RGP-32: Seeding Aevo Insurance Fund


With the imminent launch of Aevo, this is a proposal for the Ribbon DAO to lend $1m to the Aevo Insurance Fund to bootstrap it.


All derivative exchanges require an insurance fund. The insurance fund acts as backstop capital for the exchange to maintain solvency if an account on the platform has a negative balance. This could happen if a liquidation is not performed quickly enough — the position may be sold for less than the value of the account’s collateral, making the account “underwater”.

This insurance fund acts as a buffer so that all traders can have their positions closed fairly — which in turn builds confidence for large traders to trade on Aevo.


We propose that the Ribbon DAO lends $1m of assets to bootstrap the Aevo Insurance Fund, with the following conditions:

  • $1m of assets will be lent, in USDC*
  • At a rate of 10% APR, payable after 12 months
  • Will be repaid in 1 year, with the option to extend (requires another governance vote)
  • DAO can vote to rollover the loan

Bootstrapping $1m in the Aevo Insurance fund puts Aevo in a stronger position to attract larger traders on day 1. Over time, the trading fees accrued from Aevo will create a bigger and bigger insurance fund, and Aevo will be able to fully repay the DAO loan. Longer-term, this will create a stronger tie-in between the Aevo/Ribbon tokenomics (“Ribbonomics 2.0”).

Assuming an average fee of 3bps and 20% of trading fees being sent to the insurance fund, and we conservatively estimate 5m in notional daily volume (1.8b cumulative over one year), the exchange would have generated ~$550,000 in revenue and will have sufficient liquidity to repay the loan and interest.

Average Fee 0.03%
Daily Volume $5,000,000
Cumulative Volume (1y) $1,825,000,000
Cumulative Fees $547,500
Insurance Fund Contribution $109,500

Other Considerations

To manage risk well, the size of the insurance fund should scale with the open interest of all derivative contracts on the platform. If the insurance fund is too small compared to the size of the exchange OI, large positions may not be able to get liquidated by the insurance fund.

Using those exchanges as benchmarks, $1m in the Aevo Insurance Fund should be able to support up to $50-100m of OI without too much risk for the exchange.

Exchange OI Futures OI Options Insurance Fund IF as a % of OI
Deribit (Options Only) $11,500,000,000 $40,000,000 0.35%
OKX (Options Only) $450,000,000 $5,990,500 1.33%
Bybit (Options + Futures) $3,520,000,000 $325,000,000 $250,000,000 6.50%
Bit.com (Options + Futures) $30,000,000 $8,000,000 $875,000 2.30%

Additional notes:

  • Deribit’s insurance fund is the most relevant, since they are primarily an options exchange and the insurance fund backs the liquidations of options directly. Other exchanges like Bybit may have an inflated number because the insurance fund is shared across perps and options.
  • During the extreme price events in the past 3 years, Deribit’s Insurance Fund as a % of their OI has fluctuated between 0.17% to 1.11%
  • Using a projection of Aevo’s Open Interest as a percentage of Deribit Open Interest, a $1m insurance fund should be able to comfortably support Aevo as it grows from 5-10% of Deribit’s OI
Deribit 14/3/2023 08/11/2022 09/05/2022 18/05/2021 04/05/2021 09/03/2020
Spot Price (ETH) $1,663 $1,250 $2,128 $2,450 $3,107 $168
OI (contracts) 3,760,799.00 4,742,333.00 1,995,743.00 1,625,281.00 1,509,729.00 216,538.00
OI (USD) $6,254,000,000 $5,928,000,000 $4,247,000,000 $3,982,000,000 $4,691,000,000 $36,000,000
IF (ETH) 8,407.00 8,055.00 6,988.00 4,952.00 4,856.00 2,566.00
IF (USD) $14,000,000 $10,100,000 $14,900,000 $12,100,000 $15,100,000 $400,000
IF as a % of OI 0.22% 0.17% 0.35% 0.30% 0.32% 1.11%
Aevo Projection Conservative Aggressive
OI as a % of Deribit OI 5.00% 10%
OI (USD) $750,000,000 $1,500,000,000
Insurance fund (USD) $1,000,000 $1,000,000
IF as a % of OI 0.13% 0.07%

*The DAO currently has ~$3.5m of non-RBN assets sitting idle in the treasury, comprised of ETH, USDC, and a few other tokens. If this proposal passes, there will be a second proposal to figure out which assets to liquidate to get $1m USDC.


Proposal will be live on forum for the next 7 days voting will then be open for 5 days. Voters will be able to vote Yes, let’s do it or No, let’s not do it.

Over the next week, we invite community feedback for the terms and specifications before creating a Snapshot vote.


Yes lets do it.

Question, if OI is significantly higher than anticipated how will aevo come back to ask for more?

I agree with $1M loan to bootstrap Aevo. Seems low cost for Ribbbon & win - win for both protocols. Curious how ties into Ribbonomics 2.0 down the road.

If this passes, interested to see which assets make the most sense for Ribbon to liquidate to hit the $1M USDC. Happy to discuss using SIZE for any OTC (particularly any lower cap exposure).


I find it hard to evaluate this proposal without a clear view on the structure between Aevo <> Ribbon <> RBN DAO.

  • Who ‘owns’ Aevo? Who will decide where Aevo revenue will flow? I always assumed given this was fully built by the Ribbon Core team which is funded by the RBN DAO that Aevo would be owned and governed by the RBN DAO? In my minde I can draw a complete parallel here with Earn/Lend, only Aevo is launched under a different product name to differentiate from the core Ribbon product suite.

From what I read in this proposal I believe my assumptions are wrong, but I can’t figure out what the actual structure is.

I don’t think anyone is able to correctly evaluate this proposal without such information given that the loan will introduce some counterparty risk to the RBN DAO.
If Aevo is owned/governed by a bunch of rogue anon devs (I’m exaggerating to make my point), 10% APR will not be enough to cover the risk. If Aevo is owned/governed by the RBN DAO (or a proxy of such), we might ask ourselves ‘why even charge the 10% APR in the first place?’.

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lend USDC but ask to repay in RBN :wink:

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Have the same questions. Is there anyone who can answer these questions about relationship between RIbbon core, RBN DAO and Aevo?

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@julian Can you provide some clarity around these questions and around the further timing of this proposal?


cross posting some more information shared through the discord.

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