The Evolution of DeFi Services

Decentralized Finance (DeFi) has transformed the global financial ecosystem, disrupting traditional banking and investment paradigms. From Centralized Exchanges (CEXs) to Automated Market Makers (AMMs) and yield farming solutions, DeFi has introduced a suite of financial tools designed to enhance accessibility, transparency, and efficiency.

However, despite its promise of decentralization and financial inclusion, current DeFi solutions often come with significant drawbacks. That is why, 1xMM Pools are pioneering a new class of financial instruments — Perpetual Constant Maturity Options (PCMO) — that promise to refine and elevate the DeFi experience.

The DeFi Ecosystem: Strengths and Limitations

Centralized Exchanges (CEXs): Convenience at the Cost of Control and Higher Fees

Platforms like Binance or Coinbase provide deep liquidity, robust security, and intuitive user interfaces, making them attractive for both retail and institutional traders. However, their reliance on centralized custody introduces significant counterparty risks and regulatory vulnerabilities. While these platforms offer efficiency, they ultimately replicate the traditional banking model, prioritizing user acquisition over decentralization. Users in this model simply do not hold their assets,exposing them to all the risks related to giving custody to an external counterpart. Moreover CEXs engage in fierce competition for market dominance, often at the expense of traders, imposing some of the highest transaction fees in the industry.

Automated Market Makers (AMMs): Decentralized Trading with Imperfections

AMMs such as Uniswap and Curve Finance enable decentralized trading without intermediaries. While they improve accessibility, anonymity and financial inclusion, they also introduce the problem of impermanent loss, where liquidity providers may suffer financial losses due to price fluctuations. AMMs like Uniswap and Curve Finance enable permissionless trading without intermediaries. However, they come with their own set of challenges:

• Impermanent Loss: Liquidity providers face financial risks due to price fluctuations
• Liquidity Fragmentation: Capital efficiency is compromised due to scattered liquidity pools
• Transparency Gaps: While more decentralized than CEXs, AMMs still face concerns regarding sustainable liquidity management

To address these challenges layer 2 solutions such as dYdX were developed to aggregate on-chain liquidity and combine it with centralized liquidity, increasing efficiency and limiting Impermanent Loss issues.




Yield Farming Solutions: Profitable but Risky

Platforms like Aave and Compound allow users to earn passive income by lending assets. However, these solutions often lack complete transparency, making it difficult for investors to assess their true risks. Some lending platforms also rely on over-collateralization, which can reduce capital efficiency for users.




Perpetual Futures Contracts: Leveraged Trading with High Volatility Risks

Decentralized trading platforms such as GMX or PERP offer fully decentralized perpetual futures contracts, allowing traders to maintain leveraged positions indefinitely. While they provide attractive liquidity and hedging opportunities, they come with some limitations:

• Users are exposed to capital gains and losses, which can be volatile and unpredictable
• Contracts are only short-term

1xMM: A New Paradigm in Decentralized Finance

To counter all those drawbacks, 1xMM introduces perpetual constant maturity options. Unlike perpetual futures, where users can face significant capital gains or losses, 1xMM allows participants to pay only funding costs based on vanilla options performance. In other words, users can benefit from the potential of vanilla options (theta) while the profits and losses are accrued over the fixing period to limit PnL volatility. Furthermore, users can speculate on different terms, to adjust the duration of their strategies to optimize their returns, while the 1xMM Pools gather all term liquidities on a token within a single place. This structure mitigates volatility risks while offering a sustainable and transparent financial model.

Key benefits of 1xMM include:

• No Impermanent Loss: Unlike AMMs, liquidity providers do not suffer from adverse price movements
• Full Transparency: Unlike some yield farming protocols, all transactions and pricing mechanisms are transparent on-chain
• Reduced Risk Exposure: Users only pay funding costs, avoiding the unpredictable swings associated with perpetual futures contracts
• DeFi-Native Efficiency: Built to maximize capital efficiency without the custodial risks of CEXs

Fun Fact

1xMM Pools aim at implementing an alternative to the Perpetual Options conceptual idea created by Alameda Research, but of course more sustainable and fully transparent.

Conclusion: The Future of DeFi with 1xMM

As DeFi continues to evolve, the need for innovative, transparent, and efficient financial solutions becomes more pressing. While CEXs, AMMs, and yield farming platforms have laid the groundwork, they each come with inherent limitations. 1xMM's perpetual constant maturity options introduce a new way forward, providing a sustainable, low-risk alternative to traditional DeFi instruments. By bridging the gap between security, transparency, and efficiency, 1xMM's perpetual constant maturity options (PCMO) provide a groundbreaking solution, merging decentralized security and capital efficiency. By mitigating risks and enhancing stability, 1xMM is paving the way for the next era of decentralized finance.