In the traditional financial field, derivatives have always been a much larger market than spot. In the cryptocurrency world, the trading volume of derivatives on centralized exchanges has achieved a counterattack to the spot market, but in the field of DeFi derivatives, there is undoubtedly a vast space.

Although there are early cultivators such as Synthetix, there are still many problems in the derivatives market. For example, in the field of synthetic assets, there are problems such as insufficient user education, high barriers to use, and high costs, which exclude many retail investors. In addition, the richness of products also needs to be improved.

In response to these problems, many latecomers have proposed solutions, and Linear Finance is one of them.

Compared with Synthetix, the optimization plan proposed by Linear Finance includes: based on the compatible chain BSC operation of Ethereum, it can solve the problems of expansion and high transaction costs for users; in terms of product design, it can customize a simple and easy-to-use UX/UI for beginners, And focus on optimizing the trading experience, which can achieve low slippage or even no slippage; in terms of product richness, Linear Finance has provided products such as digital assets, commodities, foreign exchange, and market indexes, and will even add some creative themed indexes in the future. Such as e-sports, etc., to create a 360-degree investment risk exposure.

We believe that with the hard work of such a professional team, DeFi derivatives will not only have complete investment targets in the future, but also have a friendly trading experience close to a centralized platform.

In order to better understand synthetic assets and the solutions behind them, we invited Drey Ng, the co-founder and product manager of Linear Finance, to unveil the synthetic assets for us.DeFiThe value and potential of niche areas.

The following is the essence of AMA questions and answers organized by Odaily, enjoy~

01 Project positioning and team background

OdailyQ1: Linear is positioned as a cross-chain decentralized synthetic asset protocol. Can you tell us first, what is the use of synthetic assets? And what pain points in the industry did the birth of Linear want to solve?

Drey：DeFi started from Maker and Uniswap to the later liquidity mining, flash loans, etc., which is still very early stage. These developments are the same as traditional finance, and lending is an important cornerstone. However, the derivative line of synthetic assets can bring more room for growth to DeFi.

The concept of synthetic assets has long existed in the traditional financial field, and it is actually a mirror simulation of the target asset. Futures is one of them, which allows investors to obtain income through derivatives without directly holding the spot.

In traditional financial markets, synthetic assets have many uses, such as using total return swaps and credit default swaps to reduce financing costs and inject liquidity into the market. It is also possible to copy the cash flow of any security through a combination of tools and derivatives, reduce market access, open a relatively free trading market, and basically achieve the function of "trading when there is a price".

In 2020, we will see that many traditional finances begin to support cryptocurrencies. We have seen that through the combination of CeFi and DeFi, the potential users of Linear are not only users in the currency circle, but also everyone in the world who has an appetite for investment. Just imagine that if Xiao Ming wants to switch different risk exposures, such as from stocks to cryptocurrencies to physical gold, the required liquidation and account opening time will cause Xiao Ming to lose many opportunities.

Using Linear can completely solve this problem, because "there is a price to trade", and the conversion of all risk exposures can be completed painlessly and instantly only on the Linear exchange. This kind of convenience is unique to DeFi synthetic assets. In the long run, there are even other projects being built on Linear to achieve advanced functions such as asset management portfolios. Pledgers can go to https://buildr.linear.finance/ to obtain staking rewards and exchange fee sharing; users with ℓUSD on the exchange can trade on https://exchange.linear.finance/.

OdailyQ2: Can you give us an overview of the important milestones from project initiation to development and realization of the Linear project?

Drey：Linear has developed rapidly since its launch in September last year, with an average TVL of more than 80 million to more than 100 million US dollars; and our total transaction volume has reached 1 billion US dollars a few weeks ago. The daily trading volume of Linear Exchange is already higher than other competitors in the market.

We have to praise our front-end design team for creating a simple and easy-to-use user interface, allowing them to conduct transactions intuitively and simply. In addition, we use the Binance Smart Chain as Layer 2, which greatly improves the speed and will not feel High fees and high delays on other platforms.

In terms of cooperation, we have also established relationships with all mainstream BSC platforms, such as Pancake, Fortube, etc. Please pay close attention, we will cooperate with other DeFi platforms to launch interest-bearing products. Let ℓUSD have uses other than pledge LP and transactions, follow-up The function of short position and multi-currency pledge will also be launched.

OdailyQ3: The team has received more than US$2.6 million in financing. Can you introduce the general situation of the following investors and team members?

Drey：The financing was led by 6 strategic investment institutions, including blockchain venture capital institution NGC Ventures, cryptocurrency quantitative fund company Alameda Research, South Korea's well-known blockchain investment company Hashed, transaction service provider CMS Holdings, and top OTC digital asset trading platform Genesis Block, and Kenetic Capital, a venture capital firm focused on blockchain technology. Other investment institutions participating in Linear Finance’s financing include Evernew Capital (Taiwan Hengxin Capital), Soul Capital (family venture capital fund), Moonrock Capital (blockchain consulting and investment agency), and Black Edge Capital (trading company) .

In addition, Linear Finance has also reached a strategic cooperation with Asian blockchain consulting and media company PANONY. They have also given valuable advice on cooperation and product design. At the same time, we are now negotiating with institutional-level liquidity providers in the secondary market to further stabilize Linear's pledge pool.

The general situation of the team members is that there are currently 13 people in the technology development team together with operations and partnerships. Co-founder Kevin is responsible for Linear's strategy and business direction. He has an MBA from Harvard Business School and has more than 13 years of experience in financial services, especially mortgage debt and alternative assets, mergers and acquisitions, and lending. Banks include Swiss Letters, BNP Paribas and Standard Chartered, etc. I am mainly responsible for product development at Linear. I have worked for Deutsche Bank and HSBC. In the industry, I am also the chief product officer of Liquefy, the largest STO (Securitization Token Issuance) platform in Asia. I have experience in mainstream blockchains including Ethereum Extensive experience in creating cross-chain compatible, institutional-grade financial products on Fang, Quorum and NEO, focusing on processing speed, security and scalability. My experience at Liquefy also made me realize that decentralized solutions like Linear Finance are expected to solve many inconveniences in financial transactions, including liquidity restrictions and centralization obstacles.

02 Business and data

OdailyQ4: What is the implementation logic of Linear’s synthesis, including which tokens can be synthesized by mortgage, and the mortgage rate, can you introduce it to us? And what are the similarities and differences between it and Synthetix?

Drey：Unlike other synthetic asset protocols that only allow their own tokens to be pledged, LINA is one of the collaterals for creating Liquid using Buildr. The initial setting for other digital assets is 20%, that is, at least 80% of the collateral at the time of pledge Need to be LINA tokens, of course, with the start of LinearDAO, this ratio will be adjusted according to community decisions.

Initially, the platform will set the pledge ratio at 600% (the best ratio), and it will be adjusted according to the evaluation of LinearDAO. Considering black swans and uncertain events, an initial high collateralization ratio is therefore critical for the long-term growth of the platform.

The contracts of DeFi projects need to deal with valuable financial businesses in the real world, which really requires us to be particularly cautious and rigorous. In addition to absorbing the experience and lessons of some previous black swan events, we will strictly test all codes, and at the same time find experienced auditing companies in the industry to audit our codes, and try our best to ensure the security of users' assets in the contract .

We differ from existing DEXs such as Synthetix in many ways.

First of all, our advantage lies in cross-chain compatibility, which provides a complete solution for DEX users to solve the problems of expansion and high transaction costs.

More importantly, cross-chain compatibility opens up the way for us to reach new markets and acquire new users. For example, our platform will first be integrated on Binance Smart Chain (BSC), and we are now considering other potential " Aether Killer".

In terms of products, Linear's UX/UI is easy to use, easy to promote and educate new users, and even allows transactions without slippage.

Finally, it is worth mentioning that staking Linear’s token LINA can obtain digital assets, commodities, foreign exchange, and market indexes, and even add some creative theme indexes, such as e-sports, to create 360-degree investment risk exposure. In the long run, I think the blockchain world will be Inter-Chain. Different users will use corresponding blockchains for cross-chain transmission according to different situations. Linear’s vision is to grow together with these blockchains and bring User aggregation and intercommunication of DeFi on different chains.

OdailyQ5: What assets can we synthesize now? Besides the platform itself, can Linear's synthetic assets be applied to other scenarios?

Drey：You can imagine that Linear is a one-stop platform for wealth management. At this stage, users can directly obtain digital assets, foreign exchange precious metals commodities and indexes, and even add some creative theme indexes, such as e-sports, etc., to create 360-degree investment risks exposure.

We are now discussing with some teams in Southeast Asia and the United States, and soon you will see that some portfolio management/social trading platforms are connected to Linear, so that "fund managers" can directly create different index funds through Linear.

At present, the main functions of the platform are basically complete, and we will gradually expand the application scenarios of Linear synthetic assets in the future. Just two days ago, we announced our cooperation with ForTube, a decentralized lending agreement. ForTube will reach a comprehensive strategic cooperation with Linear Finance in the fields of liquidity, asset-backed lending, etc. Specifically, ForTube V3 (BSC) will support The lending business of LINA tokens, and jointly launched liquidity incentive activities.

In addition, the simplest application can also be to use synthetic assets as collateral to other cooperative DeFi lending platforms for further transactions, making the entire decentralized financial experience flawless. We'll also build for different synthetic assets"vault"function, so that your idle synthetic assets can earn interest.

OdailyQ6: In addition to coin synthesis, Linear also synthesizes derivatives of other assets. Can you introduce some of them? And is there a criterion for our selection of target assets?

Drey：Now our first step is to launch cryptocurrencies, commodities, foreign exchange, and cryptocurrency indices. Those indexes are weighted, and there is also an index of the sum of the average investment, so it can basically cover the risk appetite of most people. In the next step, we will also introduce different related single assets according to other asset classes, or an index. For example, in the case of red wine, the red wine index is more interesting than a single synthetic red wine token, because it is difficult to call Users said that they are particularly optimistic about a single red wine, so for ordinary users, they would be more suitable to buy a red wine index like this. Because our other founder came from an asset management company, whether it is cryptocurrency or other indices, our risk declaration and index components are more professional than other existing platforms , all information is very transparent.

OdailyQ7: A major feature of Linear is that it supports cross-chain, so can it be understood that my assets on Ethereum can also be crossed to BSC through Linear? How is it achieved?

Drey：Cross-chain means that our native tokens and any synthetic assets generated by us on the Binance Smart Chain can be easily converted to Ethereum or any public chain compatible with the Ethereum Virtual Machine. So a common process is that you may make a synthetic asset on Linear, and then you can transfer it to a different blockchain through our bridge (Swap). Because we have always believed that the future world is interchain, so in different application scenarios, you will need to put synthetic assets on different chains, so we are actually ready for this.

OdailyQ8: Just now you mentioned that Linear.Exchange and Swap can realize low-cost and high-efficiency cross-chain transactions. How many currencies and trading pairs does it support now? How do you increase its liquidity?

Drey：Basically, users can just pay the swap fee once, or they go directly to Binance Exchange, and then users can directly exchange the Ethereum version of Lina for the BSC version (and vice versa). After doing a conversion, basically you can enjoy the high-speed and low-rate processing of BSC in the future, and that rate may only be 1% of Ethereum. So you may not be able to do 100 transactions for less than one time when Ethereum is congested, so it is very convenient in this case.

03 Market aspects and future planning

OdailyQ9: Linear has been listed on Binance not long ago. Can you tell us about the token distribution model, release and circulation and other market conditions?

Drey：The total supply of LINA tokens is 10 billion, and the initial liquidity tokens: 237,666,666. The distribution is as follows:

• Staking return 40.0%

• Reserve 15.0%

• Seed round 2.4%; private round 7.0%; public round 0.6%

• Team 10.0%

• Consultant 5.0%

• Liquidity 5.0%

• Ecosystem 10.0%; Community 5.0%

We will also have other promotional activities with Binance in the future, and there will also be some cooperation with the DeFi platform on BSC. For example, we just announced the ForTube cooperation yesterday, which will be very helpful for our Linear Vault. Please pay more attention to our future information.

OdailyQ10: The proportion of tokens that are pledged and mined by Linear is relatively high. May I ask what are the considerations of our design? How can ordinary currency holders participate in pledge mining?

Drey：In fact, we are not saying that it is particularly high, but that the annual interest rate is relatively competitive. In fact, we wanted to build a sustainable token model from the very beginning, so the API started from the rewards on the pledge. more. But in the future, we believe that through the increase of the annual interest rate of the transaction fee and the gradual reduction of the annual interest rate of the pledge, the sum of these two figures will reach a balance.

OdailyQ11: In the next Q2 and the second half of the year, what other important milestones can you share with us?

Drey：The second half of the year is actually our core development and update. It has been about six months since our product was released. Before that, the previous work was ready. In terms of business, we will have some very creative indexes or asset classes to go online, and then we will also do some joint mining or joint promotional activities with different DeFi platforms.

In terms of technology, of course, we will have the Linear Vault we focus on, which can generate interest for users who pledge synthetic assets, and then we will also have the function of short positions. After that, we can not only take long positions, but also short positions.

And the most important thing, of course, is our decentralized governance, as well as our multi-currency pledge, so our development has just begun, and we will update it wave after wave until it reaches everyone. So I am very excited, and I am very much looking forward to what user experience you will have in the future. You can also tell our operation team, let us create a more useful synthetic asset platform.

Odaily: Okay, thank you Drey for your detailed sharing today.