Zero fees + 500x leverage, interpreting Avantis, the largest derivatives trading exchange on Base

Source: Alea Research Daily Newsletter

Compiled by: Zhou, ChainCatcher

Synthetic derivatives, decentralized oracles, and composable liquidity protocols enable traders to access everything from Bitcoin and ETH to gold and foreign exchange using stablecoin collateral.

Since Avantis launched on the mainnet in February 2024, it has become the largest derivatives exchange on Base and the largest DEX in the field of RWA trading and market making.

The protocol has processed over $18 billion in transaction volume and executed over 2 million trades for more than 38,500 traders. Avantis has a TVL of $23 million across more than 25,000 LPs and over 80 markets, solidifying its position as a hub for perps.

This article will explore Universal leverage, the architecture of Avantis, and the launch of $AVNT.

Avantis Introduction

Avantis is a perps DEX that allows users to trade cryptocurrencies, forex, commodities, and indices using stablecoin collateral. The protocol abstracts a single order book and instead builds a "universal leverage layer" where any asset with reliable price information can be listed.

Synthetic leverage is achieved through a USDC-based liquidity pool, which acts as the counterparty for all trades, thereby providing efficient capital exposure to multiple markets. Traders can choose leverage of up to 500 times, allowing them to express directional views with minimal capital, while liquidity providers (LPs) earn returns by supplying USDC to support positions.

The difference between Avantis and other perpetual contract exchanges is that users can trade non-crypto markets such as Japanese Yen, Gold, and US stock indices alongside BTC or ETH. The design of the protocol also supports features like zero trading fees, loss rebates, and positive slippage, adjusting the incentives between traders and LPs by returning a portion of the fees or profits to users when they improve the risk profile of the protocol.

Avantis architecture

At the core of Avantis is a capital-efficient synthetic engine. Traders use the protocol's interface to open positions on supported assets. Avantis does not match orders in an order book but pairs each trader with a USDC treasury that bears the other side of the trade. This treasury aggregates deposits from thousands of LPs and acts as a single counterparty. This structure allows the protocol to provide deep liquidity across many markets without needing separate liquidity pools for each currency pair, enabling Avantis to list over 80 markets, including 22 RWA assets.

Avantis introduces risk segments and time lock parameters so that LPs can choose their preferred risk exposure. LPs can passively deposit into the senior segment or take on more risk in the junior segment, which has higher return potential but also absorbs a larger share of losses.

In addition, LPs choose a time lock (for example, 30 days or 90 days) to control the timing of their capital investment, with longer locks generating more fees. This design mimics the concentrated liquidity model of Uniswap v3 while applying it to risk management in perpetual trading exchanges.

Trader<> LP Alignment

Avantis' innovative mechanism further aligns the interests of traders and LPs.

Loss rebate: Traders who take the opposite side of the open contracts (to help balance the platform's long/short bias) can receive up to 20% loss rebate. This encourages traders to arbitrage open contracts and stabilize the LP exposure.

Positive Slippage: When a trader's order reduces the risk to the treasury (for example, closing out a significantly long position), the entry price offered by Avantis is higher than the mark price. This "above market" execution rewards traders for helping to balance the flow.

Zero trading fees: Avantis has created a product where traders do not have to pay opening, closing, or borrowing fees. Instead, they only pay a portion of the profits when closing winning trades. This tool can be used for $BTC, $SOL, and $ETH, with leverage of up to 250x, making it popular among scalpers and high-frequency traders.

Advanced Risk Management: LPs can act as passive lenders or active market makers by selecting risk portions and time locks. Each portion has its own fees and potential loss shares, allowing LPs to control risk and return.

$AVNT: Token Issuance and Token Economics

To promote its next phase of growth, Avantis has launched the utility and governance token $AVNT.

$AVNT has multiple functions:

Security and Staking: Holders can stake $AVNT in the Avantis security module to support the USDC treasury during extreme market fluctuations. Stakers can earn $AVNT rewards and transaction fee discounts.

Community Rewards: 50.1% of the total supply of 1 billion tokens is reserved for traders, liquidity providers, referrers, and builders who contribute to Avantis. Airdrop 1 (12.5% of the supply) will reward protocol activity since February 2024, while on-chain incentives (28.6%) will fund future XP seasons and community contributions. Builders and ecosystem grants (9%) will support the creation of new front-end and trading tools, such as AI agents and Telegram bots.

Governance: Token holders will be able to propose and vote on protocol decisions, ranging from asset listings and fee structures to buyback plans and cross-chain deployments.

The remaining 49.9% of the supply distribution is as follows:

• Team (13.3%)
• Investors (26.61%)
• Avantis Foundation (4%)
• Liquidity Reserve (6%)