Zaros: On-chain Perpetual Futures with Liquid Staking

Introduction to Zaros

Liquid staking and perpetual futures markets are two mechanics deeply rooted in the DeFi World but they rarely coexist. Designed to optimize capital efficiency and real yield, Zaros](https://www.zaros.fi/)) enables holders of Liquid Staking Tokens (LSTs) and** Liquid Restaking Tokens (LRTs)** to significantly enhance their rewards by providing essential liquidity for the creation of perpetual futures markets. Zaros advances on-chain perpetual futures, incorporating cutting-edge financial tools and methodologies to address the untapped potential at crossing LSTs and perpetual futures markets.

The Unique Proposition of Zaros

Zaros distinguishes itself by addressing some of the most pressing challenges in DeFi—primarily liquidity fragmentation and capital inefficiency. By leveraging LSTs and LRTs, which represent a significant portion of DeFi's total value locked (TVL), Zaros introduces a robust model for perpetual futures markets. These markets are critical in offering traders the ability to speculate on price movements without the actual delivery of the asset. 

Innovative Liquidity Provisioning and Risk Management

One of the key innovations Zaros brings to the table is its market-agnostic liquidity provisioning model. This means that the liquidity provided by users is not tied to specific assets or markets. Instead, it can dynamically flow to where it is most needed, regardless of the market. This flexibility is crucial in reducing the common problem of **liquidity fragmentation **seen in traditional decentralized exchange (DEX) models, where liquidity is often spread thin across numerous pools, leading to reduced market efficiency and higher slippage costs for traders. This is complemented by a risk assessment strategy that clusters assets based on their correlated risks and applies tailored funding rates to manage systemic risk effectively.

This dual approach not only ensures a more stable and efficient market but also enhances the appeal of Zaros to both liquidity providers and traders. For liquidity providers, it promises better capital utilization and reduced exposure to unbalanced positions. Traders benefit from access to a broader range of assets and potentially** lower slippage** due to the concentrated liquidity.

Dynamics of Zaros

At the heart of Zaros's operations are the Zaros Vaults. These vaults utilize USDC and Liquid Staking Tokens (LSTs) to support the issuance USDz, an over-collateralized stablecoin that enhances market liquidity, enables efficient trades with minimal slippage, and acts as a buffer against market volatility through its over-collateralization.

These Vaults interface with the protocol’s Strategy Manager and Market Manager modules to deploy collateral effectively and sustain liquidity throughout the markets. This framework supports an array of assets, including cryptocurrencies, commodities, and FX, via Chainlink oracles. 

Zaros’ interoperability

Initially, Zaros is starting with perpetual futures trading on Arbitrum, powered by popular LSTs like Lido’s stETH and native liquid restaking token WeETH. Soon, the integration with Chainlink's Cross-Chain Interoperability Protocol (CCIP) will](https://chain.link/cross-chain)will) allow for expansion to more chains. 

Zaros also leverages Chainlink's CCIP to enable cross-chain communication between its L1 liquidity engine and L2 deployed markets. This provides traders with synchronous, deep liquidity and boosts LP's rewards across deployments powering products at supported L2s. By sending messages through CCIP, the smart contracts on Ethereum L1 can aggregate required data such as debt and fees to reward users providing LSTs or USDC while taking advantage of lower gas fees for traders using Zaros’ products on L2s.

Strategic Market Operations

Each perpetual futures market within Zaros operates as an independent smart contract, which allows for precise control and risk isolation. Traders can engage in leveraged trading with enhanced flexibility through features like cross-margining, which provides a more nuanced risk management capability compared to traditional systems.

Outcomes for Zaros’ users

Liquidity providers will be highly incentivized thanks to Zaros’ vault. These vaults are highly lucrative for LST holders. Usually, LSTs have an APY hovering 3% - 4%. With Zaros, LST holders could earn around 33% APY for WeETH and 30% for stETH, almost 10x’ing  their rewards. 

Traders enjoy a sophisticated trading environment with a** CEX-like UX**, a wide array of assets and advanced tooling, all designed to provide a seamless and efficient trading experience. This UX experience comes thanks to Chainlink’s Data Streams](https://docs.chain.link/data-streams)) low-latency oracles which provide a faster order execution, better settlement price, and front-running protection.

Meet the Zaros team

Led by co-founders Guilherme Bettanin and Pedro Bergamini, the Zaros team combines expertise in marketing, e-commerce, and blockchain technology. Guilherme focuses on bridging traditional finance with DeFi, while Pedro, with significant experience in secure blockchain development, drives technical innovation. Joining the two co-founders are a Ph.D. mathematician specializing in Machine Learning as Head of Risk, and a Growth marketer coming from Binance. Supported by 17 core contributors, they work together to advance Zaros in the perpetual futures and liquid staking markets, continually enhancing user experience and platform adaptability.

Where Chainlink meets Zaros

Zaros utilizes multiple Chainlink products, like CCIP,](https://chain.link/cross-chain),) Data Streams,](https://chain.link/data-streams),) Data Feeds and](https://chain.link/data-feeds)and) Automation 2.0.](https://chain.link/automation).)

Relying heavily on multiple Chainlink services, it only made sense that it joined the Chainlink BUILD program](https://mirror.xyz/zarosfi.eth/1_ybp2OofuifcCtPMqXPjc412QtKw4K6FKBy2saVdzE)) in August 2023 to gain multiple benefits including access to and integration of Chainlink Data Feeds, access to new Chainlink product alpha and beta releases, among others. 

Conclusion: Zaros as a Market Innovator

Zaros stands out as a visionary project that not only addresses existing market needs but also anticipates future trends in the financial markets. Millions of dollars worth of ETH are borrowed to re-stake and leverage their rewards, and Zaros offers a more profitable alternative to LST holders. Its commitment to integrating liquid staking with perpetual futures trading positions it uniquely in the DeFi landscape, offering substantial benefits to a wide range of users. 

By strategically aligning liquidity provisioning with market needs and technological advancements, Zaros is poised to set a new standard in the DeFi space, potentially catalyzing broader adoption of blockchain technology in the financial sector.