Today, we’re looking at Ostium, a perps DEX on Arbitrum. Want to short the S&P 500, long gold or BTC all in one onchain venue? You can do that on Ostium.

In other news…are you coming to Permissionless IV Brooklyn in June? Tickets are $399 (for now!), but you can get one for half price with a unique 50% off discount code if you successfully refer 10 new subscribers to the 0xResearch newsletter. Scroll down for details.

RWAs in vogue:

The total value of onchain real-world assets (excluding stablecoins) has reached an all-time high of $21.1 billion, according to data from rwa.xyz.

Unsurprisingly, tokenized Treasury bills make up the largest share. It may surprise you, however, to know that tokenized gold ranks second — despite bitcoin often being positioned as digital gold. Tokenized gold is about ~$2b in market cap and recorded a record-high $77.6m in trading volume on Ethereum over the past week.

— Donovan Choy

Permissionless IV is where the builders show up — devs, founders, protocol teams, product minds. No waiting on the next bull. Just shipping.

The lineup: Jesse Pollak, Hayden Adams, Kain Warwick, Mert Mumtaz, Smokey the Bera + more.

The themes: Infra, AI x crypto, modular, DeFi, consumer apps, Bitcoin, token design.

💻 Hackathon: $100K+ in bounties

🎟️ Developer tickets available

📅 June 22–26 | Brooklyn, NY

Trading RWAs onchain with Ostium

In light of all the hype around real-world assets of late, I thought it’d be interesting to look at Ostium on today’s edition of 0xResearch.

Ostium is a perps DEX on Arbitrum that lets you trade RWAs onchain. It’s not a new project. The team raised $3.5m in a round led by General Catalyst and LocalGlobe in October 2023. 

What is new, however, is its recently launched points program, which has propelled TVL up tenfold from $5.5m to $53.6m.

The unique selling proposition of Ostium is its ability to long or short popular market indices (S&P500, Nikkei 225, Dow), commodities (gold, silver, copper, crude oil) or forex (GBP, EUR, JYP) – with up to 100-200x leverage.

Unlike tokenized RWAs, tradable assets on Ostium are synthetic assets so they’re not actually backed by actual collateral. Instead, asset prices are tracked by oracles. A custom-made pull-based oracle system was built for RWAs, and Chainlink Data Streams are used for crypto assets.

Despite its RWA-niche, actively traded assets on Ostium are generally varied. On its highest trading volume day (April 16), crypto assets formed the largest percentage of assets traded (53%), forex was 22%, commodities was 18% and indices was 7%.

In the last seven days, Ostium has generated $938m in trading volume, which translates to about $411k in fees. For context, total trading volume on all Arbitrum DEXs was ~$3.6b in the last seven days, based on DefiLlama.

Is Ostium the next Hyperliquid?

Both began as perps DEXs on Arbitrum. But here’s where they differ.

Ostium uses a two-tiered liquidity layer structure consisting of a “liquidity buffer” and a market making vault.

This market making vault works similar to Hyperliquid's HLP vault, where the relationship between liquidity providers and the platform's traders is of an adversarial nature, i.e. if traders win, LPs lose and vice versa.

(This is the same vault that Hyperliquid recently controversially bailed out in the JELLYJELLY memecoin debacle.)

Ostium’s two-tiered design, however, is meant to thwart this zero-sum relationship. Its “liquidity buffer” allows LPs to benefit from growth in trading volume and open interest instead of only trader losses. This way, Ostium LPs and traders are in a win-win relationship (see docs for a fuller explanation).

Ostium’s OLP vault is currently offering an above average 28.69% APY on USDC deposits to compensate for the risk of LPs potentially having to act as a counterparty.

The second key difference in protocol design lies in Ostium’s rejection of a central limit orderbook (CLOB) design, popularized by perps DEXs like dYdX and Hyperliquid. This is probably due to the fact that Ostium does not exist on its own L1 protocol, but I may be wrong.

Instead, Ostium opts for a pool-based design. This design solves the obvious problem of liquidity fragmentation and mirrors the price of RWAs offchain using oracles.

Ostium is an exciting project but it’s still early days for the DEX in terms of trading activity. I’ve heard it described as the next Hyperliquid poised to ride the tailwinds of the burgeoning RWA narrative. That’s a neat mental model, but whether or not crypto traders want to abandon traditional exchanges to trade commodities and forex onchain is a whole other story.

— Donovan Choy