- Use Cases
In this episode, Amberdata's Director of Derivatives, Greg Magadini interviews Terence An the Co-Founder of itos. Born in Queens, New York, Terence An graduated from Carnegie Mellon’s School of Computer Science and spent the next six years as a trader at Hudson River Trading. After working on their more traditional US Equities HFT desk, he spent two years developing ultra-low latency strategies, situating him closer to the infrastructure, and ultimately sparking his interest in designing financial markets.
The transition to DeFi protocol design was swift and now he runs Itos Finance, the first protocol to empower anyone with access to structured products entirely on chain. Itos is launching its testnet and raising a seed round in September 2023.
In his spare time Terence likes to climb, cycle, reattempt his topology textbook, and when possible he spends time living abroad. However, his favorite pastime is of course displacing traditional finance.
In this podcast episode, we take a deep dive into the technical insights shared by Terence An, the co-founder of Itos Finance, during a podcast interview. Itos Finance is a DeFi protocol dedicated to mitigating risks associated with Automated Market Makers (AMMs) and providing convexity options to users. Terence discusses his background, the genesis of Itos, their choice of EVM Layer 2 solutions, and their ambitious roadmap.
Background and Journey into Crypto
Terence's journey into the world of cryptocurrency began after working at a trading firm and pursuing studies in computer science and mathematics in college. His formative years at Hudson River Trading, a renowned high-frequency trading (HFT) firm based in New York, equipped him with invaluable insights into market microstructure and technical engineering. These skills would prove to be the building blocks for his ventures in the cryptocurrency space.
Choosing EVM L2 Solutions
Itos's strategic decision to build on Ethereum Virtual Machine (EVM) Layer 2 solutions was driven by the need to mitigate risks. Terence elaborated on the inherent uncertainties surrounding emerging blockchains, citing Solana as an example that experienced frequent outages. By leveraging EVM compatibility, Itos aimed to enhance interoperability, reduce the risk of blockchain lock-in, and ensure a more robust and stable infrastructure.
Roadmap and Product Offerings
The podcast provided an insightful glimpse into Itos's comprehensive roadmap. Their journey was set to commence with the launch of their testnet on September 15th on Arbitrum Goerli, followed by rigorous security audits and the eagerly anticipated mainnet release on Arbitrum mainnet, Avalanche mainnet, and Base: Coinbase's L2 network. The mainnet launch would introduce a sophisticated portfolio management system designed to empower users with transparent insights into their positions.
Key Product Offerings:
Non-Liquidating Money Market: This innovative feature enables users to borrow and lend assets while simultaneously hedging their exposure using options. The objective is to prevent liquidation events commonly associated with lending platforms.
Oracle-Free Perpetuals: Itos aspires to provide users with perpetual contracts that don't rely on external oracles for price feeds, enhancing security and independence.
Self-Paying Insurance: This feature explores the concept of self-sustaining insurance within the DeFi ecosystem. They aim to offer insurance products that are economically sustainable and capable of covering losses.
Ultra-Short-Term Finance: Leveraging the security of hedged LP positions, users can access ultra-short-term financing options with significantly reduced risk profiles. This approach enables users to amplify their returns safely.
Risk Management through Convexity
At its core, Itos is committed to mitigating risks for users, and Terence dived into the mechanics of how they achieve this. The protocol provides convexity options, allowing users to hedge against impermanent losses commonly encountered in AMMs. Terence elucidated that their protocol offers a dynamic fee structure that adjusts based on implied volatility. This ensures that liquidity providers (LPs) receive fees that accurately reflect current market conditions.
Dynamic Fee Structure for AMMs
One of the most intriguing innovations discussed during the podcast was the implementation of dynamic fees within Itos Finance's AMM. Unlike traditional AMMs with fixed spreads, Itos Finance's AMM dynamically adjusts fees based on implied volatility. This novel fee structure aims to replicate the behavior of centralized order books during periods of high volatility, providing fairer compensation to liquidity providers.
Terence An's technical insights during the podcast shed light on Itos Finance's innovative approach to risk management and efficiency improvement within the DeFi ecosystem. Their choice of EVM Layer 2 solutions, dynamic fee structure, and diverse structured product offerings provide potential solutions to the challenges faced by DeFi users and LPs. As they progress with their roadmap, Itos Finance aims to deliver a safer and more user-friendly DeFi experience while offering a range of sophisticated financial instruments.
In this episode, we provide valuable insights into the inner workings of Itos finance and its potential to reshape the DeFi landscape.
For more information about Itos visit: https://www.itos.fi/
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