Pythiad: Things Are Warming Up with Friktion and Entropy
We may be in crypto winter now, but things are just heating up for Friktion!
Friktion and Entropy are bringing new energy into the markets. Many of you know Friktion as “Solana’s first structured products protocol”, and as the winners of the Serum Community Prize in the Solana Ignition Hackathon in October 2021. Earlier this March, Friktion launched Entropy Markets, a decentralized exchange (DEX) focused on giving traders tools to trade volatility and bringing first-in-class volatility products to DeFi.
It’s been 8 months since Friktion’s mainnet launch. Hot on the heels of Friktion’s first Volt products comes offerings like Circuits for DAOs/Institutions treasury management, the Entropy volatility DEX, an Institutional Grade Analytics page, and Portfolio Manager!
What is Friktion up to now, and what’s the secret behind their constant shipping? We’re joined by the Friktion team themselves to find out…
Let’s start off easy. What is Friktion?
Friktion is a portfolio management protocol which allows investors to build a portfolio which generates returns in bull, bear, and rangebound (crab) markets. Users can invest in ‘Volts’, Friktion’s native strategies, to express market views or passively allocate into market-neutral strategies! We’re also very focussed on bringing transparency to DeFi: each Volt has an accompanying set of Analytics with it to track performance, risk, and strategy details.
You can explore all the Volts at https://friktion.fi/volts
Our first 2 Volts (#01 & #02) which most people are familiar with are the Covered Calls and Cash Secured Puts strategies — which allows users to monetize volatile markets to earn income.
While most sources of DeFi yields fell in the first half of 2022, Volt#01 outperformed, returning nearly 20% on SOL year-to-date as shown below:
Volt#03 is the Crab strategy: a delta-neutral volatility harvesting strategy that performs best in range-bound or sideways markets. It’s built on Entropy — the first volatility DEX for volatility enjoyoooors to trade Power Perps and Volatility Perps!
Volt#04 is Basis Yield: it earns funding rates from a delta-neutral automated basis strategy.
You can read more about the strategies here!
How does Friktion use Pyth?
Pyth plays an important role in our infrastructure stack — Friktion generates a 30-minute TWAP (Time Weighted Average Price) based upon Pyth’s price feeds for options settlement at expiry and compare with the strike price to determine P&L of our Volts. With Entropy, we also leverage Pyth’s prices to determine funding rates on BTC²-PERP. This unlocked for the first time on Solana, a yield strategy using Powers (Squared Perpetuals)! 😎
Who is Friktion? What’s the founding story?
Our core contributors came together from working in proprietary trading and quantitative research firms (commodities, treasuries, volatility products, crypto assets), full-stack blockchain engineering. and UI/UX design. We’re building Friktion because of the massive need for risk management and sources of real, safe yield in DeFi.
As new users adopt DeFi, Friktion aims to provide a single venue to access DeFi.
Uddhav and Alex met back in university and decided to quit their commodities/treasury trading jobs to go full-time DeFi with the initial idea of building out a hedge for impermanent loss in the CeFi OTC market making space.
We quickly realized that this was too complicated for median DeFi users, so then decided to move up the stack and build out a set of more user friendly products first! We took part in Solana’s Ignition Hackathon and won the Serum and PsyOptions prizes — things took off from there and there’s been no looking back since!
Volts, power perpetuals, and volatility perpetuals! What firepower are you giving to your users?
Entropy is the DeFi’s first volatility exchange that we built on top of Mango — unlocking a powerful set of instruments to trade volatility with that don’t exist in traditional markets!
A quick look on what’s available:
- Power Perpetuals (BTC²) track the price of an asset squared! This allows users to get exposure to “convexity”, which means that the upside is greater than the downside for the same move.
- Volatility Perps (BTC_1D_IV) tracks the “implied volatility” or “predicted move” of an asset based on centralized options exchanges. This allows users to trade options without having to deal with exposure from all of the other greeks. Pure vega!
Friktion recently passed $2.5B in traded volume! Congratulations! How does it feel to have achieved this milestone? What do you think allowed you to reach this stage?
It feels super awesome to see how far we’ve come since our mainnet launch 8 months ago!
We couldn’t have done it without our fantastic community of power users who always give us great suggestions and feedback — that has played a pivotal role in how we build out upcoming Volts and UX. We prioritize shipping and love building!
Many readers no doubt are interested in building more durable portfolios for wintery market conditions. How should these traders be thinking?
Diversification. Being able to answer some fundamental questions about risk appetite is the best way to be prepared to survive and thrive during crypto winters. There’s a team working on an entirely new flow on top of Friktion which uses Volts to diversify portfolios based on a users risk and reward profile. Stay tuned for some exciting updates on this 👀
What’s in a name? Why “Friktion” and “Entropy”?
Physics meet Greek mythology. Two things we’re passionate about ⚡
Tell us more about the Lightning OG NFT!
Lightning OGs are Friktion’s collection of 2,222 commemorative NFTs — airdropped as a reward to early supporters who have been with us from the very beginning, giving feedback while we were on devnet!
Users with the NFT who verify themselves get a Genesis Wielders role on discord which unlocks private channels where we share first hand updates on upcoming launches ahead of the public, market and quant trading insights and alfa leeks!
It’s also an integral piece to unlock access to our upcoming Volt#05: Capital Protection that will only be able to accessible to NFT holders in the initial launch happening very soon 👀
Any last words for the readers?
We just launched our site redesign — would love for you guys to check it out at friktion.fi and let us know what you think!
UI and UX is a long overlooked piece in DeFi and we believe having a simple, intuitive and transparent design is the first step in the improving onboarding experience to demolish the barrier of entry for anyone into DeFi and help scale DeFi to the next million (and then billion) users.
Some exciting things in pipeline is Friktion Learn, a homebase for DeFi education, as well as our new Volt#05: Capital Protection launch!
If you’re interested in learning more about Friktion, we recommend you to join our Discord! It’s the best place to find all you need, and we are always hanging out there to chat with our users — so feel free to pop by if you’ve any questions or just to say hi!
Stay in touch on Twitter: twitter.com/friktion_labs
Learn more: docs.friktion.fi