The second round of our Trading Challenge finished on May 22nd. To register for the next round — i.e. the Open Alpha starting September 12th, join us on Slack subscribe to our newsletter and follow us on our blog and social medias (Twitter, Facebook) to get started.

At VariabL, we have decided to go down the derivative road to provide a scalable infrastructure for both on-chain hedging solutions and stable coins. This put us in a position to organize a market for derivatives designed to be used by traders.

Since March 2017, we have been organizing Trading Contests in order to better understand crypto-traders and improve our User-Experience accordingly.

Just like in the first round, we had about 100 contestants trading for 2 weeks during the second round, betting on the variation of the ETH/USD price.

The main goal and focus of the latest round was to improve the ergonomy of our interface while collecting KPIs on traders’ behavior to build a traders-centric solution.

Market Makers & Market Organizers: A Love Story

We had already split our users into 2 categories : the market “Takers”, who match an order directly in the orderbook , and the market “Makers” who anticipate a precise increase in price and try to make an arbitrage on the current market Premium. Market Makers are called this way because they fill the Order Book in a way that should reflect their estimation of the right Price.

In order to create a more understandable User Interface, we then separated the order creation section into two parts:

”Instant Trade” for Market Takers who want to instantly start a derivative position whatever the Premium

”Beat the Market” for Market Makers who want to set their own price.

To understand how well those two categories of traders performed in our market, we used KPIs to differentiate the Top 10 players (the most successful) and the rest. The Figure 1 shows that the best players typically preferred to use the “Beat the Market” mode in order to fix their own price and be advantaged when matching an opposite order.

Figure 1: Proportion of Instant Trade vs Beat the Market mode use for the Top 10 players and the rest of the players during the Round 2 of the VariabL Challenge

The Figure 2 further explains the phenomenon: Top 10 players are also the players who were the most advantaged by the Premium they were receiving from the market. They were smart enough to set their own price and cover the risk of their Derivative bet on ETHUSD.

Figure 2: Average Premium Paid by players during the Round 2, for the Top 10 players and the rest.

In summary, the best performing players were using our “Beat the Market” mode and would always match at a good enough Premium that would enable them to make money even if they lose on their bet on the variation of ETHUSD (Long or Short — i.e. increase or decrease).

To conclude, our hypothesis has been confirmed: to win the challenge in a low liquidity market, players are incentivized to fill the Order Book with their own orders at advantageous Premium Prices.

This is good news because the reason we chose a Premium-based market was to provide liquidity, which is the main issue for a scalable crypto-finance structure.

Next round — the VariabL Open Alpha, is coming soon

Thanks to 2 rounds of Trading Challenge, we learned enough to start improving our interface and design: this is going to be one of many exciting new features of the Round 3 of our Alpha — the Open Alpha.

In order to keep track of who is helping us, we will introduce VariabL Contribution Tokens, detailed in the article here, that will be distributed as rewards during the Open Alpha.

Another difference with previous rounds is its duration: it will be unlimited in time, and reset every two weeks, in order to give a chance to newcomers. Every round, VCT Tokens will be rewarded to the best traders, but also to the most active users, following the principles of Contribution Tokens. Anyone can enter the Contest at any time but only the most loyal users will accumulate big amounts of our Tokens.

Along with our new Brand Design by Vlad Todirut, we will soon release a new Landing Page summarizing our project, completed by our Blog for detailed explanations.

Figure 3: New Design (Day Mode)