition will take place later this year.
The number of $AEVO is 1 billion, exactly the same number of RBN tokens exist.
With this ratio we can assume that FDV MC AEVO will be equal to FDV RBN at the start, which is $160M of which $128M is in circulation.
Competitors
Even if we ignore the overall market outlook, AEVO's valuation seems unjustifiably low, despite the fact that it has the highest volume among its direct competitors and the best Volume/FDV ratio.
If we take into account that AEVO also has a number of products that its competitors do not have, it becomes the clear favorite in this race. It also has the highest investment attractiveness.
Growth potential
Over the past week, volumes have averaged $10M per day.
Revenues of $1,460,000 per year.
In total, several future potential scenarios can be identified.
Scenario #1
AEVO fails to wrest market share from centralized options exchanges, the crypto market does not grow and AEVO only increases its volume along with the growth of the options market, which should aim for the same distribution among derivatives in favor of options as traditional finance 1:2.
Even if we imagine that in the next couple of years options will take a 30% share of the derivatives market in crypto, AEVO volumes will increase 7.5 times to $135M.
With a 0.04% commission, the revenue per day would be $54,000 or $19,710,000 per year.
P/S - 8
Scenario #2
The market doesn't grow, options share doesn't increase, but AEVO chews up some volume from Deribit and takes at least 5% of its market.
With $1.5B volume at Deribit, 5% is $75M. In this case, daily revenue would be $30,000 and annual revenue would be $10,800,000.
Scenario #3
The crypto market does not increase, but the above scenarios add up.
In this case, the profit would be $81M per year.
The crypto market grows and with it all the above scenarios come true.
Potentially, the price of BTC at a future bullrun could reach the $160K mark. This is 6 times more than the current ones, we can assume that the derivatives market will increase at least 6 times, but in theory even more.
In this case, AEVO's profits would rise to $486M per year.
To summarize:
Assuming that P/S growth has a direct correlation with coin price.
In this case, under:
- first scenario, the fair price of AEVO will be 14x the current price.
- second scenario 8x
- third scenario 56x
- fourth scenario 376x
In this case, the FDV would be $60B, which sounds unrealistic in the current realities.
Team and Funds
AEVO has received investment from funds such as: Paradigm, Dragonfly Capital, Ethereal Ventures, Coinbase Ventures, Nascent, Robot Ventures, Scalar Capital, Alliance.
Paradigm closed the Series A+ round at an RBN token valuation of $0.25
- Julian Koh, CEO - former Coinbase software engineer
- Ken, CTO - also a former Coinbase engineer.
- Jacob - Tech Lead
- Jeremy - Quant
- Vinnie - Design Lead
- Gabriel - Operations
- Ben Burns - Solidity Engineer
- Anfal - Marketing
Conclusion
Options is one of the most important financial instruments that can allow both ordinary users and institutional market makers to make money.
In traditional finance, it has already become the dominant derivative for speculation, overtaking futures.
There are two main challenges to the democratization and popularization of options - high entry threshold and low liquidity.
Most crypto market players are not familiar with this instrument and AEVO's task is to educate and build the trust of new users almost from scratch.
With the arrival of new users, volumes will increase, this will attract professional market makers, and therefore the level of liquidity will increase, reducing spreads.
In the crypto market, the options market is just beginning its ascent. But with the growth of the cryptocurrency sector itself, as well as the development of DeFi and the eroded confidence of centralized exchanges, the options market is expected to boom in 2024.