In the future, Ostium will solely have the opportunity to obtain long-term wholesome improvement if it switches to an order ebook model, reduces charges and improves market effectivity.
The Genesis Story: How Crypto Discovered Me
Authentic creator: @hmalviya9
Authentic translation: zhouzhou, BlockBeats
Editor’s notice: Though the utilization of present RWA perpetual merchandise (reminiscent of Ostium) has surged, the GLP-style liquidity model is unsustainable due to excessive funding charges, zero-sum video games between merchants and LPs, and lack of hedging mechanisms, which restrict the growth of the platform. In distinction, HyperLiquid makes use of a extra versatile HLP model and performs higher. In the future, if Ostium switches to an order ebook model, reduces charges and improves market effectivity, it will probably be potential to obtain long-term wholesome improvement.
The following is the unique content material (for simpler studying and understanding, the unique content material has been reorganized):
Over the previous month, as tariffs loom, foreign money markets oscillate, and shares fluctuate like an EKG, RWA perpetuals have seen unimaginable development in utilization. @OstiumLabs’ whole deposits have soared from a gradual lower than $6 million to over $60 million in only one month. Buying and selling volumes have additionally surged. HyperLiquid has additionally launched @Paxos’ PAXG perpetual market.
The want to go lengthy or quick RWA with crypto derivatives is already clear. The query is, are present options adequate? If not, how can they be improved?
Why would possibly these options be unhealthy?
At the starting, I discussed two seemingly contradictory factors of view: on the one hand, merchants are certainly utilizing RWA merchandise; on the different hand, I questioned whether or not the current options are adequate.
Some individuals might imagine that since customers are selecting these platforms, doesn’t it imply that the present RWA perpetual contract is adequate? However this is not the case. Let me clarify it by means of some knowledge.
If we take a look at the funding charges on Ostium, we will see that the funding price for the gold buying and selling pair (XAU/USD) was as excessive as 30% and is nonetheless 13% now.
Compared, the present funding price of BTC on Bybit is about half of that of Ostium, whereas the funding price of BTC on Binance and OKX is solely a couple of quarter of that of Ostium. Some individuals might imagine that this is as a result of gold performs higher, however it is not essentially the case.
Gold is up about 50% up to now this yr, whereas Bitcoin is up an analogous quantity.
Furthermore, after we evaluate the crypto market with conventional monetary markets (reminiscent of CME), the hole is much more apparent. If you’re lengthy gold on CME and roll your place, the annualized price is about 6%, which is solely half of Ostium’s minimal funding price, a distinction of 600 foundation factors.
Seeing such a big unfold, readers who do delta impartial (no directional danger) buying and selling might imagine there is an enormous arbitrage area: for instance, shorting Ostium and charging a 13% funding price, whereas going lengthy on CME and paying an annualized price of 6%. However this is not truly the case.
As a result of Ostium adopts a model comparable to GLP (GMX’s liquidity pool), when you quick Ostium, you at present have to pay a 13% funding price.
This leads to neither delta impartial merchants nor market makers having an incentive to present liquidity. This is not unintended, however a basic drawback in Ostium’s design.
The GLP model is unsustainable
The GLP model utilized by Ostium and @GainsNetwork_io, briefly, can’t be scaled.
The GLP model is basically a guess between all merchants and the protocol’s capital pool. It was first launched by GMX, and their capital pool was referred to as GLP. In Ostium, it was referred to as OLP; on Beneficial properties, it was numerous g (asset) vaults.
It is vital to notice that the GLP/OLP model is very totally different from @HyperliquidX’s HLP model. The HLP pricing model is hidden and dynamically altering, whereas the GLP pricing is mounted and static.
Which means that though HyperLiquid additionally has primary liquidity suppliers, primary LPs usually are not the solely counterparties, and the funding price mechanism can proceed to inspire the market to be extra environment friendly. In Ostium’s OLP model, merchants should lose cash so as for OLP liquidity suppliers to become profitable. This is a zero-sum recreation from starting to finish.
Furthermore, in contrast to the HLP model, which may partially hedge publicity on the chain, there is no steady mechanism to hedge the danger publicity of RWA underneath the OLP model.
Though the OLP model helped Ostium rapidly enhance liquidity in the early days, it has now grow to be an impediment to their continued development. Simply as HyperLiquid lastly had to launch HLP’s absolute counterparty management over person transactions, Ostium may even want to loosen OLP’s dominance over pricing in the future so as to obtain higher growth.
A warning instance has already emerged: in phrases of relative share of the gold market, Ostium at present holds solely $4 million in the gold market, whereas HyperLiquid’s newly opened PAXG market has a holding of $15 million (and the funding price and opening price are additionally decrease).
As well as, Ostium’s present whole locked-in quantity is $65 million, of which $57 million, or 86%, is concentrated in OLP. Though HyperLiquid’s is additionally excessive, it accounts for about 60%, which is more healthy as compared.
In brief, this model is unsustainable.
Doable future instructions
Whereas the above issues might be severe if left unchecked, they will theoretically be solved by altering the paradigm.
If Ostium can change to an order ebook model, it can cut back transaction charges, and the funding price may even lower due to improved market effectivity. At the identical time, the platform can nonetheless make a revenue by charging transaction charges.
OLP may also proceed to exist, however ought to function in a extra dynamic and versatile kind.
In my private opinion, as somebody who loves the idea of RWA sustainability, this is the solely sustainable long-term model for RWA sustainability merchandise, not solely for Ostium, but additionally for Beneficial properties, and all associated tasks.
It has been confirmed many instances that the GLP/”casino-style” model can solely be utilized in the chilly begin section and is unrealistic for long-term improvement.
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This text displays the opinions of PANews’s columnist and doesn’t symbolize the stance of PANews. PANews doesn’t assume obligation. The article and opinions don’t represent funding recommendation.
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