Vertex Protocol has emerged as a notable newcomer in the competitive decentralized exchange (DEX) sector for derivatives. Since its mainnet launch in late April 2023, it has quickly captured approximately 10–15% of the daily trading volume among liquidity pool-based perpetual DEXs. In June 2023, the protocol secured a strategic investment from Wintermute Ventures, signaling growing institutional confidence.
This article explores Vertex's market position, key features, tokenomics, and potential risks.
Key Performance Metrics
Trading Volume
Vertex has generated significant trading activity, largely driven by its incentive programs. Recent data shows an average daily trading volume of around $40 million over a seven-day period. The platform supports both spot and perpetual futures trading, with derivatives constituting the majority of its volume.
While this volume remains below industry leaders like dYdX, GMX, and Synthetix, it is competitive among second-tier derivatives DEXs. Over the past week, Vertex ranked among the top ten perpetual DEXs by volume.
Total Value Locked (TVL)
The protocol's TVL stands at approximately $6.22 million, a relatively modest figure compared to more established players. This value is distributed across four primary assets.
Daily Active Users (DAU)
Vertex has accumulated over 1,800 cumulative users, with a seven-day average of about 200 daily active users. For context, GMX reports over 1,000 DAU, dYdX around 700, and Synthetix approximately 500.
Open Interest
Open interest across Vertex's seven trading pairs is currently around $5.37 million, with Bitcoin and Ethereum dominating. This is considerably lower than dYdX's $300 million or GMX's $150–200 million.
Protocol Revenue
Cumulative gross revenue is approximately $540,000. After accounting for maker rebates ($86,000), net revenue totals about $460,000.
Team, Investors, and Background
Vertex was co-founded by Darius, who leads marketing efforts, and Alwin Peng, a former Jump Trading blockchain engineer.
The project raised $8.5 million in a seed round in April 2022, led by Hack VC and Dexterity Capital, with participation from Collab+Currency, GSR, Jane Street, Hudson River Trading, and others. Early investors received 8.5% of the token supply, implying a $100 million valuation at the time.
Notably, Vertex initially launched on Terra before migrating to Arbitrum following Terra's collapse.
In June 2023, Wintermute Ventures made a strategic investment. Wintermute, a leading crypto market maker, cited Vertex's "strong team of traders and engineers" and its innovation in smart contracts and market design.
Product Innovation: Hybrid Orderbook-AMM Design
Vertex operates as a unified DeFi platform offering spot, perpetual futures, and money markets, though its core focus is derivatives.
Its key innovation is a hybrid orderbook-AMM liquidity model. This architecture combines off-chain order matching via a sequencer with on-chain automated market maker (AMM) liquidity.
How the Hybrid Model Works
- Off-Chain Orderbook: Managed by a sequencer, it enables fast execution and reduces MEV risks.
- On-Chain AMM: Provides permissionless liquidity, ensuring trades execute even when orderbook liquidity is thin.
The system merges both liquidity sources into a single interface, offering traders the best available price. Here's a simplified example:
Assume ETH is trading at $1,200. A buyer wants to purchase 75 ETH with a 1% max slippage.
- The orderbook has 25 ETH available at $1,200 → 25 ETH are filled.
- The next orderbook sells 60 ETH at $1,210.
- However, LP liquidity offers 25 ETH between $1,200–$1,210 → 25 ETH are filled from LPs.
- The remaining 25 ETH are filled at $1,210.
This mechanism ensures efficient trade execution across varying market conditions.
Universal Cross Margin: Enhancing Capital Efficiency
Vertex introduces "Universal Cross Margin," expanding traditional cross-margin functionality.
In isolated margin modes, assets are segregated per trading pair. In standard cross-margin, all account assets collateralize positions but are limited to specific products.
Vertex's system allows all user assets—including spot holdings, perpetual positions, money market deposits, and even LP shares—to serve as margin. Unrealized profits can offset losses or collateralize new positions.
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Account Health and Liquidation
The platform provides clear account health indicators:
- Initial State: Varying risk levels based on collateralization.
- Maintenance State: Initial margin exceeded; no new positions allowed; requires deposit to avoid liquidation.
Liquidations follow this sequence:
- Cancel open orders.
- Unstake and sell LP assets.
- Liquidate spot balances and perpetual positions.
- Liquidate borrowed assets.
Liquidation halts if account health restores above zero during the process.
Competitive Fee Structure
Vertex offers low trading fees:
- Maker fees: 0%
- Taker fees: 0.01% – 0.04%
Makers exceeding 0.25% of epoch volume (28 days) qualify for rebates, ranging from 0.005% to 0.02%.
This structure is highly competitive versus GMX (0.1% per trade), dYdX (0.02–0.05%), or Kwenta (0.02–0.06%).
VRTX Tokenomics
The VRTX governance token has a total supply of 1 billion. 90.08% will distribute over five years.
Allocation
- 46% for community incentives (9% initial, 37% ongoing)
- 41% to team, treasury, ecosystem fund, future contributors
- 8.5% to early investors
- 4.5% for liquidity
Token distribution is scheduled to begin around October 2023, six months post-mainnet launch.
Trading Rewards
An initial phase allocates 15 million VRTX per 28-day epoch across six epochs. Rewards are weighted by fees paid and vary by trading pair. Users can track rewards via the protocol's app.
Like many newer DEXs, Vertex relies on trading incentives to bootstrap volume, which may include some wash trading. However, sustained activity suggests market optimism toward its token value.
Conclusion and Risks
Vertex enters a crowded derivatives DEX market but differentiates via its hybrid model and universal cross margin. These innovations aim to improve liquidity depth and capital efficiency.
However, universal cross margin also increases risk exposure. Traders must manage leverage carefully, as adverse moves can trigger broad liquidations.
Despite risks, Vertex's rapid growth and backing by credible investors make it a project to watch.
Frequently Asked Questions
What is Vertex Protocol?
Vertex is a decentralized exchange on Arbitrum offering spot, perpetual futures, and lending markets. It uses a hybrid orderbook-AMM model to combine low latency with robust on-chain liquidity.
How does Vertex's hybrid model benefit traders?
It offers faster execution and reduced MEV via its off-chain sequencer while ensuring trade availability through its AMM. Traders access blended liquidity from both makers and LPs.
What is Universal Cross Margin?
It allows all user assets—spot, perpetuals, LP shares, deposits—to serve as margin. This maximizes capital efficiency but also increases risk, requiring careful management.
When is the VRTX token launching?
Token distribution is expected around October 2023. Early users can earn rewards through trading activity during pre-launch epochs.
How do Vertex's fees compare to competitors?
Its maker-taker fee structure is highly competitive, with zero fees for makers and low taker fees. Volume makers even earn rebates, enhancing its appeal for active traders.
What are the main risks of using Vertex?
The primary risk is its universal margin system, which can lead to cascading liquidations across all account assets during high volatility. Users should monitor account health closely.