Vertex Received Strategic Investment from WinterMute：What is Vertex？

Introduction

Vertex is a cross-margined decentralized exchange (DEX) protocol offering: spot, perpetuals, and money markets in one vertically integrated application on Arbitrum.The platform operates with USDC as the quoting currency and currently supports three trading pairs in the spot market and seven different currencies in the perpetual market.

In addition to providing traditional spot, contract, and lending functionalities, Vertex introduces significant innovations in two areas known as Hybrid Orderbook AMM Design and Universal Cross Margin.

Hybrid Orderbook AMM Design

Typically, DEXs operate in two modes: Automated Market Maker (AMM) and Central Limit Order Book (CLOB). Vertex adopts a hybrid model that supports both Unified Central Limit Order Book (CLOB) and AMM. This model allows the liquidity aggregated by the AMM to coexist with buy/sell prices on the order book, enabling users to trade based on a unified liquidity source.

Vertex achieves its hybrid orderbook AMM design through the following three core components:

• Fully on-chain trading venue (AMM): Vertex leverages an on-chain automated market maker mechanism to provide liquidity and facilitate trading. This allows users to trade directly on the blockchain without relying on an intermediary.

• Fully on-chain risk engine: Vertex incorporates a risk engine that operates on-chain to monitor and manage the risks associated with trading activities. This ensures the integrity and security of the trading platform.

• Off-chain sequencer for order matching: While the trading venue and risk engine are on-chain, Vertex utilizes an off-chain sorter to efficiently match orders and optimize trading execution. This enables fast and accurate order matching while leveraging the benefits of on-chain security and transparency.

Trades are always executed through the CLOB-AMM hybrid model to achieve the best possible price. The sequencer is utilized to automatically access the best available liquidity. It ensures that orders are matched efficiently, taking into account both the order book liquidity and the liquidity provided by the automated market maker mechanism. This hybrid approach aims to optimize trade execution by accessing the most favorable liquidity sources in real-time.

Universal Cross Margin

By default, Vertex operates on a cross-margin basis, which means that a user's trading account combines liabilities to offset margins between positions. The user's investment portfolio then serves as collateral for multiple open positions.

In comparison to cross-margin trading in CEXs' contract trading, Vertex supports a wider range of collateral assets. Users can utilize all of their funds (deposits, positions, and profits/losses) as collateral, and open positions in spot, perpetual contracts, and money markets (such as spot borrowing) contribute to the collateral in their account.

This approach reduces the risk of liquidation for users during volatile market conditions, but it also means that in one-sided markets, users' assets may suffer greater losses.

The Data of Vertex

Vertex's Total Value Locked (TVL) is 7.48 million, with an average daily trading volume of 55 million over the past 30 days. The data shows that the majority of the trading volume comes from the Perp market.

Since its launch in late April, the protocol has generated approximately $644 K in revenue. After deducting Maker rebates totaling $143 K, the net protocol revenue amounts to $501 K.

Financing

According to publicly available information, Vertex Protocol has completed two rounds of financing:

Seed Round: Raised $8.5 million, led by investors including Hack VC, Dexterity Capital, Jane Street, Hudson River Trading, and others.

Strategic Round: Invested by Winmute Ventures, specific amount undisclosed.

Tokenomics

Vertex Protocol has three types of tokens, including VRTX as the governance token, and xVRTX and voVRTX as subtypes of VRTX:

• xVRTX: Transferable tokens that represent the eligibility for governance voting, as well as a proportionate share of protocol revenue and emissions, when VRTX liquidity is staked.

• voVRTX: Non-transferable “voting power shares” tokens that represent the “user score” of the holder. voVRTX tokens unlock eligibility for users to have higher voting power and specific ecosystem rewards based on activities such as using VRTX to pay transaction fees and staking xVRTX in an insurance fund.

The total supply of VRTX is 1 billion tokens, and it cannot be increased. Out of this, 90.08% of the tokens will be allocated over a period of 5 years. The token distribution will begin six months after the launch of the mainnet, and the allocation breakdown is as follows:

Based on the official token release schedule, it can be observed that VRTX has a higher inflation rate in the first two years after the Token Generation Event (TGE). The following chart further illustrates the annualized inflation rate of VRTX tokens compared to the first month after TGE.

Summary

Vertex offers certain innovations compared to other exchanges and is still in its early stages. There is a significant gap in terms of TVL and trading volume compared to top-tier DEXs like GMX and DYDX. However, the protocol's revenue situation is favorable when compared to the current TVL. Additionally, the current phase provides incentives for users to trade and earn VRTX tokens, which stimulates user engagement with the protocol. The future performance of the protocol will still require continuous monitoring and observation.