HyperVIX

HyperVIX 

🔍 Description

Variance Protocol is a decentralized derivatives exchange that allows traders to speculate on or hedge against the future volatility of crypto assets. It introduces a perpetual futures contract whose price is pegged to the realized volatility of an underlying asset (e.g., ETH), calculated in real-time. This provides a capital-efficient tool for traders to gain exposure to market turbulence itself, independent of price direction.

🛠️ How It Works

The protocol is a two-part system designed for security and efficiency, leveraging Hyperliquid's unique infrastructure.

1. The VolatilityIndexOracle (The Index):

   • This on-chain oracle calculates the realized volatility of a specified asset. It does not rely on external data feeds like Chainlink.

   • Architecture: It uses the L1Read precompile to atomically and directly query Hyperliquid's L1 mark price. This eliminates oracle latency, stale data, and third-party risk, which have been critical failure points for previous volatility projects.

   • The oracle uses an Exponentially Weighted Moving Average (EWMA) on squared price returns to produce a smooth and manipulation-resistant volatility index (σ).

2. The VolatilityPerpetual (The Market):

   • This contract implements a virtual AMM (vAMM) where traders can take long (betting volatility will rise) or short (betting it will fall) positions on the volatility index.

   • A funding rate mechanism tethers the vAMM's market price (the Mark Price) to the oracle's true value (the Index Price). This is achieved by calculating the time-weighted average price difference between the two. When the Mark is above the Index, longs pay shorts, and vice versa, creating arbitrage incentives that ensure the peg's stability.

   • The architecture is inherently extensible and can be modified to trade on variance (σ2) instead of volatility (σ), effectively creating a Power Perpetual on volatility with minimal code changes.
     
     
     

     Exponentially Weighted Variance (EWMA)

     
     

     The protocol estimates the conditional variance, σt2, using an Exponentially Weighted Moving Average (EWMA). This model, closely related to GARCH(1,1), acts as a recursive low-pass filter, giving exponentially less weight to older observations. It is defined by the recursive relationship:

     σt2=λσt−12+(1−λ)rt2

     • σt2 is the estimated variance at time t.

     • rt2 is the squared log return, representing the most recent "shock" to the system.

     • λ is the smoothing factor or decay rate (e.g., 0.94). A value closer to 1 results in a smoother, less reactive index, as more weight is placed on the historical variance σt−12. A lower λ makes the index more sensitive to recent price movements.

Why HyperVIX

HyperVIX leverages Hyperliquid’s native architecture to solve the long-standing oracle problem for on-chain volatility. The result is a capital-efficient VIX-style perpetual that is fast, secure, and directly serves the needs of the ecosystem.

Its most powerful feature is its extensibility. The design allows it to function as a Power Perpetual on variance (σ2), offering a direct tool for Hyperliquid's market makers to hedge their gamma exposure. Future work with CoreWriter can unlock even more sophisticated automated hedging strategies.

💻 Demo

Link: https://www.loom.com/share/placeholder-demo-link

Demo Walkthrough: The video demonstrates the full user journey:

1. Connecting a wallet to the platform.

2. Viewing the real-time volatility index chart generated by the VolatilityIndexOracle.

3. Opening a leveraged long position on volatility with collateral.

4. Inspecting the position details: entry price, notional size, leverage, unrealized PnL, and liquidation price.

5. Closing the position to realize the profit/loss.

📂 Project Links

• Code: https://github.com/ChinmayGopal931/HyperVIX

• Live Demo: https://hyper-vix.vercel.app/

• Video: https://youtu.be/MRniWMK8ZfI

• FE: https://github.com/ChinmayGopal931/HyperVIX-interface
  
  Slides: https://gamma.app/docs/HyperVIX-A-Perpetual-Futures-platform-for-trading-vol-on-HyperEVM-48nmgp3n1tjpadb
  
  

👥 Team

• solo @0xidli on X