Aevo is a blockchain and order-book-based decentralized exchange(DEX) for trading professional options. It provides various services, including options and futures trading, with features like algorithmic strategies and decentralized governance. ^[1]

Overview

Aevo is a high-performance, order-book-based decentralized exchange designed for professional options trading. It features a robust margining system, including portfolio margin, and offers various trading instruments, such as daily, weekly, monthly, and quarterly options. Built on a custom EVM rollup that scales and rolls up to Ethereum for security, Aevo provides over 100 instruments with various strikes and expiries, deep liquidity through partnerships with top options trading firms, and instant onboarding with USDC deposits from any EVM chain. ^[1]

Ribbon Finance

On July 25, the Ribbon DAO approved the merger of Ribbon into Aevo through RGP-33, with an almost unanimous vote indicating strong alignment between holders and the team. Following the vote, key points from the proposal were transformed into an action plan: by August 25, all Ribbon Finance communication channels will be rebranded to Aevo, and the existing Tokenomics system linked to $RBN will be wound down, allowing for a penalty-free unlocking of veRBN pending a 1:1 swap with $AEVO. ^[2]

A new unified landing page for Aevo and Ribbon will be launched in September, merging the products. Users can then swap $RBN for $AEVO without deadlines or limitations. The community will be engaged in shaping the new governance system and tokenomics. Discussions on the governance system will commence, with proposals drawn from internal and community input. Aevo's complexity requires a structured system with clear rules. Following this, the focus will shift to developing the new tokenomics to meet holder expectations and support platform growth. ^[2]

Products

Aevo OTC

Aevo OTC is a platform for on-chain altcoin options trading with institutional-grade liquidity providers, using a Request-for-Quote (RFQ) system and a dynamic margin system. Users can trade weekly, biweekly, and monthly options on 13 different coins, with the coin list rotating monthly based on market popularity. The margin system requires liquidity providers to maintain a 30% initial margin in USDC and a dynamic variation margin based on the trade's mark-to-market value, all securely locked on-chain. ^[3]

In response to increased awareness of counterparty risks post-FTX, Aevo OTC mandates that option sellers post collateral on-chain, ensuring transparency. At launch, trading required a minimum notional volume of $10,000 and a maximum of $2.5 million for ETH and BTC options, with a $1 million cap for other options. ^[3]

In August 2023, Aevo introduced users' ability to unwind their OTC positions early, allowing them to capitalize on mark-to-market gains. Users can now submit unwind requests to institutional market makers to profit from changes in spot prices or implied volatility. This feature enables users to benefit from market movements during the option's lifespan rather than only realizing profit or loss at expiration. ^[4]

Perpetual Futures

Launched in May 2023, Aevo offers Perpetual Futures, a popular crypto derivative, allowing users to trade up to 20x leverage on ETH perps. Integrating perpetuals and options on the same exchange enhances capital efficiency for traders. Aevo's Portfolio Margin system covers options and perps, simultaneously facilitating efficient trading of both. ^[5]

Unlike other on-chain DEXs, Aevo allows the margining of options and perps within the same account, making it the most capital-efficient platform for trading these derivatives in DeFi. Initially, users can trade with a maximum of 20x leverage, a $100,000 notional per order limit, and a $175,000 maximum position size. These limits will increase as daily trading volume and open interest grow. ^[5]

Pre-Launch Token Futures

Aevo offers Pre-Launch Token Futures, a perpetual future without an index price or funding rate until the token's spot market is live. Once the spot market launches, the instrument will reference the index price and enforce a funding rate, causing it to converge to the spot price. This product allows users to trade and speculate on a token's starting or listing price before the spot market is available. Given its experimental and high-risk nature, Aevo implements strict position limits and an open interest cap on these markets. ^[6]

Ribbon Vaults

Aevo will be integrated with Ribbon as the venue where Ribbon’s options contracts settle. This integration allows Ribbon Vaults to provide consistent flow to Aevo and creates more sophisticated vault structures. Ribbon users will no longer need to lock up funds weekly and can exit their vault positions anytime by closing them on the exchange. Due to the high liquidity provided by Aevo, they will also be able to take profits or cut losses on their positions. ^[1][7]

Aevo will transition Ribbon Vaults to settle on its platform, with weekly Ribbon Auctions moving to Aevo’s new RFQ platform. Ribbon Auction participants will benefit by using vault positions as real positions on an exchange, allowing them to trade more, take profits, and hedge. This integration is expected to increase interest in Ribbon Auctions and make pricing more competitive. Participants must pre-fund their accounts with USDC to join. Once the auction is settled, premiums will be bridged from Aevo L2 to Ethereum Mainnet, converted to WETH or WBTC if needed, and sent to the Vault contract. ^[1][7]

Currently, market makers buy options tokens from Ribbon Vaults on Ethereum Mainnet and hold them until expiry due to the lack of a secondary market. With the new system, options bought by market makers will be fungible with other listed instruments on Aevo Exchange, allowing re-trading, use as margin for other trades, and delta hedging through perpetuals. This transition eliminates the ~4bps fee paid to Paradigm for facilitating Ribbon Auctions, directly increasing user yield. Additionally, the process will become permissionless, allowing anyone to participate. ^[7]

Earn Vaults

Earn Vaults are a new yield product with a risk profile complementary to Theta Vaults. These vaults offer principal protection and use a combination of lending and exotic options to enhance yields through exposure to short-term market volatility. Like other vaults, Earn Vaults are autonomous blockchain-based smart contracts operated directly by users. These vaults enable users to administer fully funded strategies, allowing depositors to capitalize on intra-week ETH movements while protecting their capital. ^[8]

Aevo Basis Trade

Aevo Basis Trade collects funding payments by buying spot and selling a perpetual future contract for the same asset. The vault remains delta-neutral, balancing every long spot position with a short perpetual future position. It is expected to perform positively if the funding rate is positive. The strategy is fully algorithmic and continuously monitored by a risk team. ^[9]

The trade rationale is based on the differential, or "basis," between spot and future contract prices, which diverge due to demand and supply dynamics. To ensure convergence, periodic funding payments are made between traders holding perpetual futures contracts. If the funding rate is positive, long-position holders pay short-position holders. If negative, short-position holders pay long-position holders. ^[9]

AEVO Token

The Aevo protocol's native token, $AEVO, functions as a governance and utility token, allowing holders to propose and vote on governance decisions regarding the platform's features, upgrades, and parameters. Voting rights are based on the number of tokens staked, and these rights are limited to decisions about Aevo's protocol, not the operation or management of the company or its affiliates. $AEVO does not grant equity or participation in any entity's assets or decision-making bodies. ^[10]

$AEVO also provides economic incentives to encourage user participation and contribution to the Aevo ecosystem. These incentives are distributed based on users' actual usage, activity, and transaction volume on the platform. Users who do not actively participate will not receive $AEVO incentives, ensuring that all participants are fairly compensated for supporting the ecosystem. ^[10]

Tokenomics

$AEVO is a rebranded version of the previous governance token, $RBN, as approved in Ribbon Finance's governance proposal RGP-33. This means that the distribution of the token largely remains unchanged since $RBN is already widely distributed and allocated in the market. At the end of the Token Generation Event (TGE) on May 15, 2024, 99% of the token supply was fully unlocked according to the original 2021 distribution. However, 15% of the token supply, which includes tokens from the team and backers, has been re-locked until the end of 2024, as outlined in previous governance proposals. ^[11]

The DAO Treasury holds the largest number of tokens, which has largely remained unproductive, except for those used in liquidity pools supporting $RBN. With AGP-1, the DAO approved a more dynamic and functional treasury allocation linked to establishing Committees tasked with administering the funds. The fixed breakdown of the DAO Treasury is as follows: ^[11]

• Up to 16% of $AEVO will be used for incentives, including airdrops, managed by the Growth & Marketing Committee to attract users and liquidity.
• Up to 9% of $AEVO for token liquidity, managed by the Treasury and Revenues Management Committee to support $AEVO liquidity on DEXes and CEXes.
• Up to 5% of $AEVO for community growth and bounties, managed by the Growth & Marketing Committee for events and bounties.
• 16% unearmarked/reserved for future DAO spending, including a 2% yearly allocation for Aevo Project Contributors.

sAEVO

$AEVO is an access token, with its staked version being sAEVO. Users can stake $AEVO or $RBN for at least 9 weeks, after which they can unstake weekly. If they choose to remain staked, they continue to receive sAEVO benefits without further action. ^[10]

sAEVO offers various perks, such as participation in special initiatives like commission discounts, reward multipliers, and early access to new products. It also allows holders to propose new voting initiatives, be elected to committees, and provides double the voting power compared to $AEVO. ^[10]

Aevo DAO

Ribbon Labs Foundation, also known as Aevo DAO, is an autonomous entity formed by the owners of $AEVO and sAEVO. It aims to promote the growth and development of Aevo through various initiatives, both for-profit and non-profit. The DAO governs and directs Aevo's development through formal voting while adhering to applicable laws. It holds and safeguards the $AEVO token treasury, financially supports Aevo's growth and maintenance, and employs strategies to sustain the liquidity of the $AEVO governance token. Additionally, the DAO promotes the development of Aevo's user community. ^[10]