A brief introduction to Strips Finance: It's the FIRST revolutionary interest rate derivatives exchange on Arbitrum. STRIPS was designed to allow users to trade, speculate, and hedge interest rates. STRIPS cutting edge AMM technology allows for cross-chain yield markets on the most popular DeFi and CeFi platforms.
Saigon 💎 | OIG: We have with us Andrew Head of Marketing and Ming the CEO of Strips Finance. The first revolutionary interest rate derivatives exchange project which will launch on Arbitrum. This is a great project with amazing fundamentals and they are looking to solve a very specific problem within De-Fi. Please join me in welcoming to the OIG Stage — Andrew and Ming! 🚀🚀🚀
Andrew: Hi all, thank you for joining the AMA. Lots of exciting things going around and as we are preparing for TGE our CEO would like to thank everybody for tuning in as well 🙏😊
Saigon 💎 | OIG: Thank you for being here! To kick it off, our community loves hearing about projects that provide high-tech, high-value to the blockchain.
Please tell us how this project came to be? What is the origin story for Strips Finance?
Ming: Hi everyone. The idea for Strips came about out of our own frustration with the lack of tools in DeFi that could allow us to hedge our yields from various yield farms. We identified that there was a huge gap in the market for interest rates trading, and we put together an amazing multidisciplinary team of builders and experts to build the easiest derivatives dex to trade interest rates.
Saigon 💎 | OIG: Thank you Ming! Yes, this idea of interest rates trading is a very unique and differentiated idea from the rest of De-Fi. And we’d love to explore it more here.
Strips Finance is the world’s first decentralised interest rate derivatives trading platform, why do you think it's not been done before up until this point?
Ming: The short answer is that it’s hard — like very hard. It takes a very unique set of skillsets and expertise to understand how interest rate derivatives function and to build something totally new in DeFi. In order to be successful in this space, you have to be multidisciplinary and understand the inner workings of financial markets at their core. We’re lucky to have an all-star team of builders and experts who have each individually reached the pinnacle of their respective fields.
Building and bringing to market a successful new idea simply isn’t easy. We’ve put together some of the sharpest minds in the world to tackle this problem, and we think we’ve come up with the solution.
Saigon 💎 | OIG: That’s amazing! Yes one of the things that really stood out to me when I met with your team was how well-versed they were with financial knowledge and application within the traditional finance world. And we are slowly starting to see this level of expertise trickle over into De-Fi. It’s incredible that you have collected an all-star team to be able to deal with this problem in De-Fi.
The Interest Rate Swaps market is one of the most important pillars of finance, but many people do not really understand why, could you simplify what IRS is and why its so relevant?
Ming: IRS stands for interest rate swap, and also commonly termed IR swap. It is just like a BTC perpetual swap, the only difference is that you are trading interest rates instead of BTC price. Think about what interest rates or yield represents — it is the price of money. The fact that you can put in $1 today and get back $1.01 tomorrow, that $0.01 is the price of money. Once you understand that fact, then you can understand the importance of having a market for interest rates and why it is important to the future of DeFi.
An interest rate swap is the most capital efficient way to trade interest rates, as it requires very little capital up front but gives you exposure to movements (whether up or down) in interest rates. If you think the “price” of interest rates is going to go up, simply go long on an IRS. If you think it’s going to go down, then you can also go short. It’s the perfect tool for speculators and arbitraguers in DeFi. There are a lot of other very interesting strategies that you can do, such as interest rate convergence/divergence between two protocols — i.e. AAVE vs Compound. We call this a “swap spread”. Say you are borrowing USD from AAVE and don’t want to pay higher interest if markets go up. You can hedge your floating rate risk by going long an IR swap.
Ultimately, if DeFi is going to eat TradFi, interest rate will become an independent asset class, and also potentially even bigger than BTC trading.
Saigon 💎 | OIG: Very interesting! This definitely adds another layer to De-Fi that we have not seen before. I think with a lot of the great minds in crypto right now, there is a large user base that would be very happy to see this implemented into working De-Fi models.
How big is the market potential for Strips Finance and for interest rate derivatives?
Ming: In TradFi, The IRS market accounts for over $6 Trillion daily trading volume. In traditional financial markets, interest rates trading is 26x bigger than equity derivatives. Think about that! The current TVL in DeFi sits at ~$180 Billion (~900%YoY) and growing daily. Even if you were to give a conservative estimate, I would say that is a tremendous potential market.
The market potential cannot be understated. There is tremendous potential here, and more room for growth. Unlike lending/borrowing, interest rate trading isn’t limited by the TVL of DeFi, in fact, it can even help grow the TVL of DeFi, as it will bring down the volatility of interest rates, and bring more institutions into the space. As DeFi continues to grow, more users become their own banks. The market potential is huge.
Saigon 💎 | OIG: You said it, the potential is HUGE. There is definitely an addressable portion of the market that is being underutilized right now. And Strips Finance unlocks that segment. Very good stuff guys!
We read an interesting aspect of strips regarding insurance pools and protection against liquidation losses, can you outline this for us?
Ming: Of course! Our insurance pool is there as a 2nd stop gap against market volatility. We have all been liquidated from sudden dips or rises on the crypto market in general. Although our AMM is designed to take into account unforeseen volatility, the insurance pool exists to add another layer of protection for our traders and ecosystem as a whole. The insurance pool will pay the AMM to recoup its losses if a trader is liquidated. It will also pay traders in case the AMM does not have enough liquidity to pay the trader. It also pays out AMM trading fees as a bonus =)
Saigon 💎 | OIG: I can definitely attest to being liquidated due to sudden market volatility 😂 This is a great feature that adds an extra layer of security for investors!
Let’s talk about $STRP, what is the utility of the $STRP token?
Ming: Our token is unique in the sense that every part of it powers an ecosystem that promotes AMM robustness which in turn powers its own appreciation.
The utility portion is charged by the STRP-USDC LP tokens being the native token for staking in our AMM and Insurance pool to earn rewards and trading fees.
Users can then choose to stake in the insurance pool (protects ecosystem), the interest rates market (enhances liquidity), or the governance pool (decentralized government) all of which ultimately pays out stakers AMM trading fees. We say token appreciation because the better the AMM does, the more trading fees it pays out to stakers, which then creates more demand for $STRP, ultimately increasing token value.
Saigon 💎 | OIG: Very well thought out model Ming. There are many different ways for investors to engage with $STRP and no matter what you choose, you are ultimately delivering value back to the end user.
Can you tell us about your roadmap, specifically what is coming up in the near future and then what are the more long term goals?
Ming: We’re really excited to launch our mainnet and staking rewards in November and December of 2021. In addition, we will launch fixed term products and free NFT rewards to our community traders and stakers. In the future, we also plan to launch bonds and fixed income structured products that will be built on top of the infrastructure of Strips.
Saigon 💎 | OIG: Great roadmap Strips team! Very interested in the mainnet launch and staking announcements to come. And i don’t think anyone will ever say no to the possibility of free NFT’s!
At this point I’d like to turn it over to community questions on Twitter! We’ve had a great turn-out!
Community Twitter questions:
Twitter question 1)
Ming: Our revolutionary feature which introduces interest rate swap derivatives to DeFi sets us apart from competing projects. There are a few fixed rate decentralised apps that have launched in the market, but none have taken a derivatives first approach like Strips has.
Other protocols cater to very specific use cases, a subset of use cases, while Strips is a superset of them. Strips allows for both speculation AND hedging of interest rates in a seamless manner.
By using derivatives rather than tokens as the tradable instrument, we solved a lot of the underlying problems plaguing the current fixed-rate protocols in DeFi. Namely, ease of use, capital efficiency and flexibility. Whether that becomes the norm, I’m not too sure, and we’ll find out.
In addition, we are the first derivatives protocol to use LP tokens as liquidity for our AMM. This ties the profitability and growth of the protocol closely together with token value.
Saigon 💎 | OIG: Strips is a superset of them. Quote of the day!! 💯
Twitter question 2)
Ming: Additional rewards to stakers on top of AMM trading fees include:
- Insurance Pool: liquidation profits + realized profits + unstake fee distribution + $STRP
- Interest Rate Pool: realized profits + $STRP
- Governance Pool: STRP Governance tokens for raising proposals
We are also planning valuable NFT giveaways, where holding these NFTs will bring about certain perks such as lower trading fees or staking boosts
Saigon 💎 | OIG: Thank you for the well thought our rewards structure!
Twitter question 3)
Ming: Covid has actually supercharged the growth of the industry as more people have had time/access to discover the world of DeFi. As far as our team is concerned, the global nature of DeFi predetermines the necessity of working within a global mindset. Our team is spread out throughout the world, but our goals and work ethic have always been aligned regardless of Covid.
Saigon 💎 | OIG: Great answer Ming. There is always opportunity amidst tragedy.
So this is it for us, we’ve had a great time with you both Ming and Andrew! Any last words you’d like to leave with our OIG community?
Ming: Thank you for having me 🙏 it’s been a pleasure answering your questions. Remember to keep up to date with our latest announcements from our official twitter: https://twitter.com/StripsFinance.
Our official website is https://strips.finance.
Saigon 💎 | OIG: Thank you Strips Finance! We look forward to your mainnet launch, and all of the upcoming milestones you have highlighted!
OIG Community thank you as always for tuning in! We are proud to have such an engaged community that always turns up.
