The Crypto Volatility Index (CVI) was established to offer an infrastructure for individuals and institutions in the crypto industry to manage risk, engage in trading, and make investments based on their predictions of crypto volatility.
The past year has been truly remarkable for us. Back in November 2022, we debuted the CVI V3, which featured the highly anticipated Theta vault and volatility token ($CVI). The launch, hosted on the Arbitrum chain, was a great success, attracting significant attention within the DeFi community. The results have been impressive, with over $3.7M deposited into the Theta vault and over 10M $GOVI staked. Our user base has also seen substantial growth, as well as great awareness and engagement from DeFi key players.
As exciting as 2022 was, 2023 will even be bigger. We are happy to introduce our roadmap for 2023:
The major topics we’ll focus on in 2023 are:
Volatility trading optimization: higher capital efficiency, lower slippage, leveraged trading
- Support V3 concentrated liquidity: Which will allow high capital efficiency for the volatility token’s liquidity on concentrated liquidity DEXs
- Launch a new volatility token: Ultra CVI ($UCVI) — leveraged volatility token which allows traders to benefit from small changes in the CVI.
- Develop a dynamic funding fee: a new model to manage the risk of Theta vault depositors during high exposure and to incentivize $CVI token traders during low demand.
Improved Tokenomics — lowering $GOVI emissions to 0!
- Lowering $GOVI emissions to 0 — $GOVI will become a deflationary token and its value will grow with its usage
- Moving to an escrow model: esGOVI and vesting model
- Develop Protocol Owned Liquidity (PoL)
Composability and ecosystem growth
- Integrating CVI with other successful Arbitrum protocols. For example, our recent integration with Factor Dao will allow us to create LYRA-based hedging strategies for Theta Vault liquidity providers.
- Launching a Referral program, supporting the growth of awareness to CVI.
In detail:
Volatility trading optimizations
Concentrated Liquidity (V3)
High capital efficiency for the volatility token’s liquidity by launching a concentrated liquidity Theta vault, integrated with Uniswap V3! This new improvement will allow traders to incur minimal slippage on trades while requiring considerably less liquidity than Uniswap V2 type DEXs. Deep and efficient liquidity, as will be supported by the vault, is a key requirement in order to launch the leveraged volatility tokens, which have been part of the early vision of CVI since inception. Overall, concentrated liquidity for the volatility tokens is a required step for them to be a viable hedging tool for large players and power users in DeFi.
Ultra CVI ($UCVI): Leveraged Volatility Token
$UCVI will reflect ~2x exposure to the CVI index, allowing the traders to benefit from short-term changes in the CVI, while requiring Significantly less capital!
Dynamic Funding Fee
One of the most important key upgrades we will implement is the dynamic funding fee. Currently, the funding fee rate is solely determined by the CVI level. As the CVI level rises, the funding fee rate decreases, and vice versa.
In the newly introduced funding fee (“FF”) model, the rate will also depend on the utilization ratio. This means that when there is a surge in demand for the $CVI token, the funding fee ratio will increase, and when the demand for the token decreases, the FF ratio will decrease accordingly. We are introducing this new FF model to manage the risk of Theta vault depositors during high exposure and to incentivize $CVI token traders during low demand.
Tokenomics
Lowering $GOVI emissions
In Q4 2022, CVI V3 was introduced as the advanced product line of CVI, supporting scalable DEX liquidity. In tandem, an extensive PoL process was conducted throughout 2022 to enhance the $GOVI token liquidity. By combining the mature product line with PoL, emissions of $GOVI were significantly reduced to near zero.
esGOVI
After reducing emissions, the next intended move is to achieve 0 $GOVI emissions by adopting the escrowed model pioneered by GMX. The new model will directly connect the value added by participants to the rewards they receive, incentivizing those who believe in the long-term vision of CVI, while protecting the protocol from mercenary capital.
PoL — Protocol Owned Liquidity
In just three months since its launch, the Theta vault has generated an impressive yield of 8.9%, which is equivalent to a yearly return of ~35.6%. As per the community’s suggestion, a careful PoL process will be launched for the CVI protocol to become a part-owner of the vault’s liquidity, following the successful PoL done for $GOVI liquidity. This process will not only facilitate the creation of a Hedging vault and integration with other protocols but also allow the CVI protocol to share in the vault’s generated yield. For instance, a PoL of $1M from the vault would have resulted in ~$356k of profits for the protocol itself, alongside other theta vault depositors.
Hedging integrations
We partnered with LYRA, one of the biggest crypto options trading protocols in the DeFi space, and Factor Dao, a protocol that offers the building blocks for modular asset management.
Factor Dao will offer a vault that will offer a combination of LYRA options and CVI volatility products in order to create hedging strategies for the Theta Vault Liquidity providers, and long option positions in Lyra via $CVI.
We believe that Factor Dao vaults will increase usage and use cases for $CVI traders and help seamlessly decrease $CVI Liquidity providers risks. We aim to create more partnerships to increase the protocol’s composability and develop new tools and strategies.
Referral infrastructure
The referral program presents a thrilling chance to join CVI’s journey of growth and earn incentives for introducing volatility traders to CVI, thereby expanding the CVI ecosystem. Its goal is to attract new users to the platform, bolster our community, and encourage trading Volatility Tokens and participating in the Theta vaults. By participating in this program, CVI users can contribute to forming a robust and dynamic community of volatility traders, all while receiving rewards for their efforts.
Improved reflexivity of the theta vault
It would be expected that over time the TVL of the vault would reach an equilibrium that matches the yield generated by usage. However, in order for the TVL to become “sticky”, vault depositors have to be incentivized to stay for long periods of time and avoid managing their liquidity in-out according to their risk perception of the market. A reflexive loop is planned to be implemented as well.
UX improvements and mobile support
Following the implementation of TradingView, we are now focusing on enhancing the UI/UX to offer users a more streamlined and intuitive trading experience. Our efforts are geared towards providing professional traders with the essential tools necessary for their trading activities. Furthermore, we plan to integrate better mobile support in 2023 to ensure seamless access to our platform on-the-go.
Multiple assets support
The CVI platform is designed to support USDC as its base asset, providing enhanced safety and minimizing exposure to stable-coin de-pegging as well as market risks associated with other assets. Despite this, users may prefer to keep their collateral in different assets while still being able to trade and provide liquidity on CVI.
To cater to both preferences, we will introduce a unique feature that strikes a balance between the two. This feature will allow the platform to remain in USDC while also supporting multiple assets, giving users the flexibility to diversify their exposure according to their preferences.
Multiple volatility tokens infrastructure
As the launch of the $UCVI token approaches, we are upgrading our infrastructure to enable the Theta Vault to support multiple tokens, thereby accommodating multiple volatility tokens.
Security and Additional data sources
A bug bounty program will be launched for additional platform security. We understand the importance of maintaining the security and integrity of the CVI platform. We recognize that despite our best efforts to ensure the security of our products, there may still be vulnerabilities that we are not aware of. By launching the bug bounty program, we are inviting ethical hackers and security researchers to identify any potential security vulnerabilities that may exist in our software or systems. This will enable us to proactively address any security concerns and improve the overall security of our products. Additionally, offering rewards for identifying and reporting vulnerabilities incentivizes security researchers to collaborate with us and ultimately results in better protection for CVI.
On another aspect of security — a key requirement for a DeFi markets volatility index is to include as many data sources as possible, in addition to Deribit. The CVI calculation will be updated to include additional derivative options data as they become mature throughout 2023, thus increasing the decentralization of the CVI.
Summary
The year 2022 was a tremendous year of growth and accomplishment for the Crypto Volatility Index. The CVI 2023 roadmap boasts numerous significant milestones, all of which share a common goal: to maintain our position as the leading DeFi volatility protocol and the benchmark for crypto volatility. We are committed to delivering cutting-edge features and functionalities that enhance the user experience and offer greater value to our community. We are dedicated to pushing the boundaries of what is possible in the world of DeFi. With each development, we are confident that we are taking another step toward our ultimate goal of revolutionizing the way the crypto ecosystem approaches volatility.
For all of our updates and to join the conversation, be sure to check out CVI channels:
Website: https://cvi.finance
v3 Litepaper: https://cvi.finance/files/CVI.v3.Litepaper.pdf
GitBook: https://docs.cvi.finance/
Whitepaper: https://cvi.finance/cvi-white-paper.pdf
Twitter: https://twitter.com/official_CVI
Telegram (group): https://t.me/cviofficial
Telegram (channel): https://t.me/cvichannel
Discord: https://discord.gg/yuDsy7SM2H
