Detailed Explanation of Avantis: The Largest Derivatives 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 RWA trading and market-making space.

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

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

Introduction to Avantis

Avantis is a perps DEX that allows users to trade cryptocurrencies, foreign exchange, 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 vault that acts as the counterparty for all trades, allowing for capital-efficient exposure across multiple markets. Traders can choose leverage of up to 500x, enabling them to express directional views with minimal capital, while liquidity providers (LPs) earn returns by providing USDC to support positions.

What sets Avantis apart from other perpetual contract exchanges is that users can trade non-crypto markets such as yen, gold, and U.S. stock indices alongside BTC or ETH. The design of the protocol also supports features like zero trading fees, loss rebates, and positive slippage, adjusting incentives between traders and LPs by returning a portion of fees or profits to users when they improve the protocol's risk profile.

Architecture of Avantis

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 the USDC vault that takes on the other side of the trade. This vault 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 tranches and time-lock parameters so that LPs can choose their preferred risk exposure. LPs can passively deposit into the senior tranche or take on more risk in the junior tranche, which has higher return potential but also absorbs a larger share of losses.

Additionally, LPs choose time locks (e.g., 30 days or 90 days) to control the duration of their capital commitment, with longer locks generating more fees. This design mimics the concentrated liquidity model of Uniswap v3 while applying it to risk management in perps exchanges.

Trader<>LP Alignment

Avantis's innovative mechanisms further align the interests of traders and LPs.

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

Positive Slippage: When a trader's order reduces the risk of the vault (e.g., closing a heavily long position), Avantis offers an entry price above the mark price. This "better than market" execution rewards traders for helping to balance flow.

Zero Trading Fees: Avantis has pioneered a product where traders do not pay opening, closing, or borrowing fees. Instead, they only pay a portion of profits when closing winning trades. This tool is available for $BTC, $SOL, and $ETH, with leverage up to 250x, making it popular among arbitrageurs and high-frequency traders.

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

$AVNT: Token Issuance and Tokenomics

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

$AVNT has multiple roles:

Security and Staking: Holders can stake $AVNT in the Avantis security module to back the USDC vault during extreme market volatility. Stakers earn $AVNT rewards and trading 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 supply) will reward protocol activity since February 2024, while on-chain incentives (28.6%) will fund future XP seasons and community contributions. Builder and ecosystem grants (9%) will support the creation of new frontends and trading tools, such as AI agents and Telegram bots.

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

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

Team (13.3%)

Investors (26.61%)

Avantis Foundation (4%)

Liquidity Reserve (6%)

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