CorrFi

Demo

About

CorrFi is a service that allows users to trade on how closely the prices of multiple assets move together. Rather than focusing only on whether individual assets go up or down, users can incorporate their views on the relationship between assets into their trading and risk management strategies. CorrFi is primarily designed for investors and traders who manage multiple assets. For example, even if someone holds different assets to diversify risk, those assets may all fall at the same time when markets become unstable. In other words, a portfolio may appear diversified while still being exposed to the same underlying risk. Some traders may also believe that two assets that have historically moved together will begin to move differently in the future. However, simply buying or selling the assets themselves means that the price movements of each individual asset also affect the trader’s profit and loss. This makes it difficult to express a view specifically on how the relationship between the two assets will change. CorrFi turns the degree to which two assets move together into a tradable instrument. Users select an asset pair and a time period, then trade either the side that benefits when the assets move more similarly or the side that benefits when their co-movement weakens. For example, instead of predicting whether both assets will rise or fall, users can trade on whether the tendency of the two assets to move in the same direction will continue. At the end of the specified period, the degree of co-movement is calculated based on the assets’ actual price movements, and the final payout of the product is determined accordingly. However, having the correct market view does not necessarily guarantee a profit. Profit and loss depend on both the price at which the position was purchased and the final payout. CorrFi is also not an insurance product that directly compensates users for losses caused by falling asset prices. Rather, it is a tool for managing risks arising from the relationship between assets from a different perspective. The other key group of users is market makers, who support trading by continuously providing bid and ask prices. A common challenge for market makers is capital fragmentation: if funds are allocated separately to each market, some markets may have excess capital while others may not have enough. CorrFi aims to provide users with a way to trade the relationships between assets, while giving market makers a mechanism to support trading across multiple markets using shared capital.

How it's made

I built the core of CorrFi using Solidity smart contracts together with Python-based computation. I also integrated 1inch Protocol’s SwapVM and Aqua to enable capital-efficient market infrastructure, programmable pricing and settlement logic, and atomic execution. The protocol is currently deployed on Base Sepolia. CorrFi is a correlation derivatives protocol with multiple markets. In our MVP, each asset pair has three different maturities, which means even a single correlation pair creates three separate markets. As the number of asset pairs and maturities grows, the number of markets increases rapidly. A major challenge is that liquidity can become fragmented across these markets, making it difficult for market makers to provide sufficient liquidity to every market independently. We use Aqua to address this problem through shared liquidity. Instead of requiring market makers to allocate isolated capital to each individual market, Aqua allows liquidity to be shared across multiple CorrFi markets, significantly improving capital efficiency and enabling more flexible liquidity allocation. SwapVM is used to make the market-making logic programmable. It allows us to incorporate validation of calculated correlation values, risk-management rules, and incentive mechanisms directly into the quote-generation process. This enables market makers to set quotes based on the protocol’s correlation data while managing their exposure in a way that supports sustainable liquidity provision. SwapVM also allows this pricing and settlement logic to be composed into a seamless, atomic execution flow. By combining Solidity contracts, Python-based correlation computation, Aqua’s shared-liquidity architecture, and SwapVM’s programmable execution, CorrFi can support a large number of correlation markets without requiring completely separate liquidity for every market.