JOJO Exchange debuts zk-proofs to enhance on-chain derivatives

Decentralized
exchange
for
perpetuals
trading
(perp
DEX)
JOJO
implemented
zero-knowledge
proof
(zk-proofs)
technology
for
funding
rates
in
their
platform
to
keep
perpetual
contracts
aligned
with
the
spot
market
prices.
According
to
Jotaro
Kujo,
JOJO’s
co-founder,
this
is
a
fundamental
development
for
on-chain
derivatives
trading.

JOJO
tapped
into
Brevis
zk-proofs
technology,
which
is
a
coprocessor
able
to
read
from
and
utilize
the
full
historical
on-chain
data
from
any
chain,
and
run
customizable
computations
in
a
completely
trust-free
way.

“With
Brevis’
zk-proofs,
we
have
the
ability
to
do
any
calculation
based
on
the
transactions,
the
events,
on
any
block
time
in
any
timeframe,
and
generate
proofs
validated
on-chain.
It’s
pretty
suitable
for
us
because
we
have
a
very
open
liquidity
layer,
which
means
that
people
can
build
different
liquidity
structures
on
top
of
JOJO
and
they
may
also
have
their
own
impact
on
the
price.
That
means
if
you
calculate
our
rates
on-chain,
will
be
a
very
hard
work
to
do,”
explained
Jotaro.

Therefore,
zk-proofs
allow
JOJO
to
calculate
the
funding
rates
off-chain
and
register
them
on-chain,
avoiding
the
very
demanding
process
of
calculating
it.
The
result
is
an
“efficient
and
secure”
solution
to
the
industry.

This
development
by
JOJO
and
Brevis
is
important
given
the
importance
of
funding
rates
to
the
design
of
perpetual
contracts,
highlighted
Jotaro.
Funding
rates
keep
the
perpetual
contracts’
prices
tied
to
the
spot
market,
making
them
more
accurate
for
traders. 

“When
our
perpetual
contract
has
a
higher
price
than
the
spot,
the
funding
rate
will
charge
from
the
long
positions
and
pay
to
the
short
positions.
So
that
creates
an
incentive
for
people
to
close
their
long
positions
and
open
short
positions.
That
means
people
will
sell
the
perpetual
contract
and
start
to
buy,
dumping
the
price
and
making
the
perpetual
price
back
to
the
same
as
the
spot
price.”

Consequently,
this
mechanism
encourages
the
arbitrageurs
and
the
traders
to
make
de
perpetual
price
keep
following
the
spot
price.
Without
a
funding
rate,
the
perpetual
contract
is
“just
a
shitcoin”
and
doesn’t
make
sense,
added
Jotaro.

Despite
a
monthly
23%
fall,
the
trading
volume
of
on-chain
derivatives
is
still
at
its
highest
levels.
The
gradual
growth
of
this
decentralized
finance
sector
depends
on
capital
efficiency,
Jotaro
stated,
and
developments
such
as
accurate
funding
rates
are
one
of
the
fundamental
contributions
to
this
industry’s
expansion.

“The
funding
rate
is
very
important
for
decentralized
exchanges,
and
we
need
to
calculate
it
efficiently,
but
at
the
same
time
in
a
safe
way.
And
now
we
see
a
lot
of
other
exchanges
showing
that
they
calculate
the
final
rate
by
centralized
oracles.
Well,
that
is
not
the
right
way
to
do
it,
although
they
may
have
faced
some
temporary
difficulties
with
the
on-chain
calculation.
We
think
this
zk-proof
model
can
make
the
on-chain
derivatives
advance
a
lot,
so
we
can
make
it
verifiable
by
anyone.”