Derivadex should support $ETH as collateral

Derivadex should allow users to deposit $ETH as a collateral type in an addition to existing stable coin collateral types.

Some arguments in favor of this change:

  • Traders are increasingly becoming accustomed to being able to use ether as a collateral option due to the rise of perpetual protocols such as GMX.
  • Supporting ETH as collateral allows traders to interact with the exchange without converting their ether tokens into USDC, or USDT.
  • Many jurisdictions consider such a conversion (ETH->USDC) a taxable event, which increases friction between users and the Derivadex exchange. We should always try to reduce as much friction as possible between traders and the exchange.
  • Enabling $ETH as collateral would allow people to make deposits with ETH and pay the deposit gas fee in a single transaction. The cost of gas could be deducted from the amount deposited. This reduces further friction to using the exchange.

Arguments against:

  • This could introduce more volatility/liquidations in the exchange

This change would require several technical upgrades, such as the gas fee deduction mechanic, supporting ETH as a collateral type on the exchange, supporting ETH as a stop-gap in the insurance fund, and so forth.

Would appreciate community feedback on this idea. Would you support it? Why or why not?


I think it would also be easier to decide whether to support this if we could look at some volume numbers i.e., on other exchanges, how do ETH-backed pairs compare to USD/USDC/USDT backed pairs?

Another thing I know is that many exchange which offer multi collateral have multiple insurance funds.

^ in prog research on ins funds to demonstrate that each collateral type generally requires its own ins fund.

I think the major questions to answer would be

  • are marketmakers/liquidity providers interested
  • are the volume #s compelling on other exchanges
  • how would the insurance fund be bootstrapped and what would the cost be.

That’s without getting into the technical aspects. It would probably be a complex upgrade but definitely worth evaluating from a product perspective early.

1 Like