Deriva DAO (DDX) operates as a decentralized exchange (DEX) for derivatives on the Ethereum network. It highlights specific performance benefits compared to other DEXs, including real-time price feeds, rapid trade resolution, and a competitive fee structure. As a DAO from its inception, the platform is directly governed and controlled by its traders and token holders.

The project aims to bridge the gap between trading and blockchain technology by tackling issues common to both centralized and decentralized exchanges. Deriva addresses the security weaknesses and regulatory risks associated with CEXs by functioning as a DAO, which eliminates censorship concerns and single points of failure. Additionally, it provides a capital-efficient and high-performance user experience through an order book model designed to resolve the liquidity and UX challenges typical of DEXs. By utilizing off-chain price feeds, matching engines, and liquidation operators, Deriva DAO intends to achieve the speed and efficiency levels of centralized exchanges.

Aditya Palepu, a Duke University graduate and ex-algorithmic trader with a background in software engineering, established Deriva DAO. He is backed by a nine-person team that includes co-founder Frederic Fortier, a San Francisco-based software engineer who has spent more than ten years developing distributed systems.

The project has secured $2.7 million across multiple funding rounds from a notable group of investors. This list includes Polychain Capital, Coinbase Ventures, Electric Capital, Dragonfly Capital Partners, CMS Holdings, Three Arrows Capital, Calvin Liu (strategy lead at Compound), and crypto researcher Phil Daian.

Deriva DAO seeks to differentiate itself from other DEXs through a distinct architectural approach. Rather than processing trades and related transactions on a public blockchain, the platform operates via its DerivaDEX operator network. On this layer-two system, the DAO oversees two categories of staked insurance capital: funds generated from its insurance mining program and organic reserves accumulated from exchange fees. These resources serve to protect traders from auto-deleveraging events.

This bespoke L2 infrastructure enables Deriva to rival centralized exchanges in terms of speed and expense. Because sub-second transaction finality is essential for high-frequency trading, Deriva’s custom L2 provides this guarantee. Additionally, users are spared from paying elevated Ethereum gas fees.

Through this design, Deriva intends to deliver the primary features of a centralized exchange without requiring custody. The Ethereum network retains responsibility for securing and holding all assets. Unlike alternative L2 technologies such as optimistic rollups or zk-rollups, Deriva’s centralized order sequencer lacks control over order flow, avoiding the discretion seen in CEXs. Furthermore, users do not experience the prolonged delays for on-chain settlements that can occur with optimistic rollups.

The total supply of DDX stands at 100 million. Of this, 50% is issued as the genesis supply, while the other 50% will be released over ten years via liquidity mining. The allocation of DDX tokens is as follows:

• The team and DerivaDAO foundation receive 34,005,404 DDX from the genesis supply, with 21,263,737 unlocking when the network launches.
• Investors are allocated 15,334,596 DDX from the genesis supply, vested on a one-year linear schedule.
• Advisors receive 660,000 DDX from the genesis supply, split into 460,000 DDX on a two-year linear schedule and 200,000 DDX on schedules of three months or less.
• From the liquidity mining supply, 2,500,000 DDX will be emitted linearly over one year for the insurance mining program.
• The remaining 47,500,000 DDX will be emitted over ten years.

Quantstamp has audited Deriva DAO’s smart contracts, determining them to be of high quality. The protocol relies on Ethereum for security, a blockchain widely used by DAOs that employs a proof-of-work consensus mechanism requiring miners to mine new Ether. A network of decentralized nodes is responsible for validating transactions and securing the Ethereum blockchain.

For its custom L2 solution, Deriva uses a specialized sidechain where operators run code inside trusted execution environments. This setup ensures that the code cannot be tampered with and allows executions to be proven. On this sidechain, Deriva implements Raft along with a checkpoint consensus mechanism. Through Raft, operators confirm the validity of orders and other exchange transactions by sending a hash of the exchange’s complete state to Ethereum.

You can purchase Deriva DAO (DDX) on Coinbase Exchange, Uniswap (V2), Sushiswap, Hoo, and CoinEx.