GAINS Associates · Follow
Published in · 9 min read · Oct 22, 2021
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On Tuesday, October 05, we had the pleasure to welcome to our Telegram chat:
Ming Wu, Founder
We asked him questions about the development of Strips Finance.
Some sentences have been slightly edited for readability but the meaning has been conserved.
Strips finance is the FIRST revolutionary interest rate derivatives exchange on Arbitrum. STRIPS was designed to allow users to trade, speculate, and hedge interest rates. STRIPS cutting edge AMM technology allows for cross-chain yield markets on the most popular DeFi and CeFi platforms.
Strips Finance is building the largest decentralized fixed income platform. Their first product is Strips Exchange; a decentralized interest rates trading platform. Strips Exchange is the number one place to trade interest rates. Strips is like a latticework, different elements interact and reinforce each other to create DeFi that is more amazing.
Some key features that make Strips 10x better are Derivatives model (Long & short with 28x leverage), AMM model (Continuous 24/7 liquidity), Insurance fund (Liquidity of last resort)
Strips finance envisions that DeFi will take over legacy finance. They believe that interest rate swaps are the future of DeFi. They strongly believe in a community driven projects.
Q — Ayeley from GAINS: Please introduce yourself. What did you do before crypto and did you have any other previous venture in crypto?
A — Ming from STRIPS: Sure, definitely. Our entire team hails from traditional finance. We all have first-hand knowledge of the inefficiencies and archaic processes that are in place due to legacy infrastructure. It’s a very frustrating experience. I previously worked at a high-frequency trading firm. I was initially attracted to crypto for the trading opportunities but ultimately stayed for the technology.
When I learned about DeFi, and all of the different composable products that were being built on it, I immediately realized it was one of the best applications of blockchain technology. The ability to build streamlined financial infrastructure without the overhead of maintaining an outdated clearing and settlement process is magical. While billion-dollar trade confirmations are still being sent through chats and emails in traditional finance, blockchains allow us to create and confirm transactions at the speed of the internet. That’s a big opportunity.
Q — Ayeley from GAINS: Cool. What is the Strips Finance project about in a few simple sentences? What was the inspiration behind it and what sets it apart from the competition?
A — Ming from STRIPS: The idea is very simple. Strips makes it easy for traders and investors to trade interest rates using a derivative instrument called a perpetual interest rate swap (IRS). Because swaps require little capital up front, they give traders a way to speculate on movements in interest rates without tying up capital. We believe that DeFi will eat traditional finance, and in a world where DeFi is the future of finance, it is inevitable that there will be an interest rates market. Strips will provide the marketplace for traders, investors, and borrowers to trade interest rates as independent assets.
The current market for fixed rates is still in its infancy, so it is still too early to tell. There are a few fixed-rate decentralized apps that have launched in the market, but none have taken the derivatives first approach as Strips has. By using derivatives rather than tokens as the tradable instrument, we solved a lot of the underlying problems plaguing the current fixed-rate protocols in DeFi. Namely, ease of use, capital efficiency, and flexibility. Whether that becomes the norm, I’m not too sure, and we’ll find out.
Once you have a really robust interest rate swaps exchange, you can start to build structured fixed-rate products on top of it, such as bonds and debt markets. That is our long-term vision for Strips. The interest rate swaps exchange is our foundation for future fixed-income products.
Q — Telegram User Super-Girl Says 💬: Strips Finance claims to have the smartest AMM in the world combined with incredible speed. How do you achieve these attributes? What is Arbitrum’s role in all this? Why do you think that it is the best infrastructure for the project?
A — Ming from STRIPS: That’s a question that we thought about when we were deciding which L2 to choose, and based on the technical superiority and also development lift that was needed from the team, we decided that Arbitrum was the best contender.
Q — Telegram User Gavin Hale: You’ve said that you have a sustainable APY rate, and as more projects are listed, the APY will also rise. So, would you tell us what are some projects you are hoping will be listed before the end of the year? Do you have many partnerships in place?
A — Ming from STRIPS: The beautiful thing about Strips is that we can list any type of interest rate market without needing partnerships, as long as there is data for that interest rate. Anything from yield farms, AAVE lending/borrowing rates, to exchange funding rates, we plan to have these markets in the future.
Q — Telegram User 👽 Crypto Jiren 👽: Strips Finance offers the possibility to Bet in AMM and in the Insurance pool to earn some commissions and rewards. How does this work? Are there two Pools where we can do Staking like in other platforms? What token should we provide to get profit?
A — Ming from STRIPS: In order to stake in the AMM and Insurance, you must stake STRP-USDC LP tokens. If you would like to stake only $STRP, we also have an option for you to stake $STRP and earn 20% of the protocol’s trading fees
Q — Telegram User »›★Mauricio 🇻🇪 Rangel★‹«: 📌Currently there are no great options to negotiate interest rates in decentralized finance, this creates uncertainty among users! So what is the main goal of Strips in regards to this problem? Also, do you handle a risk and return analysis when building on Ethereum?
A — Ming from STRIPS: Yes, this is the main pain point that we are trying to solve by building a transparent and robust market for fixed interest rates in DeFi. Strips perpetual interest rate swap allows anyone to swap floating rate for fixed rates easily. Speculators can also use the perpetual IRS to speculate and profit from movements in interest rates.
Q — Ayeley from GAINS: Cool. And what role will the token play in the Strips Finance ecosystem?
A — Ming from STRIPS: The $STRP token plays a very important role in Strips. $STRP allows users of Strips to become owners of the exchange, and have a voice in the future governance of the protocol
Q — Ayeley from GAINS: Can we stake the token?
A — Ming from STRIPS: Yes, once we launch the mainnet, users will have the ability to stake STRP token, STRP-USDC LP tokens, and earn trading fees + rewards! More details will be announced after our token sale and on our Twitter.
Q — Twitter user @DERRYN82: StripsFinance shares the biggest allocation 47% STRP token for the community. Would you share with us, what kind of programs that the community could access by this allocation?
A — Ming from STRIPS: We want to put our token into the hands of the community, and one of the best ways to align the growth of our ecosystem is to reward users of Strips with ownership. Hence, we will be launching comprehensive and deeply thought-out trading and liquidity mining rewards when we launch our mainnet in November/December.
Q — Ayeley from GAINS: Did you raise funds so far? If so, how did you handle them? Are you planning to do any future raises?
A — Ming from STRIPS: We raised $2.5m in our seed round in June, led by Mechanism Capital, Crypto.com and Finlink Capital. We have announced our public token sale on Polka Starter that will be launching on October 13th. We do not plan on doing any more fundraising after the token sale.
Q — Ayeley from GAINS:final question: Can you list 1–3 killer features of Your Project that makes it ahead of its competitors? What is the competitive advantage your platform has that you feel most confident about?
A — Ming from STRIPS: Absolutely,
1) We went and created the first perpetual interest rate derivative called the perpetual interest rate swap. This innovation abstracts away the difficulty of speculating on interest rates, and opens up the possibility of many different combinations of trading strategies
2) Our AMM is amazing. Our derivatives AMM model is something that we’ve developed internally and tested rigorously for Strips. Based on backtests of our AMM, we found that stakers were able to earn 20+% with 5+ Sharpe from trading fees and marketing making pnl. This is all _before_ additional rewards that we plan on giving out to our stakers!
3) Another major innovation that we’ve developed internally is the ability to stake LP tokens as collateral for a derivatives AMM. As far as we know, no one else has used LP tokens collateral for a derivatives market.
Q — Ayeley from GAINS: Following the IDO on 13th October, what should we expect in the next weeks and months?
A — Ming from STRIPS: Well, our next most important milestone after the token sale will be our mainnet launch and trading+staking rewards in November and December. In addition, we will launch fixed term products and free NFT rewards to our community traders and stakers in Q1 2022. In the future, we also plan to launch bonds and fixed income structured products that will build out the fixed income industry of DeFi. We’re very excited.
Q — Twitter user @antonio50221026: Interest rates and fixed income trading dominate traditional finance but I would like to know how you plan to accelerate the transition of finance to a decentralized future by being the leading platform for quoting and trading interest rates?
A — Ming from STRIPS: That’s a great question. So I believe one of the biggest headwinds to the explosive growth of interest rate markets is that existing protocols in the market have been approaching the problem from the wrong angle. Other protocols cater to very specific use cases, a subset of use cases, while Strips is a superset of them. Strips allow for both speculation AND hedging of interest rates in a seamless manner. By using derivatives rather than tokens as the tradable instrument, we solved a lot of the underlying problems plaguing the current fixed-rate protocols in DeFi. Namely, ease of use, capital efficiency and flexibility.
Q — Telegram User The Curious 👀: ✅ Do you have in mind to increase the leverage to more than x10 in the future? Could the community vote for this?
A — Ming from STRIPS: We chose 10x leverage initially because based on our backtests, our AMM was able to be profitable 99.99% of the time, and our Insurance fund was also profitable 99.99% of the time. When we increase the leverage more than 10x, the Insurance fund tends to suffer, while the AMM makes even more money.
This is something that we have extensive modelling experience and data to back it up, and once we launch, we will show our community the research that we have done. In the future, we plan to decentralise the governance of the protocol, and the max leverage ratio will be a parameter people can choose to change.
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