Vyper Protocol <> Project Serum - Grant Proposal


Vyper Protocol is a bespoke derivatives protocol building on Solana and Serum. We are proposing to the Serum DAO a grant to fund development costs and bootstrap initial liquidity, thus benefiting the Solana DeFi ecosystem and order-book based derivatives.


Vyper Protocol is a derivatives protocol allowing traders to create and trade collateralized bespoke derivatives. Vyper differs from other derivatives protocols in two main ways: 1) any well-defined payoff is allowed, 2) any SPL token can be used as collateral. Settlement is permissionless and automatic, and position IOUs are minted/burned during the lifecycle of the trade.

Vyper aims to cut down the enormous cost that people incur when trading OTC/bespoke derivatives, which in TradFi involve expensive legal documents and institutional setups.

Vyper won a prize in the Serum x Wormhole Convergence hackathon thanks to the MVP integration with the Serum CLOB.


The key primitive of Vyper is structured as a suite of smart contracts which are collectively defined Vyper Core. These contracts manage the payoff definition and valuation, the underlying asset(s) settlement prices (up to 10 different underlyings for every payoff), position IOUs mint/burn, and the collateral tokens deposit/redemption. By integrating the underlying asset(s) program with oracles such as Pyth and Switchboard a large number of exotic payoffs become available such as volatility, synthetic stocks, weather, and more.

Vyper also allows the creation of Application Layers, built on top of the Vyper Core infrastructure, which cater to specific use cases. The Vyper Core team is developing Vyper Vaults which transforms impermanent loss in a tradable asset, through a vault-like epoch system. This allows users to provide liquidity on-chain without worrying about complex tail risks, while market makers and sophisticated traders can sell risk and hedge effectively on the open market.

A few other use cases which are enabled by Vyper Core include:

  • DeFi protocol insurance (similar to credit default swaps) protecting against hacks and defaults, including recovery rates trading after the credit event has happened
  • Fixed rate/variable rate swaps on top of existing lending protocols
  • NFT collateralized obligations, leveraging the growing market of NFT lending/borrowing
  • Yield strippipng of any yield-generating asset

These are just a few examples, with each of them potentially being a large market.


The Vyper Core team believes order-book price discovery is a superior mechanism to other solutions, and as such we would like to integrate deeply with the Serum CLOB, both v3 and the AAOB as soon as live. This will cement Solana DeFi in general, and Serum CLOB in particular, as the go-to venue for any type of derivative, not just delta1 (perpetuals and spot).

Given the large number of possible payoffs which can be built on Vyper, we plan to launch a Vyper Core Derivative Playground, which will provide a simplified UX for the setup of a new derivative including the payoff definition, collateral used, and underlying(s) selection. Having the possibility of creating a Serum market will greatly enhance the UX as users will have access to an out-of-the-box order book.

With regards to Vyper Vauls in particular, the advantage of integrating the Serum CLOB/AAOB is two-fold:

  1. It allows for efficient price discovery, as traders can set a specific price (i.e. premium) for which they are willing to buy/sell the impermanent loss
  2. It allows for increased market reach, as trading and speculation can happen regardless of whether the funds are deployed in a pool/farm within Vyper Vaults

Therefore, it replicates many of the features of existing AMMs, except that it completely works and lives on an order-book.

To make a more concrete example, thanks to Serum, traders will be able to buy/sell the realized 1-week IL of SOL/USDC. The contract itself has a defined initial price (=the strike) and a final settlement price (SOL/USDC at expiry) for which the payoff is computed (the IL).

In Vyper Vaults the derivative traded (exotic option just described) is currently exchanged directly between sellers and buyers, in an automatic process. Thanks to the Serum integration, sellers and buyers will be able to engage on the order book and adjust their quotes based on changing market conditions. The vault-like epoch system will be kept going for UX purposes, though under the hood it will simply make orders on the order book.


Given the above, we strongly believe that a deep integration of Vyper with Serum will provide beneficial for the Solana DeFi ecosystem and order-book based derivatives. As such we propose the Serum DAO grant a total of 500’000 SRM to Vyper to fund development costs and bootstrap initial liquidity.

In particular, these funds will be deployed as follows:

  • 300’000 to fund development costs. The team consists of 5 people including 3 full-time developers. So far the team is self-funded and has not received any funding except for the initial Serum contribution
  • 200’000 to bootstrap initial liquidity. As we move the Vyper Vaults synthetic derivatives to the on-chain OB, a SRM liquidity mining will go a long way in bootstrapping the initial liquidity and starting up the market properly


  • End of July 22: Devnet launch of Vyper Core and Vyper Vaults
  • End of September 22: Mainnet launch of Vyper Core and Vyper Vaults with synthetic (not OB based) liquidity
  • Q4 22: Serum integration and liquidity change of Vyper Vaults to Serum CLOB
  • Q4 22: Derivatives playground launch and Serum integration in Vyper Core


Final Consideration. The first Solana DeFi wave was characterized by unsustainable liquidity mining and experimentation, during this second wave we want to bring more robust financial tools to DeFi such that users can protect and hedge themselves against risks such as Impermanent Loss, counterparty Risk, etc. Ultimately we are working side by side with Serum to develop and bootstrap the risk markets of tomorrow.

We are asking for 500’000 SRM to be used for both development and for trading incentives to bootstrap risk markets and incentivize liquidity.

The development grant will allow the team - which has not received any VC funding - to continue working on the primitive and on its integration with Serum Orderbook. The trading grant will be used at a later stage after mainnet is live and audit is completed to kickstart liquidity on Vyper Vaults and on the Serum CLOB once markets are live.


Having worked closely with @Crypto_notte & knowing the Vyper team, we’d be very happy to see the expansion of new exotic derivatives (they are a very talented bunch of folks).

This should hypothetically attract more activity into the Serum ecosystem from my point of view, by attracting large market markers who 1) should end up quoting on serum as a benefit 2) will hedge directly using Serum so increased taker volumes.

That’s my 2c - it obviously assumes that the flow will be hedged/sent to Serum OBs of these risk markets.


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