Sui Roundtable: Ep. 12

The Spaces brought together host David, Aslan from Mysten Labs (lead for DeepBook), Mateo, and Death for a focused discussion on DeepBook’s margin launch on Sui, its platform strategy, and ecosystem growth. Aslan outlined how DeepBook’s spot-margin design differs from perps: leverage uses underlying spot assets, shares liquidity with aggregators, avoids funding-rate volatility, and offers flexible liquidation pathways. Integrations span aggregators, Lotus market making, front-ends like Abyss and DeepTrade Sirius, and Turbos’ AMM depositing idle capital into margin pools for extra yield. Near-term roadmap includes BTC via LayerZero-wrapped native BTC, expanding asset diversity (gold/silver and new pairs) in Q1, cross-margin, UI upgrades (auto gas), and a points program. Markets are permissionless to list (500 DEEP), while margin pools are currently permissioned; caps for USDC/SUI pools will increase. Liquidations use Pyth oracles, public incentivized endpoints, and a backstop. Aslan detailed the Moonshot program’s hands-on builder support, advocated pragmatic AI-assisted “vibe coding” with human architecture oversight, and encouraged developers to integrate by routing idle treasury into margin pools or building new leverage experiences. He emphasized DeepBook’s platform breadth versus Hyperliquid’s depth, and expressed personal, NFA optimism on DEEP’s long-term outlook.

DeepBook Margin Launch and Ecosystem Roundtable (Twitter Spaces Summary)

Participants and Roles

• Azlan (DeepBook lead at Mysten Labs) — primary guest, technical lead for DeepBook, margin, and broader DeFi strategy on Sui
• David — host/moderator
• Mateo — co-host, posed comparative/strategy questions
• Death — co-host, asked product roadmap and ecosystem questions
• Audience (various) — Q&A on BTC wrapping, permissioning, liquidations, UI/UX, and builder APIs

Key Announcements and Highlights

• Margin is live on DeepBook (launched Thursday prior to the Space):
  • Initial leverage parameters: 5x on SUI/USDC pairs, ~3x on DEEP; team may consider higher caps later if safe.
  • Uses underlying spot assets/liquidity (not siloed perps); borrow fees are stable, no funding rates.
  • Integrations: front-ends Abyss and DeepTrade enable margin trading directly.
  • Points program for margin is active.
  • Cross-margin is the next major enhancement.
• BTC on DeepBook:
  • Targeting LayerZero-wrapped BTC (native wrapped from Bitcoin).
  • Already present on Sui and on DeepBook; liquidity needs to be strengthened (via Lotus and other approaches).
• New markets and asset diversity:
  • Near-term priority: get BTC, then gold/silver and other “exotics.”
  • Goal: make novel assets tradable on Sui/DeepBook as close to day one as possible when they launch elsewhere.
  • Timeline: foundational assets ASAP in Q1; aim to deliver 1–2 exotic markets in Q1; scale horizontally through Q2–Q3.
• Ecosystem integrations and composability:
  • Aggregators already route substantial volume to DeepBook (esp. pairs like SUI/USDC when liquidity is strong).
  • Lotus: market-making participation with yield.
  • Turbos: building an oracle-based AMM that deposits idle capital into margin pools to earn extra yield beyond swap fees.
• UI/UX:
  • Abyss UI praised as “exchange-grade,” tight spreads and deep liquidity.
  • Upcoming feature: automatic gas payments for one-click trading feel (reduce wallet approvals friction).
• Community and momentum:
  • DeepBook trending on X.
  • Strong builder interest; open invitation for teams to brainstorm leverage-enabled experiences with Azlan.

Deep Dive: Margin vs. Perps, Liquidity, and Composability

How perps differ from DeepBook spot margin

• Perps (e.g., USDC-collateralized venues):
  • Require matched long/short positions; when imbalance grows, funding transfers from longs to shorts.
  • Siloed order flow; auto-deleveraging can occur to protect exchange solvency.
  • Liquidations occur within the exchange’s own book, with limited composability.
• DeepBook spot margin:
  • Underlying is the actual spot asset; no counterparty required for your position size.
  • No funding rates; you pay a predictable borrow fee on the borrowed asset.
  • Order flow and counterparties are diverse: aggregators, lending protocol liquidations, AMMs, and other spot participants can fill your trades.
  • Liquidations are composable: can route via order book, AMMs, or even bridge as needed.

Liquidation and risk management

• Oracle: Pyth prices drive liquidation checks.
• Execution:
  • Public, incentivized liquidation endpoint; searchers actively pick up liquidations.
  • Backstop liquidator operated by the team exists as safety net.
• Margin pool risk profile:
  • Higher risk than “set-and-forget” passive lending because capital underwrites leveraged retail trading.
  • Rewards: borrow fee yield plus liquidation rewards accrue to pools.
  • Pools can accrue bad debt during extreme black swans; rewards are designed to compensate over normal regimes.

Leverage, capacity, and constraints

• Example: On SUI/USDC with 5x, $10,000 collateral can borrow $40,000 and place a $50,000 long.
• Trade size limited by available borrowable capacity in margin pools; caps can be raised if demand exceeds supply.

Permissioning and market creation

• Creating spot trading pairs on DeepBook is permissionless; fee: 500 DEEP per market (any base/quote).
• Margin pool creation is currently permissioned; the team aims to enable permissionless pool creation in the future after solving ownership and risk controls.

Platform Strategy and Comparison to Hyperliquid

• Azlan is a long-time Hyperliquid user and fan; credits HL’s excellence in perps.
• Strategic differentiation:
  • Hyperliquid: excels at vertical depth in perps (including stocks via perps), limited by lack of underlying spot for composability.
  • DeepBook: platform-first approach optimizing for horizontal breadth and composability across modules.
    • Modules today: DeepBook (CLOB) + Margin.
    • Future: add a third (and more) composable modules to multiply the number of app experiences builders can create.
  • Examples of composability unique to a spot-centric platform:
    • Margin pool aTokens as yield-bearing receipts; can be used as collateral in lending protocols (e.g., Alpha Lend).
    • Protocol treasuries or AMMs depositing idle funds into margin pools for extra yield.
    • Launching new market types beyond pure leveraged perps.

Versioning, Engineering, and Roadmap

• History:
  • DeepBook v1 → v2 shortly after Sui network launch.
  • Azlan and Tony rebuilt DeepBook v3 from scratch (no carryover from v2), launched by “October ’24” per Azlan’s phrasing; it’s been “almost 1.5 years” in production per his anecdote.
• Current iteration:
  • Margin added via upgrades to DeepBook core (minor/major semver increments), without breaking changes.
• Future V4:
  • Azlan anticipates a future V4 when hitting bottlenecks, potentially rewriting DeepBook + margin and extensions for tighter cohesion and composability. No immediate work on V4 yet.

Ecosystem Growth: How to Bring More Users and Liquidity to Sui

• Core thesis: deliver experiences on Sui that equal or exceed other chains; make Sui the place users never need to leave to do anything interesting in crypto.
• Enablers:
  • Cross-chain orchestration (e.g., producing Solana transactions from Sui) so users can act across ecosystems without exiting Sui.
  • Lower builder friction: DeepBook modules as plug-and-play liquidity and leverage infrastructure.
  • Diversify tradable assets early and broadly (BTC, metals, exotics, novel launches).

Moonshot Program (Builder Support)

• Shift from pure grants to hands-on co-building:
  • Weekly syncs, code/architecture reviews, Sui-specific support, examples, and research.
  • Goal: accelerate early-stage product cycles (test PMF quickly, pivot efficiently), raise quality and shipping velocity.
• Scope:
  • Open to any DeFi project (not just DeepBook integrations).
  • High bar for selection with tighter criteria; chosen teams get intensive support.

AI and “Vibe Coding” in DeFi on Sui

• Azlan’s stance:
  • AI coding will get increasingly better; productivity uplift is significant (2–10x). Not using it is leaving efficiency on the table.
  • Sui/Move provides stronger built-in safety guarantees than EVM, making AI-generated code more robust on Sui.
  • Caveat: AI is strong at writing code, weaker at engineering thoughtfulness (minimizing complexity, smart architecture). Human oversight remains essential.
• Practical takeaway for builders:
  • Use AI to ship, but ensure rigorous architecture, reviews, and testing, especially for financial logic.

Builder Pathways to Integrate DeepBook

• Start simple: treasury/idle capital yield
  • Any DeFi app with a vault or treasury can deposit idle funds into margin pools to earn yield (no minimum duration, no supply/withdraw taxes).
• Build unique experiences on top of DeepBook + Margin:
  • Launch new market types or trading experiences and natively enable leverage where safe and composable.
  • Explore cross-margin extensions.
  • Consider leveraged meme markets (e.g., 3x meme trading), with appropriate risk controls.
• Contact:
  • Azlan invites builders to DM him on X/Telegram for brainstorming and technical guidance.

Q&A Highlights

• Wrapped BTC type:
  • Plan: LayerZero-wrapped BTC; already on Sui and DeepBook.
  • Liquidity bootstrapping via Lotus and other methods is underway.
• Markets and leverage caps:
  • Spot pairs permissionless (500 DEEP fee); margin pools are permissioned for now.
  • Trade size bounded by available pool borrow capacity; caps can be raised (“champagne problems”).
• Liquidations and oracle:
  • Liquidations occur when Pyth price crosses the position’s liquidation threshold.
  • Searchers call a public incentivized endpoint; a backstop liquidator exists.
• Risk to lenders in margin pools:
  • Higher-risk than passive lending; compensated by borrow fees + liquidation rewards.
• Copy-trade vault:
  • Not in active development by DeepBook; Azlan is open to supporting a team building it.
• Explaining margin to non-crypto users:
  • Like borrowing to buy a house: you borrow to go longer/shorter than your cash allows. Differences: immediate liquidation if undercollateralized; borrow fees instead of mortgage payments.
• Abyss front-end:
  • Praised for exchange-like UX and high-quality market feel.
  • Upcoming: auto gas to streamline one-click execution.

Azlan’s Background and Role

• DeFi since “DeFi Summer”; former Coinbase (integrated DeFi hooks pre-IPO) and GSR (systematic trading, arbitrage).
• Joined Mysten Labs ~two years ago to rebuild DeepBook into v3 with Tony.
• Current focus: lead DeepBook, margin, and broader Sui DeFi strategy; less pure coding, more strategy and orchestration (still codes more efficiently using Claude/AI).
• Ecosystem support: spot builders, moonshot program, ensuring Sui DeFi stays ahead (e.g., agentic payments readiness).

Community Sentiment and Closing Notes

• Strong community bullishness on DEEP/DeepBook; Azlan emphasizes he hasn’t sold any DEEP (token locks, long-term alignment).
• Early DEEP price action (launched ~$50M FDV; moved from sub-cent to multiple cents, then ~$0.30) was “overvalued” then; he’s more comfortable at current levels.
• 2025 framed as defining year for DeepBook: scaling the platform, enabling new apps and experiences, and strengthening liquidity/markets.
• Disclaimer: personal views, not financial advice.
• Call to builders: ship more apps, leverage DeepBook’s composability, and reach out for collaboration.