CompliFi is a derivatives issuance protocol combined with an Automated Market Maker (AMM). It aims to allow users to trade and provide liquidity for derivatives as easily as for regular tokens on Uniswap.
CompliFi addresses two key problems in decentralised derivatives:
Defaults, margin calls, liquidations
All CompliFi derivatives are fully backed by collateral at all times. A CompliFi user never faces a margin call or a liquidation. At the same time, a winning position will never suffer from a counterparty default.
Automated market making in derivatives
CompliFi AMM is designed to work with extremely volatile assets and incorporates a number of critical innovations that focus on protecting LP value. In particular, it reprices derivatives prior to trading in every block, dramatically decreasing the scope for impermanent losses. Just as importantly, the AMM algorithmically manages LP risk by preventing excessive market exposure of its pool. This is done by enforcing fixed exposure limits and through a dynamic fee mechanism that links a given transaction's fee to the change in pool risk that it causes.