On 5/7/2024 at 9:00 p.m. (UTC), an AMA session was held on Avalaunch Telegram group with the Arrow Markets team to learn more about the powerful features being built on Arrow, which users can look forward to in its upcoming V2.
Below we present to you an excerpt from AMA with questions and answers.
Kirbee | Avalaunch
Hello everyone and welcome to another AMA, this time with Arrow Markets! We’ve got the Arrow team here today and we’ll be diving right in. How are you today?
Viking | Arrow Markets
Heyyy, doing good, excited to answer some questions 🫡
Kirbee | Avalaunch
Awesome, let’s get right in! Can you give us a brief intro of yourself and how you became involved with Arrow Markets?
Ed | Arrow Markets
Hey Kirbee, really excited to be here and answer the community’s questions!
I am one of the two co-founders of Arrow markets. As for my background, I was a PhD candidate at Cornell University doing research at the intersection of financial economics, blockchain, and AI. Cornell was a great place to be at for all three and I even had the pleasure of taking Emin Gun Sirer’s one and only PhD course on blockchain before he left to create the avalanche protocol!
The seed of the idea of Arrow markets came out of the IC3 hackathon back in late 2020. Patrick and I came from an academic background and had some professional experience in TradFi. In TradFi, options are massive and dwarf spot markets. We did not see the same traction in DeFi with options and wanted to create a platform that would provide transparent creation and settlement of options on-chain.
Viking | Arrow Markets
Hey! I’m Viking, marketing lead and community Lead at Arrow. I have been trading full-time crypto for a bit over 4 years now, so very crypto native and bit of a DeFi degen myself. Been trading perps for awhile and got excited about options about 1 year ago -that is how I ended up connecting with Arrow. Been around in Arrow for around a year, doing everything Growth and Community related, so if you have been around for awhile you have probably seen me at some point in tg/discord or twitter.
Kirbee | Avalaunch
Wow that’s awesome, a very impressive background from both of you. I’m sure the audience would love to know more about the rest of the team behind Arrow Markets — could you tell us more?
Ed | Arrow Markets
Other than myself and Vikingcrypt, the Arrow Markets team has deep expertise from top institutions. Our other cofounder Patrick Kiefer has a PhD in finance/financial economics from UCLA and Cornell (ABD, on-leave) and also has experience from industry in different areas of quant finance.
Our CPO Dheeraj Chakilam has a CS Masters from Cornell and worked at Jet/Walmart as a software engineer focused on options platform UX.
The team combines strong academic credentials in finance with real-world experience across quantitative trading, macro investing, software engineering and product design — giving us a unique position to build a superior options platform.
We also have respected advisors from the options market making industry and AI backgrounds providing invaluable guidance.
To learn more about the team please visit https://www.arrow.markets/about
Kirbee | Avalaunch
Quite the powerhouse team you have there, we are in good hands 🙂 so Arrow’s vision is to become the go-to platform for retail options traders — can you share more insight on your approach?
Viking | Arrow Markets
Absolutely! Our vision is to democratize options trading and be the premier platform tailored for retail traders. A few points on our approach:
1 — User-centric design is our core. Our “Lite Mode” interface guides beginners through complex strategies, lowering barriers to entry. Even those that have never traded options before can execute complex options trading strategies using our Lite Mode.
2 — Education is prioritized with testnet, trading competitions, social integration to learn in a risk-free, engaging manner.
3 — Robust technology like our innovative RFE system ensures competitive pricing and liquidity on par with centralized platforms.
4 — We’ll offer options on a wide range of crypto assets beyond just BTC/ETH to cater to diverse trader needs.
5 — Our team combines finance, quant trading, product design, and engineering expertise to deliver an exceptional user experience.
The goal is to bridge simplicity and sophistication — empowering retail traders with powerful tools while maintaining an intuitive, accessible platform.
Kirbee | Avalaunch
Great to see you are putting so much focus on educating users and a really clean UX, that’s so important for onboarding new users. With V2 coming out, you’ve shared that it will include a powerful Request-for-Execution system — can you explain why this is such a game changing feature?
Viking | Arrow Markets
The Request-for-Execution (RFE) system is a true game-changer for our V2 platform. Here’s why it’s so powerful:
– Traditional RFQ systems have stale quote risk — market makers must honor quotes over a time window, leading to wider spreads to account for this risk. Our RFE flips this on its head. It requests a reference quote from makers, which the user can then execute against within their set slippage tolerance. This allows makers to provide much tighter quotes since their risk is limited.
– It gets better — RFE masks the user’s slippage tolerance and quickly pings makers for final quotes, accepting the best one within that tolerance range and rejecting any stale prices. This creates a win-win — makers face less risk so can quote tighter spreads, while users get superior pricing within their own slippage control.
– Coupled with KPI-driven maker incentives, RFE ensures the options liquidity and execution rivals centralized platforms.
It’s a true innovative breakthrough.
Kirbee | Avalaunch
That’s really exciting to hear — congrats on the amazing work! On top of all the innovations, you have a strong focus on making options trading more accessible to more traders, how have you gone about this? And why was this such an important goal for Arrow?
Ed | Arrow Markets
Making options trading truly accessible to a wider range of traders has been a core mission for Arrow from day one. A few key elements of our approach as briefly mentioned before:
1. The “Lite Mode” UI guides beginners through complex strategies step-by-step, removing much of the intimidating complexity.
2. Educational tools like testnet, trading competitions, social integration let traders learn in a fun, risk-free environment.
We believe the immense potential of options has been limited to professionals/institutions due to opacity and high bars to entry. By democratizing access, we can unlock innovation and new use cases.
Options are powerful risk management and trading tools — our goal is to empower all traders to leverage them intuitively. This accessibility drive is central to our vision of a truly decentralized options economy.
Kirbee | Avalaunch
Making options more accessible is so important for the future of DeFi! You’ve been building in Avalanche for 3 years! Why did you choose to build on Avalanche in the first place and what has this journey through the years been like? Any insights for teams who are undecided on where they want to build?
Ed | Arrow Markets
Two words: CONSENSUS MECHANISM 🤝. From the moment we read the Avalanche whitepaper, we were super impressed with the innovation behind the consensus mechanism. Why’s it important — it allows for cheap and lighting fast txns while still maintaining a good degree of decentralization among the validators.
Avalanche is a great place to build and we think the team at Ava labs has been really supportive. Our advice for those building out a product is to create a pitch and a simple proof of concept and reach out to the Ava labs team to see how they might be able to support you as a builder.
Kirbee | Avalaunch
Very helpful for emerging teams, thanks for the insight! Community is a key part of building a successful product in the Web3 space. What strategies have you implemented to build the Arrow community in the Web3 space, and what have been your main areas of focus?
Viking | Arrow Markets
Completely agree that community is a key part of building a successful product on DeFi!
We have seen a lot of growth in our community in the last few months and we are constantly trying to host different events and come up with interactive ways to engage our community. We can quickly highlight V2 Mainnet waitlist, the different milestones campaigns to advance in the waitlist, multiple testnet trading competitions and other social campaigns.
We will continue to host different campaigns that help us interact with our community, and try to innovate new and fun ways to engage with Archers. Once V2 Mainnet is out, we will also continue to host events on Testnet to ensure that everybody gets to participate, without gatekeeping events and rewards to those that are already familiar with Options Trading. As highlighted before, we put a lot of emphasis on Education and encouraging our users to experience a risk-free environment to leverage a great tool like Options!
Kirbee | Avalaunch
That’s a lot to look forward to and many ways to get involved! Everyone is hugely excited about Arrow V2 — is there any V2 alpha you can share with the Avalaunch community?
Ed | Arrow Markets
We will be dropping some alpha with some research we have been doing for our upcoming margin system. We are super pumped about the results around capital efficiency relative to CEX options margin systems and Arrow’s is even able to support cross-margining. Stay tuned! 👀📺
Kirbee | Avalaunch
Very exciting stuff! Arrow V2 will mark a pivotal milestone for DeFi — can you share what else you have planned in the future for Arrow?
Viking | Arrow Markets
As discussed a bit earlier we are very excited about productionizing our margin system and integrating that into our version 2. We are also excited about opening up some options markets ($AVAX 👀🔺) on the platform!
Kirbee | Avalaunch
👀 this is the last question from us before we move onto the community questions. Arrow Markets is significantly expanding the possibilities in DeFi, as there hasn’t been a solid choice for options trading until now. Where do you see the future of DeFi heading, and what will Arrow enable to be built?
Ed | Arrow Markets
In general we like to think of the future of DeFi being all the possibilities that arise from ‘open finance’. Open finance in our mind is similar to open source technology. DeFi enables easy composability between protocols, in a transparent and accessible way. Furthermore, open finance also allows real cool future innovations like on the fly stress testing of a whole interconnected DeFi ecosystem in real time — not something that we can do in TradFi because of how closed that system is.
In addition, I personally am very excited for how DeFi will enable the future development of AI algorithms and allow users/traders to participate in real time in the upside of development of new AI tools. 🤖
Finally for what Arrow will enable to be built, we think that in the medium term, the goal of getting more and more options trading on-chain in a more transparent system is a big step in the right direction of having a fully functional open financial system and we’re super pumped to be making it happen in real time!
Kirbee | Avalaunch
A future of unlimited possibilities! Right now we’re onto our community questions, first one is from @kieule0701 — How can beginners utilize the Arrow Markets platform? Is there a guide available for newcomers?
Viking | Arrow Markets
For beginners, we offer a “Lite Mode” that simplifies executing options strategies with just a few clicks. We also have a testnet, trading competitions, and periodic social campaigns with web3 communities to learn in a fun, risk-free way. You can check out more about how our platform works by visiting our docs: https://docs.arrow.markets, and also by testing it out on Testnet at https://www.arrow.markets/!
Kirbee | Avalaunch
Next one is from @Nicolassteam — Can you share the backstory and challenges that motivated the development of Arrow Markets?
Ed | Arrow Markets
The seed of the idea of Arrow markets came out of the IC3 hackathon back in late 2020. Patrick and I came from an academic background and had some professional experience in TradFii.
In TradFi, options are massive and dwarf spot markets. We did not see the same traction in DeFi with options and wanted to create a platform that would provide transparent creation and settlement of options on-chain.
Options allow users a huge amount of flexibility in how they can express their market views, however, in part, because of this flexibility they are complex. Other than the purely technical side of programming options contracts on-chain we also wanted to create a platform with great UI/UX as well as plenty of opportunities to paper trade options.
Kirbee | Avalaunch
@ducluong27 would like to know — Has Arrow Markets undergone any security audits by third parties? What measures are in place to safeguard the community from potential threats?
Viking | Arrow Markets
Yes there have been third party audits of different aspects of the platform from our v1, to v2, to our $ARROW token contracts. We are currently in the process of auditing our token staking contracts. Please be on the lookout for more details to be released in our docs!
Kirbee | Avalaunch
Awesome, @tripham8 has a great question — How does Arrow Markets plan to strengthen its community and foster ongoing support? Are there regular community events, and could you provide examples?
Viking | Arrow Markets
As mentioned earlier, we have held multiple community events in the past — we can highlight Arrow V2 Waitlist that included completing different milestones to advance in the waitlist, lots of testnet trading competitions, and different social campaigns using tooling like Galxe.
Going forward we will continue to host different community campaigns — both on Mainnet and Testnet so everybody can participate -. To mention some, Trading Competitions, Sweepstakes, overall different incentives and ways to get the community involved. Would stay tuned for a new campaign starting soon 👀
Kirbee | Avalaunch
Can you share the inspiration behind the name “Arrow Markets” and any meaningful story associated with it? from @TamekaHopson
Ed | Arrow Markets
The name Arrow Markets actually comes from the famous Economist Kenneth Arrow. He was the first economist to show that having a rich enough set of options in a free and open market would allow participants in the economy to maximize their ‘welfare’ and attain an ‘efficient market equilibrium’.
To learn more about this great economist please check out this article: https://www.nature.com/articles/543624a
Kirbee | Avalaunch
Very interesting! We’ve got a very good question from @JammieDelagarza — In traditional options markets, the role of a writer is crucial. How does Arrow Markets innovate this process by enabling users to buy options without relying on a middle-man, and what benefits does this decentralization bring to traders?
Ed | Arrow Markets
Arrow markets directly connects users to market makers in our v2. In addition, we have a KPI driven system in place for how market makers are compensated. This approach allows users to get the most competitive prices for options. Finally because of the fact we are a DeFi protocol, composabiliy between us and other platforms is completely open.
Kirbee | Avalaunch
Awesome, thanks for that. Now we hear from @AllenaGivens — Can you discuss how Arrow Markets leverages options contracts to construct a wide variety of derivatives and structured products, and provide examples of the diversity of products that can be created using the platform?
Ed | Arrow Markets
Excellent question on the versatility of our platform! Options are the building blocks that allow creation of an incredibly diverse range of derivative and structured products.
For example, using our platform:
1. You could create a call spread by combining a long call at one strike and another long call at a higher strike, participating in upside gains up to a cap at the higher strike.
2. Construct a put spread by combining a long put at one strike and another long put at a lower strike, hedging downside risk below the lower strike.
3. Iron condors are also possible by combining the above call spread and put spread, allowing traders to bet on high or low market volatility.
The permutations are practically limitless when you have the right options market infrastructure, which is what we’ve built with Arrow Markets.
Kirbee | Avalaunch
There’s really so much innovation that can be built on Arrow — excited to see how it will all unfold. An important question from @Alonzowhitworth20 — Did Arrow Markets consider community feedback and requests during product development to incorporate fresh ideas? Who is the ideal consumer for your project, and how do you ensure alignment with their needs?
Viking | Arrow Markets
Community feedback has been crucial in the process of building Arrow V2. We have held multiple user interviews with both experienced options traders and people who have never traded options before, to gather opinions and thoughts on the overall UI and UX. We are strong believers in taking a user-centric approach when building, so we are constantly seeking feedback and iterating on it, ensuring that we are fully aligned with our users. We invite everybody to test V2 out and let us know of any feedback they have! By offering a Lite Mode, more focused on novice traders, and a Pro Mode, more focused on experienced option traders, we cater to a wide range of users.
Our community feedback has been super important in getting the V2 product to where it is, so huge shoutout to everybody who has submitted feedback 🫡
Kirbee | Avalaunch
Great to hear that the community has played such a key role in the development of V2! An excellent question from @SaranMarlow as we near the end of the community questions segment! Looking back at the successes of 2023, what key milestones or achievements stand out for Arrow Markets, and how do they set the stage for the anticipated launch of Arrow V2 Mainnet in 2024?
Viking | Arrow Markets
There have been a lot of milestones throughout 2023 and even 2024 already. To highlight some of them,
a) In early 2023 we opened up V2 Waitlist which saw a ton of interest and signups — over 28k signups with verified socials
b) We saw thousands of Testnet Users participate in the different campaigns we held — the Milestones campaigns being a huge success!
c) We held multiple Testnet Trading Competitions which saw thousands of signups, the last one having over 5k users competing for $15K Prize Pool
d) Successfully tested Arrow V2 Mainnet internally and later on-boarded some OGs to try Mainnet out
All of these really setting up the stage for a highly anticipated Arrow V2 Mainnet — its great to see community to be as excited as we are!
Kirbee | Avalaunch
Wow, that’s amazing — congrats Arrow team! And yet you still have so much more lined up 🥳 we’ve come to our final question from @DaphineCroft — Can you elaborate on the process of signing up for the V2 Waitlist, including the criteria for participation and the benefits for users who join the waitlist?
Ed | Arrow Markets
Bit of alpha here but the opened V2 Mainnet is coming out this week, so there is no need to sign up for V2 Waitlist anymore — will be able to trade on mainnet directly as soon as it goes live. So keep an eye for that announcement! 🚀👩🚀
Kirbee | Avalaunch
A big bit of alpha there! What an exciting week it is for you guys — congrats on everything! Thanks for such an informative AMA — really eye-opening as to what Arrow Markets will unlock for the DeFi space.
Less than 2 more days to register for the Arrow Markets IDO!
Thanks to the Avalaunch community for tuning in!
Get ready for Arrow V2 🥳
Viking | Arrow Markets
Thanks Kirbee and everybody who tuned in! 🫡
Ed | Arrow Markets
Thanks Kirbee and big hugs 🫂 to the whole avalaunch community — lfg
Kirbee | Avalaunch
Thanks Vikingcrypt and Ed for your time!
