Sovryn Voices: How Vasili Serchev Builds Perpetual Futures the Sovryn Way


July 25, 2022

Vasili, can you tell us about your background and what led you to join Sovryn?

I am a computer scientist and have a PhD in quantitative Finance, I have worked for banks in interest rate derivatives pricing and quantitative risk. I met Jamie and Ororo kitesurfing in South America and it is them who brought me on to Sovryn. 

What is your role at Sovryn in a nutshell?

Building perpetual futures the Sovryn way!

What inspires you about Sovryn in particular?

I like the idea of a non-custodial permissionless bank. 

Tell us about Perpetual Futures on Sovryn - what makes them unique compared to other platforms?

With Perpetual Futures, traders can get leveraged short or long exposure to an asset. The contract is similar to that of a traditional future but has no maturity, hence the name 'perpetual future'. Futures prices move towards the spot price as the expiration nears, due to arbitrage trades. 

Perpetuals, however, have no expiry date and there needs to be another mechanism to pull its price towards the spot. This mechanism is that there are funding payments. The long pays a funding payment to the short if the perpetual price is above the spot price. This makes the product less attractive for the long trader, and a resulting change in demand for long contracts pushes the price down towards the spot. If instead the price is below spot, the short pays the long to push the price upwards.

What makes Sovryn Perpetuals unique? First and foremost, Sovryn Perpetuals are classic Perpetual Futures, no tricks and traps. Second, the pricing approach for Sovryn Perps is designed so that trades that reduce the system’s risk are most profitable for the traders. As a result, we are able to offer very competitive pricing from which ultimately traders profit. Last but not least, Sovryn Perps allow for any collateral currency. So the first Perpetual family we offer is collateralized in BTC. Imagine you buy gold in BTC - if the gold price goes down you pay in BTC, if the gold price goes up you earn more BTC.

Tell us about the Perp futures competition which recently ended. 

We had our first competition on testnet a few months ago, which allowed us to collect some user feedback. We have since improved the user interface and added limit and stop-limit orders to allow for more sophisticated strategies. 

We have now battle-tested the system with an additional competition on mainnet, involving real funds. The BTC price movement during that period made it not easy for the competitors. However, the best trader achieved a return of 225%. The prize money was distributed among the top 3 traders. 

During the competition, most traders entered very small positions with leverage up to 17x. Data from other exchanges shows that, on average, traders have larger positions and lower leverage. From that we conclude that high leverage and small positions is likely to be due to the incentives given by the competition rules, namely we awarded high percentage gains rather than high absolute gains. 

The largest notional traded was 0.4 BTC. It’s nice to see people want to trade decent amounts too. 

What’s next for Sovryn perpetuals?

Before launching additional trading pairs, we concentrate on user adoption. First, we want to make it easier for users to onboard their funds onto the platform. Second, we revisit the trader experience. Part of it is that we think it’s fun to have a leaderboard where traders can compete. We will therefore polish the leaderboard and implement some new ideas around the battle of traders.

Aside from making the world more sovereign, what do you get up to during your free time? 

I like sports - sometimes involving strapping some sort of board onto my feet, traveling, and solving tricky problems. 

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