👁️Overview

Decentralized trading infrastructure to allow you to trade anything like a perp.

At a high level, the Ostium protocol features:

Virtual Exposure. The Ostium Protocol enables onchain price exposure to a suite of Real World Assets, beginning with forex, commodities, indices, and blue-chip crypto assets. Ostium is not a tokenization protocol minting off-chain backed equivalents of non-crypto assets (e.g., ERC-20 tokens representing treasury bonds) but rather an application enabling virtual price exposure, entirely onchain, to these assets. This system is facilitated by the exchange of stablecoins between traders and liquidity providers and the use of high-speed oracles for asset pricing.

Shared Liquidity Layer & Dual Vault Structure. A Liquidity Buffer settles trades, accruing value when net trader PnL is negative and depleting in value with net trader PnL is positive. Market Making Vault Liquidity Providers ("LPs") act as counterparties during periods of imbalance in Long and Short trader Open Interest ("OI") and/or depletion in the value of the Liquidity Buffer. In contrast to standard Automated Market Makers, in which LPs take on Impermanent Loss risk, LPs in Ostium's liquidity layer provide capital that, under certain circumstances, takes on temporary trader PnL risk. Protocol fee structure, however, in particular a non-linear Funding Fee that increases convexly as utilized OI nears its limits (see here), is designed to minimize both the duration and magnitude of LP risk exposure resulting from OI imbalance. LPs are rewarded for this risk through a portion of trading fees accrued from trading activity. Together, these two capital pools (Liquidity Buffer + Market Making Vault) compose a Shared Liquidity Layer ("SLL").

Oracle Pricing at Position Open. Pricing at trader position opening is determined via Ostium's RWA oracle infrastructure (operated by Stork Network) or Chainlink low-latency oracle feeds, depending on the asset (RWA vs. crypto). Both feed networks update on a roughly sub-second basis, reporting prices pulled via a combination of sources from the traditional markets for off-chain assets.

Automations: Liquidations, Stop and Limit Orders. Asset price tracking required to determine when Liquidations, Stop and Limit orders should be executed, as well as the execution of these transactions themselves, are performed by either Chainlink Automations and Gelato Functions, depending on the asset. In contrast to protocol-run automations, these services allow for more decentralized and reliable execution, as well as more predictable pricing for users.

Risk-Adjusted Fee Structure. To capture and minimize the risk an open position poses to the Shared Liquidity Layer (SLL) via directional exposure, traders are subject to variable fees that compound per block.

• Funding Fees vary as a function of the skew or imbalance in OI for a particular asset, which exposes the SLL to counterparty risk. This fee increases non-linearly with imbalance to encourage arbitrageurs to take the more "unpopular" side of a trade.

• Volatility Fees vary as a function of the time-weighted recent volatility of the underlying asset, and are charged on a trader's entire position size to reflect the leverage levels of a trader's position. This fee captures the greater risk of future increases in OI imbalance, which scales with asset volatility.

• Conditional Opening Fees. To further incentivize closing of Open Interest imbalances, traders are subject to differential opening fees depending on their categorization as virtual makers or takers. Low leverage (1-20x) “counter-trades” that decrease OI imbalance are subject to reduced maker fees; all other trade types (high leverage and/or increasing OI imbalance) are subject to higher taker fees.